“Middle class incomes have been stagnant for years. Income inequality has gotten worse. Forty percent of American workers earn less than $15 an hour, and about 5% of full-time American workers earn the minimum wage or less, which is certainly not a living wage. In addition, 40% of Americans don’t have $400 to deal with unexpected expenses…”
The above reads like a speech from a left-leaning Democratic presidential candidate, an inconveniently accurate think-tank report, or even something I’ve written more than once. But it comes from the latest letter to shareholders by JPMorgan Chase CEO Jamie Dimon.
The Post’s headline read, “Capitalism in crisis: U.S. billionaires worry about the survival of the system that made them rich.”
On the surface, it’s an odd time for such soul-searching. The official national unemployment rate was 3.8% in March, lowest since the 1960s (3.5% in Seattle-Bellevue-Everett). By this summer, the expansion will become the longest on record. Growth is decent and inflation is low.
President Trump said, “Wages are rising at the fastest pace in decades.” Not surprisingly, this is not true, but pay has seen a modest bump as employment has risen.
Yet a Gallup poll last year found that only 47% of Democratic and Democratic-leaning voters viewed capitalism favorably, compared with 56% in 2016. Last year, 57% of this same cohort had a positive view of socialism. Fewer than half of young Americans of any affiliation viewed capitalism positively.
This bolsters the findings of a Harvard survey in 2016, which found that a majority of millennials do not support capitalism.
Social democracy is openly embraced by the growing Democratic left, including some presidential candidates. Even independent presidential hopeful, billionaire Howard Schultz, I-Sonics, talks of the “the growing crisis of capitalism in this country.”
All this and more is getting the attention of at least some billionaires. Commentator and wealth manager Barry Ritholtz put it like this: “Consider: In 1966, the ‘bottom’ 90 percent captured 64% of the national income. By 2014, that had slid to 54%. The top 10% expanded from 37% to 47%. The biggest gains came not from the top 1%, but from the top 0.01% (the 1 percent’s 1%).”
In some ways, we’ve been here before and better days came. The Gilded Age was swept aside by Progressive elements of both parties, with trust busting and the establishment of business regulation, the national income tax and Federal Reserve.
Capitalism faced its greatest crisis with the Depression, when communism or fascism seemed for many inevitable alternatives to a discredited system. The hard left never forgave Franklin Roosevelt for saving capitalism through tough regulation and unprecedented federal intervention in markets, as well as creation of Social Security.
This was the capitalism that gave us the zenith of the middle class, until the consensus broke down in the late 1970s and a long binge of financialization and deregulation set us up for the crisis of a decade ago.
President Barack Obama and a well-led Federal Reserve saved us from a second Great Depression. But mistakes were made. The rule of law was not brought to Wall Street. The banksters got away with it. Inequality and the accumulation of ever-greater wealth by the investor class increased, while little help came to underwater homeowners. The Republican Congress instituted a ruinous austerity that prevented the kinds of federal investments that would have helped stabilize the middle class.
Never let a crisis go to waste?
Ritholtz writes, “Not this time around. Instead, we have Popularism, grifters, and other carnival barkers. It is not surprising the electorate is angry; it is disappointing they have not found their champion — yet.”
As I’ve noted before, the outcome depends on what one means by “capitalism” and “socialism.”
Millennials are too young to remember successful regulated capitalism before the oligarchs amassed such financial, monopolistic and political power. They are too young to recall the utter failure of real socialism in the Communist bloc during much of the 20th century. Even many billionaires worried about capitalism are supporters of today’s highly consolidated industries, busted unions and lapdog regulators.
Like many people in blue bubbles such as Seattle, I’d be fine with northern European-style social democracy. Universal healthcare, free or affordable university education, abundant transit and high-speed rail. What’s not to like?
Plenty, in the view of much of the country. Run a Democratic “socialist” in 2020, add in voter suppression, Kremlin mischief and the self-interested spending of the rich not as enlightened as Dimon, and we have Donald Trump for another four years.
Historians may look back on 2016 as a watershed. Although Hillary Clinton, bearer of the neoliberal-globalist center, won the popular vote by a historic number, we vote by states. And about 80,000 votes in three states decided the election for Trump.
Backed by the wealthiest cabinet in history and two years of GOP control of both houses of Congress, he passed tax cuts primarily for the wealthy, reduced corporate taxes which mostly went to stock buybacks and is wrecking regulatory agencies for the inside. It’s a new era of laissez-faire that can’t end well.
The billionaires are right to be worried.