Is There a Crisis in Capitalism?
gatesnotes.com
gatesnotes.com
Naturally enough, a billionaire megaconsumer, having bought a moat intended to separate himself comprehensively from physical reality, isn't fussed. But he's a mammal. All mammals live in ecologies, not economies, whatever they tell themselves.
If anything environmental decline can be attributed to the form of democracy in which companies control government policy via donations and lobbyists.
The government policy thus serves the interests not of the people but of the companies.
Companies have no interest in anything but furthering their own goals, typically to make money without any attribution of the collateral costs such as environmental vandalism.
This is not about capitalism - it's about broken democracy, subverted to become some weird system of government that serves companies and vested interest above those of the citizens.
Nor are billionaires the cause of poverty. There's plenty of money to go around and plenty of resources to go around with room to spare for billionaires. Poverty exists because governments expend the resources to the betterment of companies rather than the citizens. If we suddenly took all the money from all the billionaires this would make zero difference to poverty because the reasons for poverty have little or no relationship to the existence of billionaires.
These kinds of companies are precisely the form in which capitalism has shaped them. Cost externalization (collateral costs, as you call them) are a competitive advantage, and under an improperly regulated capitalism these entities are incentivized to find and exploit every single one of these advantages to dominate and eventually monopolize their market.
What we are debating now is if it even possible to create a system of properly regulated capitalism. Will capitalism necessarily exhaust the planet, capture and subsume every form of regulatory control and destroy itself.
I think our current form of government is completely unsuited to saving civilisation.
There will be an environment driven revolution within 20 years.
The current generation of children will include deeply radicalised kids so disillusioned with government that it will lead to an overthrow.
Exactly what that will look like cannot be predicted. I think it will be violent because the government has so many protections in place to prevent fundamental change, but that is what future generations will want, due to the dying earth.
We're seeing hints of that now, and it's one of the few chinks of light. I don't see how they can succeed, but I don't take my own predictions too seriously
It would make a massive difference. Without billionaires, there would be more millionaires[1], and their collective ability (and collective incentive) to invest their money efficiently would be far greater. More minds making more sophisticated investment decisions under more pressure using smaller amounts of money.
A billionaire investor is a lazy investor. They can afford to make blanket decisions which ignore all the intricate negative ramifications of those decisions.
When you factor in the inefficiencies created by corporate monopolies and index funds which reward lazy investors without any risk[2], the people who end up paying for those inefficiencies are members of the working class.
[1] When we consider that supply tends to adjust to meet demand, we can deduce that if we were to artificially limit the amount of supply that any single person could reap the rewards from (which is equivalent to artificially limiting wealth accumulation of a single person), then we would need a larger number of people to supply the same quantity of goods/services.
[2] The risk is essentially 0 because index funds such as S&P500 spread risk across many stocks such that only the complete and sudden collapse of human society could result in any significant loss of investment. As a human investor, if society were to collapse completely, you probably wouldn't survive anyway, so within the scope of human experience, your risk of living to see your investment fail is 0.
> environmental decline can be attributed to the form of democracy in which companies control government policy
These are the same thing everywhere except in theory.
Whether that's true or not, many billionaires (Bezos, Thiel etc) are certainly propagandists of death cult capitalism.
This seems like a pretty extreme viewpoint. Can you explain your reasoning?
- theoretical: economic 'growth' is (a) central to capitalism, and (b) identical to global entropy increase (decoupling is a faith-based myth). So-called 'growth' IS ecosystem destruction
- empirical: numberless studies showing nearly every ecosystem to be in catastrophic decline. In short - everything is dying (and astonishingly fast - on human-generational timeframes)!
As for 'extreme': in corporatist media circles, sure. But there are plenty to whom it's perfectly commonplace (ecologists, indigenous peoples, etc), and has been well-understood for decades.
However, I've read that they are taking air pollution more seriously: https://phys.org/news/2019-03-china-air-pollution.html
>The Aral Sea was once the fourth-largest lake in the world. But in the 1960s, the Soviet Union diverted two major rivers to irrigate farmland, cutting off the inland sea from its source. The Aral Sea has been slowly disappearing ever since [0]
We need a new solution. Not capitalism, not communism. Something better. And I have zero idea on what it would look like. But the Earth need one nonetheless.
[0] https://earthobservatory.nasa.gov/features/videos/shrinking-...
As for what needs to come next, that's well beyond my abilities to come up with.
The physical problems of so-called 'growth' are many. They number in the thousands, and more are discovered with unremitting and accelerating frequency. Climate collapse is just one (albeit the most currently newsworthy). Trying to nail each one with the vast range of accounting and pricing mechanisms required would cripple capitalism. New rules and regulations would have to be enacted, and harmonised worldwide, constantly. Nostalgic capitalists call this 'green tape', and their solution is to pretend the real (physical, ecological, complex) world doesn't exist. Third Wayers instead pretend that the green tape problem doesn't exist. They both get this wrong because they have sworn religious fealty to fake 'growth' ('religious' is meant quite literally here - it has its historical origins in European variants of Christianity, and questioning it in public is taboo).
