For Baby Boomers and the Silent Generation (people born before 1964) and maybe even the generation after, “socialism” has been a dirty word. It stood for the absence of freedom and individual choice that characterized the Soviet Union and China and even political economic systems like Sweden, Norway and Denmark that tried to reach socialist values (more equality, freedom from need) through capitalist means were looked at askance.
The United States was a capitalist country down to our shoelaces and many if not most Americans harbored the secret hope that we would become wealthy someday, or at a minimum, our kids would live materially better lives that we did. Why would we want to put a cap on that, or limit ourselves with high tax rates when we might benefit from wealth redistribution NOW, but we would be the ones paying high taxes when we got rich. The promise of the American Dream was that any of us could become the one who hit the jackpot, and that kept a lot of people playing the game and accepting life’s disappointments with the hope that things would get better. And for a period of time, they did.
This article from Axios outlines the hard reality about modern American capitalism for many Americans. As we have allowed it to develop, the rich have become incredibly rich and the poor have gotten poorer than ever. The gap between rich and poor, which is not inevitable but is rather a policy decision that can be altered by political decisions, is huge and our leaders refuse to try to reduce it. In fact, tax cuts and reduction in social programs just help impoverish the world our young people will be living in and many of our kids are not living as well as we do. The American Dream seems to many to have been an empty promise and as those who remember the Soviet Union die out, a new take on socialism – that hey, maybe it’s not a satanic plot – has caught on among some younger voters.
It’s important not to exaggerate this effect. Even in the Democratic Party, moderation is a virtue that is not likely to be abandoned soon. But a lot of smart people are watching changes in the distribution of wealth and realizing that it is generating calls for change. We aren’t at pitchforks and torches yet, but people who work hard and see others benefit while they stagnate can get very angry. This article speculates on something that would have been unthinkable 30 years ago and is now slowly entering the mainstream – maybe not in the heartland of the US but certainly in the peripheral urban regions.
1 big thing: A new form of American capitalism by Mike Allen, April 7, 2019
The modern version of America capitalism seems destined to change — perhaps profoundly — for the first time in our lifetimes, Axios CEO Jim VandeHei writes.
- What’s new … Capitalism is being squeezed from both sides, by a debate over socialism vs. strongman nationalism: President Trump bullying the Fed, publicly pressuring CEOs and juicing short-term markets at all cost.
Why it matters … It’s no longer debatable: The system makes the big, bigger and the rich, richer. The rest of America stagnates or suffers.
Ray Dalio, the billionaire capitalist, argues that the rich vs. everyone else divide is an existential threat.
- “I believe that all good things taken to an extreme can be self-destructive and that everything must evolve or die,” he writes on LinkedIn. “This is now true for capitalism.”
A lot of CEOs and rich people are coming to the same conclusion — many reluctantly and privately. But the change in tone is noteworthy.
The flashing signals are everywhere:
- The data — the unambiguous reality — is sobering and startling: Since 1980, the incomes of the top 1% tripled, the top 10% doubled, and the bottom 60% of prime-age workers were flat.
History — and the past half-decade here and abroad — shows this is a key ingredient of populism.
All of this also makes socialism attractive — to the young, especially, but also to Democrats broadly.
The Democratic debate is less about Trump and more about redistribution, government intervention and huge safety nets.
- While it gets insufficient coverage, the 2020 policy debate among Democrats is fascinating and foretelling.
There’s also a healthy debate about how we judge whether something is a monopoly. Right now, antitrust law focus on whether concentrated power results in higher prices for consumers.
- As Axios Future Editor Steve LeVine has written, the debate is shifting to whether too big and too powerful is simply too big, too powerful and too dangerous.
What’s next: This may manifest on the campaign trail as referendum not only on reversing the tax cuts and implementing a New Green Deal, but then moving in the exact opposite direction — Trump as the last gasp of trickle-down economics, Axios’ Dan Primack notes.
- Axios chief tech correspondent Ina Fried points out that this comes as artificial intelligence and automation are about to disrupt and displace even more of the labor sector — and vastly increase the pace of change.
Be smart: It’s hard to imagine a more worthy debate at a more important time for America. It’s tempting to fixate on Trump. But the real action is the policy and philosophical debate unfolding before us.
Go deeper: Read our Axios deep dive on the new political and economic order
AmGov, Axios and the News 