A number of people who comment on this site are consistently critical of capitalism. I, on the other hand, am a committed capitalist, provided that economic system is properly defined and provided it is limited to economic areas in which competitive markets work.
The system in America today–the system that pisses off so many contemporary Americans– isn’t capitalism. It’s corporatism.
In a capitalist system, it is true that some people will do better than others. There is nothing wrong with that; the promise of a bigger reward for building a better mousetrap spurs innovation and benefits us all. It’s only when the rewards are disproportionate to the value of the activity involved– and especially when those rewards become disconnected from actual economic productivity– that capitalism devolves into corporatism, and things get seriously out of whack.
Competitive markets have numerous advantages in the areas where they work. Unfortunately, in the United States, we have insisted on “competition” in areas where markets are demonstrably inappropriate. From health care to education to prisons, we have pursued a privatization agenda that benefits the entitled and well-connected without delivering any of the benefits of a true market.
That may be crony capitalism, but it sure isn’t the real deal. As I wrote a few years ago,
When what people make is a reflection of their connections and/or the success of their lobbyists, it’s time to consider whether we still have a capitalist system, or whether what America currently has is corporatism–a system where power is exercised through large organizations in pursuit of their own economic agendas, to the detriment of the common good.
Capitalism creates opportunity; corporatism keeps it “all in the family,” exacerbating inequality.
If you have any doubt that the United States no longer practices capitalism, take a look at the recent, high-profile (arguably obscene) “competition” for Amazon’s second headquarters. As the Intercept recently reported,
Amazon’s announcement thisweek that it will open its new headquarters in New York City and northern Virginia came with the mind-boggling revelation that the corporate giant will rake in $2.1 billion in local government subsidies. But an analysisby the nation’s leading tracker of corporate subsidies finds that the government handouts will actually amount to at least $4.6 billion.
But even that figure, which accounts for state and local perks, doesn’t take into account a gift that Amazon will also enjoy from the federal government, a testament to the old adage that in Washington, bad ideas never die.
Enterprise Zones, one of those ideas that the Intercept characterizes as “bad,” has been resurrected in the GOP’s 2017 “gift to rich people” tax bill.
Under the tax overhaul signed by President Donald Trump last year, investors in opportunity zones can defer paymentsof capital gains taxes until 2026, and if they hold them for seven years, they can exclude 15 percent of the gains from taxation. If investors carry the opportunity zone investment for 10 years, they eliminate taxes on future appreciation entirely. Investment managers have been salivatingat the chance to take advantage of opportunity zones. Special funds have been built to cater to people holding unrealized capital gains — such as Amazon employees with large holdings of company stock.
The article details the goodies taxpayers are providing one of the most successful companies in the country, and notes that Amazon has already received $1.6 billion in state and local subsidies for its warehouses and data centers.
On the same day as the New York and Virginia announcements, Amazon also announced a new “Operations Center of Excellence” in Nashville, Tennessee, a 5,000-worker facility for which the city gave Amazon $102 million in subsidies.
The report notes that these cash handouts don’t take into account “regulatory leniency and accelerated permitting” that Amazon projects routinely get.
We can quibble over what we should call an economy in which there is nothing remotely like a level playing field; an economy that enriches the already well-to-do at the expense of the rest of us and routinely socializes risks and privatizes profits, but we shouldn’t make the mistake of calling it capitalism.