Capitalism, whether nostalgic or third way, collapses ecologies because of its inherent allegiance to a fictional concept of growth. Ecologies are where we live, and we have nowhere else to go, whatever the protestations of capitalist death cult evangelists (Bezos et al).
People see that the benefit the large majority of the wealthiest people / organizations bring to society is far from optimal compared to their capacity to do so.
I think it's not necessarily that there is an enormous divide between the wealthiest and the poorest. I think the important point is it requires close to an act of God, as a poor person (or just not wealthy), to make the kind of dent most of us want to make in the universe.
I think capitalism at its core: the human traits necessary to wildly succeed in it, are not the most desirable traits to most people. Yet we're optimizing civilization such that we should be striving to achieve them in order to live successful lives.
Strange then that in the US the "booming cities" are voting for more restrictions on capitalism than the "struggling small towns". Yet this is his primary explanation for a crisis in capitalism?
Does he mean that the crisis in capitalism is caused by its success? There may be something to that. The most vocal protesters against capitalism tend to come from more economically privileged classes, judging by, say, college students versus blue collar workers. The Australian elections and Brexit referendum echoed that pattern. It's as if protesting capitalism is a luxury good.
When you're struggling to put food on the table you don't have time to philosophise about how a better future would look.
You do have time to do the less coal = fewer jobs for your immediate community math.
Says the man that used his monopoly to crush his competition, created embrace/extend/extinguish and become the richest man in the world.
Exciting now that there are no stakes for him he's thinking about others (in both this and his other philanthropic adventures).
Bill Gates is a bully, and no matter how much money he throws at malaria research to redeem it, the sad bit is that he set the bar for Bezos, Zuck, Kalanick et al to reach and they've largely reached similar heights because over the years the US government has successfully been defanged.
And regarding the Gates Foundation:
> ...there’s clearly a conflict of interest that Gates does have that’s at stake here. And that’s this, you know, look, if you look at one of the main problems that the Global South faces right now is that they have a lot of difficulty paying the patent licensing fees that they need on sort of basic medicines and technology including for renewable energy access. And one of the reasons for that is because of the TRIPS agreements, the Trade-Related Aspects of Intellectual Property Rights, which is an agreement that came into force under the World Trade Organization in 1994, which basically massively extends corporate patents law around the world. And Gates has benefited singularly from that because that’s where the vast majority of his profits come from and what funds the Gates Foundation is rent effectively on intellectual property.
https://medium.com/@CitationsPodcst/episode-58-the-neolibera...
Was.
People change in 20 or 30 years. I sure don't want to be judged by some of the things I did 30 years ago, when I was a hypercompetitive jerk (also socially clueless, and a few other things).
And I don't think that the "vast majority" of Gates' profits came from patents in the Global South. It came from copyrights, and primarily in the First World.
So, frankly, I don't really care that Bill Gates is now a soft sweater-wearing sexagenerian who likes to talk about solving global problems with his ill-gotten gains, instead of a cutthroat corporate executive crushing his competitors and perverting the market in the process. The fact is that one led to the other.
I want to hear less from delusional, egotistical billionaires who think that they themselves can solve the problems we face as a society, and more from our actual, you know, political leaders. I didn't vote for Bill Gates, thank you.
Instead of feeling, you can instead learn and think about how wealth and value works. Capitalism allows ownership of production. Produce something valuable enough and you'll make your billions.
There are plenty of people on this forum with a 7 or 8 figure net worth from starting a business, and even a few billionaires like the founders of Dropbox and Stripe. Maybe ask them how they did it instead of assuming the worst.
At the very least, the fact BeOS isn't giving Windows and Apple a run for their money is a travesty.
The idea that super-rich people need to be super rich to do great things and society can't just come together to do them (Do you have the same reverence for the NIH? An entity that actually pays for indirect costs, unlike the Gates' Foundation.) is such a farce.
The poor stay poor, the rich get rich.
That's how it goes.
If you provide value, you will get out of poverty and even get rich. You don't always need money personally to provide value.
Think it's unfair for one person to negotiate against a company? Maybe, but that's where unions become useful.
There's ill will against them, and they're not widely used (at least in tech), but maybe that's the problem. If so it's not a problem worth tearing down the whole system.
Actually, it seems like not even in the past you did, since many many companies were started in a garage.
Here's Steve Wozniak debunking the Apple garage myth:
https://www.theguardian.com/technology/2014/dec/05/steve-woz...
And an entire thread debunking the "started in a garage" for the market dominators of today:
https://twitter.com/historic_ly/status/1119980086420299777
These founders have always had some access to resources above and beyond what is considered "standard issue." It's about time we get realistic about the necessary conditions that were required to start these radically successful companies, because we shouldn't design economies or social policies around myths.
On a more narrow level -- if people have to worry about food on the table, the stress itself causes IQ to drop, also in experiments.
Of course there are exceptions, but on a statistical level, poverty is inherited -- because of what you mention, not in spite of it!
Three or more if you count more realistic viewpoints.
