Financialised capitalism never benefits equality

No less than the Institute for Economic Affairs has sanctioned a survey which suggests that the upcoming generations have little time for capitalism.

The first two conclusions are:

1. Millennials have long been portrayed as a politically disengaged and apathetic generation. In recent years, however, that portrayal has changed drastically. The rise of mass movements such as Black Lives Matter, Extinction Rebellion, the ‘Greta Thunberg movement’ and Momentum, together with the ‘campus culture wars’, have turned perceptions upside down. Today, Millennials are much more commonly described as a hyper-politicised generation, which embraces ‘woke’, progressive and anti-capitalist ideas. This is increasingly extended to the first cohorts of the subsequent generation, ‘Generation Z’.
2. Surveys show that there is a lot of truth in the cliché of the ‘woke socialist Millennial’. Younger people really do quite consistently express hostility to capitalism, and positive views of socialist alternatives of some sort. For example, around 40 per cent of Millennials claim to have a favourable opinion of socialism and a similar proportion agree with the statement that ‘communism could have worked if it had been better executed’.

This should be of little surprise.

The fact that more than two centuries of capitalism has landed us at a dangerous disaster of climate heating can be lost on few.

However the survey further suggests that:

None of our results mean that supporters of capitalism should throw in the towel, concede defeat in the battle of ideas and just accept that the future belongs to socialism. But it does suggest that they should take ‘Millennial Socialism’ far more seriously than they currently do. They should treat it as a challenge and engage with it, rather than dismiss it or deny it exists.

It will be interesting to see how the IEA reacts to this….

It is basically suggesting that the game is likely soon to be up – it is difficult to deceive the people for ever – so they need to come up with other arguments.

It will be interesting to see if they do.

For trickle-down economics works as an idea only so long as people do not realise that it is a deceit.

At first when the logic doesn’t work. And then, more obviously, when the facts confirm that there has been no trickle-down

Money spent by government will always be spent by those who have to spend until it eventually arrives with people who do not have to spend it – the rich.

Thus money always trickles up. It stops with those who can afford to save.

No wonder the millennials think current capitalism is pretty poor – because it is. And that more socialism is worth a try – because it would be.

Life need not be as unfair as it is. It is unfair because financialised low-tax capitalism makes it so.

Perhaps the ‘millennials’ are beginning to realise that baked in to the DNA of all capitalist economies is that if you do not tax the rich they will always take your money as rent.

Comments

  1. B. Gray -

    I wish we would stop misrepresenting the argument as capitalism vs. socialism. Socialism is where the means of production is controlled by a central authority, such as a government or community. No one is proposing such a thing. Misuse of the word socialism allows conservatives to create a scary narrative with which they can bludgeon progressives. What is really being proposed is social democracy, which is increasing government intervention in a democratic mixed economy to promote social justice, address climate change, and reduce inequality.

    Also, when we talk about capitalism, a distinction needs to be made between finance capitalism (rent seeking) vs. classic or industrial capitalism (making things). In industrial capitalism, classical economists of the 18th and 19th centuries argued the role of government was to reduce the cost of production by discouraging economic rent seeking from the landlord class, as well as investing in infrastructure and worker skill development/productivity. Industrial capitalism is what led to the rise of the middle class in western democracies, but lost out to finance capitalism in the 1980’s. Finance capitalism promotes rent seeking and capital formation over productive labor output, and bears no resemblance to the capitalism envisioned by the likes of Smith, Ricardo, Mill, and Marx.

    As a side note, the ideological war between China and the west is not about political systems, but rather economic systems. China is developing an economy based on industrial capitalism and is rejecting the financialization of their economy that is being pushed by Wall Street and the City of London. China has seen what the west has done to other developing economies and wants no part of it.

    1. Schofield -

      “Finance capitalism promotes rent seeking and capital formation over productive labor output, and bears no resemblance to the capitalism envisioned by the likes of Smith, Ricardo, Mill, and Marx.”

      Rent seeking was very much in evidence during the years of the American Revolution in the latter part of the 18th century. It’s just simply been refined since. Read about the antics of Robert Morris in E. James Ferguson’s book “The Power of the Purse” charting what really went on in the United States in that period. I think it’s simpler to recognise the human invention of money facilitated “rent-seeking” exploitation.

    2. Peter May -

      @B Gray
      Much agree with the last para..

      I think that when Millenials were agreeing with socialism they were indeed agreeing with a sharing social democracy type socialism rather than heavy duty centralised planning à la USSR.

      @Schofield
      So you are suggesting, I presume that financialised capitalism long predates the Thatcher Reagan changes? But surely the banks didn’t have the power that they do now?

      1. B. Gray -

        Rent seeking goes back to the invention of money, and European economies from medieval times through the pre-industrial period were built around land ownership and tenant farming. Industrial capitalism as envisioned by the classical economists sought to diminish the power of the landed gentry class, and create more equitable economies built around manufacturing. Of course industrial capitalism of the 20th century was flawed but it led to the rise of the middle class and the reduction of inequality after WWII. Finance capitalism of the 1980’s reversed that trend and has since given us levels of inequality not seen since the gilded age.

    3. Andrew -

      There is some force in what you say about distinctions between different forms of capitalism versus socialism or social democracy.

      And indeed the rise in inequality since the 1980s, which coincides with a period of much lower headline rates of tax, and turbocharged returns on capital. That great sucking machine of capitalism.

      But when you say “China … wants” I think you must mean “the Chinese Communist Party wants” because it is not just economics but also very much about the Party and its leaders maintaining a firm grip on the levers of power.

      1. Graham -

        @B.Gray Smith also had much to say about monopolies, which is another form of rentier capitalism. The “robber barons” were a prime example in the late 19thC. Eventually Standard Oil, for e.g. was broken up, but I wonder if it made any real difference. And in the “computer” age there are plenty of examples of what are effectively monopolies extracting huge rents through online shopping, social media etc – all of which are really about targetted advertising through a monopoly on extracting personal data enabling them to “persuade” us to click through and make a purchase, even before we realise what we are doing. (Surveillance Capitalism – Zuboff) Scary stuff.

  2. Peter May -

    @ Graham Unfortunately I very much agree…

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