I see a lot of calls to end capitalism as if that were a button we could press. And assumptions that capitalism is the cause of our problems and that abolishing it would be the obvious solution.
Before I evaluate this idea, I want to define some terms.
Merriam-Webster defines capitalism as:
an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market
Okay, sounds vaguely familiar. Oh, there’s that term “free market,” I’ve heard that before.
But Oxford Languages defines it this way:
an economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state.
That also feels right. There’s that “profit” term I’ve heard that.
I’ll just cut to the chase right now, there are two strong definitions of capitalism that appear to be influencing the debate, and you can even see their influences in these differing definitions from dictionaries.
We’re going to pull one out–we’ll call a “free market” economy one in which, for the most part (we’ll allow some regulation), prices are set by supply, demand, and competition. We’ll associate it with “free enterprise,” which we’ll take to mean that people can start businesses more or less at will (again, we’ll allow for some regulation here).
I want to contrast that with another definition of capitalism, one closer to what Marx called the “Capitalist Mode of Production.”
The key I want to highlight here is the extraction of surplus value by the owning class for the purpose of capital accumulation.
In other words, many people use the term capitalism to mean an economy set up for the benefit of the capitalist.
I don’t want to use the term capitalism here. Instead, I’ll split the two. When I talk about free markets and free enterprise, I’ll say that. When I talk about a society for the benefit of capitalists, I’ll say oligarchy. I am not claiming these terms are more correct, but rather, it’s important to differentiate.
Back to our Question: Should we Kill Capitalism?
The answer? Crush the oligarchy, and save the free market.
Read on to figure out why.
Okay, you’re King for a Day, and Oligarchy is Dead; Now What?
Well, let’s fix society, right? We need to take the wealth from the wealthy and give it to the rest of society.
Let’s start with a proposal that went nowhere during the olden days, putting a 45% tax bracket on the top 1% of income earners.
A 45% tax bracket on 1% income earners nets $267B a year
Not bad. Now, what to do with it.
I know; we’ll end homelessness!
Taking a huge bite out of homelessness may cost around $30B annually
Now, this doesn’t solve homelessness, but it goes a long way. Estimating how much it would cost to end homelessness gets really tricky really quick, but we at least have a floor here. Let’s be generous and say $30B solves it.
We’ve got $237B left, and we’re off to a great start!
I know; let’s make college free. How much would free tuition at all state universities cost? About $50 Bn
Damn, seems cheap. $187B left, and we have no one sleeping on the streets, and anyone can get a four-year education if they want it.
Why not keep up the pace? Let’s end world hunger.
That would cost upwards of $265B per year, according to some estimates. We can’t afford it.
Squeeze those Fat Cats Some More!
45% tax bracket? Please, I thought we said we were going to kill the oligarchy. Let’s put a 70% tax bracket on anything over $10MM. No one needs that much money!
A 70% tax bracket on $10mm above gets only $72B additional a year.
We’re still a bit short, but let’s be generous and ask the nation to look in its couch cushions. Viola, we solved world hunger.
Though, we’re out of money again. Thankfully, we solved all of society’s problems.
Let’s Kill Poverty!
What’s that, you say? There are still people suffering in poverty? Alright, let’s kill poverty. It should be easy. We’ll figure out how much it costs and find some money somewhere. After all, we’re kings, people have to do what we say, and it all magically works out.
Looks like it will cost $539BN a year to end poverty. Oof, this one is painful. Though, I’m sure poverty is more painful. Let’s do it. Where can we get the cash? We probably can’t get much more out of the rich without breaking out the guillotines.
Make Love, not War
You know what we don’t need anymore? A military. I mean, sure, we live in a world where fascist despots invade their neighbors or threaten to.
Still, Noam Chomsky says that we should all just surrender to save lives, and we probably all secretly started these wars according to this conspiracy theory I just saw, so I bet we’d be safer if we had no military.
What’ll that get us?
The military budget in 2021 was $801B so that’s more than enough to cover ending poverty. We’ll have $268B left over! Huzzah!
Money to burn, money to burn. What’s next? Let’s solve society!
Oh, I know. Let’s finally do free health care! No one should have to go without insulin. What’s that cost?
Looks like Medicare for all would cost about $3.4T a year. That’s great; that’s $268 – $3.4, so we’ve got $264.6B left.
Wait, what? That was a T, not a B?
Ah, shit. We can’t afford that. We need more money again.
Fuck it, bring out the guillotines, and seize the means of production!
If we just grab all the wealth of the top 1%, we’d get $45.9T. Now, this is a one-time lump sum, not a yearly thing. Still, should be plenty we can do with that. For instance, pay for medicare for all for… about 14 years. Uh oh.