> Two kinds of people in this system. One of them thinks if you work hard you can climb your way out of poverty through your own self determination and hard work.
Self determination and hard work is necessary for success but it doesn't mean much without opportunity. Opportunity is unevenly distributed.
What one person see as value, which creates someone else's opportunity, is often determined by subjective social and cultural factors and isn't always objective or rational.
If you are unlucky, you have to work more.
If opportunity doesn't present itself, you go look for it.
I studied in the States and some people at my college were being paid $700/mo. on top of dorms if they took at least a handful of classes.
If poverty is inherited it's because of a negative culture and worldview is passed down, not because of money.
That's why they get paid more.
It's about something new versus what we have tried to this point.
I'm amazed people don't see that and simplify the whole thing into "owners exploit workers". It's just absurd.
Saying there's a crisis in capitalism because some people are poor is like saying the Warriors are in crisis because their bench players aren't getting much playing time.
I get that momentum is hard to overcome, but I think a sufficiently competitive system will overcome that barrier and eventually outcompete capitalism as we know it; we haven't found that system yet, though it's theoretically possible we've tossed out some better systems that weren't better enough to overcome the first-mover-after-WWII advantage.
I think the major innovation of the next paradigm shift will relate to how groups of people handle intergenerational wealth (and perhaps some related structural questions), as I think this is the most glaring inefficiency of the American system. This is a minefield of a problem with a lot of naive, popular answers.
It used to work a lot better, but they've been privatizing and monetizing non-stop during my life so far and it's mostly same ice cream/different flavor these days from what I can see.
I ask great authors post this at the start and end of bash of capitalism. It is good we all acknowledge how great markets are, what kind of damage can we do fighting it?
What he's talking about broadly merits being called "problems of capitalism", "injustices of capitalism" or similar labels. These pressing problems but only for those who experience them or those who take the time to discover them.
That said, I think one could say a ruling class that is fairly secure is often ruling class willing to toss some benefits to those below whereas a ruling class that's worried can be a ruling class that grabs everything it can. My feeling is the global ruling class is acting worried.
But runaway inequality and the intransigent insistence of people like Gates that said inequality is not a problem has me questioning whether I need to reassess. (In my view the problem with inequality is that political power corresponds roughly to economic power, so unlimited amounts warp our political system.)
If you're losing people like me, maybe a crisis really is on the way.
Curious as to why? Do you derive your livelihood from your ownership in capital? Or do you have to work, but value private property, markets and liberal economics?
I ask, because when I think of a capitalist, I think of someone whose wealth and power are derived from significant ownership in companies and assets, real or financial.
There are plenty of ideologies that value market economics from the very left to the very right. Examples include market socialism on the left and American libertarianism on the right.
Being against capital is a fairly extreme position that has been tried and has a much worse track record.
What people think of when they say capitalism these days is more like kleptocracy or corporationism.
See also: tech firms in Europe
Your last paragraph is interesting. It has an element of truth, especially for other countries. In the history of the US, though, it seems to me that more benefits were given to those below when we worried about competition from Communism, and that the rise in inequality at least somewhat coincides with the fall of the Berlin Wall.
We used to encourage far stronger social capital (think single-income marriages); that's become a luxury good. And what Gates seems to be calling a "crisis" looks like a crisis in social capital.
I think you can make a reasonable case that all these crises exist. Schumpeter argued that at the heart of capitalism is its ability to diverge from equilibrium and to innovate through the process of creative destruction.
And I don't think much of this is in sight, hell it even has people like Thiel worried who aren't exactly known for being anti-capitalist. You have financial crises that are only barely kept in check, you have the rise of the 'cognitive class' that Bill Gates points to in this article and that will create new widespread divide, you have ecological destruction and you have political inability to cope.
And as can also be seen in this thread, the first response is always to argue that there is no alternative. But that doesn't mean that the system isn't screwed up, it just means as the late Mark Fisher put it, that we have completely abolished our capacity to imagine alternative futures.
Capitalism is essentially our new religion. Suddenly responsible for curing all ills, but it’s simply an economic model.
It necessitates people be productive, but it also inherently directs income from the poorer to the richer. We in the western world redistribute trillions in taxes for social welfare to attempt to offset its natural effects.
As far as creating our utopia, it doesn’t help that political solutions designed to help the middle and lower income classes actually can have the opposite effect.
Does making 401k contributions tax deductible, when big banks take a fee on all such deposits, help the middle class save, or does it just more direct tax dollars into corporate profits.
Making it optional, not requiring employer match and allowing fees to run rampant - not such great ideas.
Vanguard is a great example of a low fee fund manager. Many good companies provide strong match and help secure the future of their workforce. But the problem is that these are all optional in the spirit of personal choice and empowerment.
Problem is, to most people these are disempowering because the compulsion to spend is too high. If all make a little less take home, but their retirement accounts are filled like the IRS coffers, overall prices decline because of less disposable income, but in the end, people get to retire.
For those that unfortunately doesn’t make it to retirement, it would be good if the accumulated wealth could be inherited and/or donated.