Where are we going to get more money? We’ve taxed the top earners and even just seized everything the top 1% has. The top 2 or 5% actually doesn’t have that much because wealth is so concentrated at the top.
Whatever, we’ll think of something, we have 15 years. And we’ll need to think of something in the next 15 years because of that whole global warming thing.
Oh shit, we need to do something about that! Okay, we’ll have fewer years of free health care, but we can put that 1% wealth to work fixing the climate.
Even if we didn’t take the free health care route, we couldn’t afford to stop climate change.
What’s the Point of this Exercise?
It is 100% the case that wealth is concentrated in the wrong hands. And society could do a lot better things with that wealth than letting it sit in trust funds.
But there is not enough wealth to solve social problems. We run out. There is a myriad of other issues that I didn’t touch that need money. Reparations, repatriating stolen land, free child care, etc.
The economy is not a zero-sum game. I think a lot of people assume that because there is so much wrong in the world, it must mean that others must be benefiting a lot more. All we have to do is balance the equation, and poof, the wrongs are gone. But that just isn’t the case–the economy isn’t zero-sum. People suffering isn’t proof others aren’t suffering, and trying to just equalize things doesn’t solve the problem because there’s too much suffering.
Can we abate it some? Yes!
Priorities, Priorities, Priorities
Fighting homelessness is relatively cheap! Fighting climate change is really expensive. We need to do both, but what something costs should make you think about it’s value.
If you knew that free public college would take only a small bite out of the military’s budget, you might be frustrated that its so hard to get attention to that issue. But, if you knew that no matter what we did, simply moving money around won’t stop climate change, well, you might have to think of different ideas.
This is economical and financial thinking. This is the return on investment. It’s a useful concept.
I keep seeing folks think we’re going to just abandon money and banks and stocks, and somehow magically, everything will work, and they don’t even apply basic economic principles to their plans.
Aside:
I mean seriously, how are we going to do things without money? The soviets still used money. It’s easier than passing out different ration cards for everything. Were you going to just abolish money then hope people charitably started building houses for the homeless rather than whatever else they were doing? At some point, the whole plan falls apart unless you assume you’re going to make people do what you want at gun point.
Investment!
We simplified some of the math above because that’s how I see people wanting to “abolish capitalism” think online. Simple balancing an equation. But the fact is, medicare for all may end up being cheaper since it would supplant our other medical bills.
Free college makes us money. And getting rid of homelessness could save us on hospital visits.
This is more financial thinking. This time we’re using the concept of opportunity costs–because we did one thing, we didn’t do another. In this way, we can spend money but end up making more money in the long run. It’s magic. And it’s important.
You have to get beyond zero-sum thinking because it blinds you to opportunities to use wealth to create more wealth.
We Have to Grow
As we saw, we can kill the rich, dismantle the military, and still not have enough money to cover all the things we want to cover. Do we just despair?
No–we grow. We grow the amount of money. We need more wealth to pay for the things we want. Star Trek society didn’t get the way it was by just re-arranging who got what; they also invented new technologies and new ways of working. They invented new capital. It’s honestly the only path forward.
Back to the Question
Why must we save (regulated) free markets and (regulated) free enterprise? Because it’s the fastest way to grow wealth.
If we look at what’s most likely the most accurate numbers of the Soviet Union versus the United States, the US still managed to outpace the USSR by about 40%.
“Oh,” you might say, “The USSR wasn’t really socialist.” Okay, you can go that way if you want to, but the onus is on you to explain what would be a good comparison of a non-free market system.
I mean, you can just hand wave and say apparently some Germans figured it all out in the 1800s and that anyone who tried to use their system did something wrong–and ignore my protestations that “either your system is impossible or imaginary.” But hey, you’re the one saying all economics research and mathematics for the past century and a half is apparently a conspiracy by Exxon to make socialism look bad.
The Takeaways
Economics is cool. It helps us make decisions. Using economic models may not actually model how humans behave, but that doesn’t matter; it still models how we should behave if we were rational. In other words, us making the right economic choices doesn’t rely on other people making good economic choices.
Free markets and free enterprise are part of the solution here. We have to grow the pie. Dividing the pie up a different way is absolutely also part of the solution here. The top 1% just have stupid amounts of wealth, and there’s a lot of suffering we could end by taxing more fairly.
Economic and financial thinking can help you solve your other problems too. For instance, do you want to lower the defense budget? Then crush defense oligopolies, don’t just try and make them skimp on uniforms. We could be getting way more stuff for our defensive dollar (or the same stuff for fewer dollars) if we understood that competition lowers prices, and thus, we want competition in our defense contractors.
Do we need to kill capitalism? It depends on what you mean by capitalism. But maybe we just shelve that question for now. We can all agree we need to crush the oligarchy–even if I think maybe we can save free markets and free enterprise along the way.