James Pethokoukis at the American Enterprise Institute does what they do best at that “think tank”, and that is to present a cogent argument advocating capitalism and free enterprise as the answer to everything. “It is simple, and it is right in front of us,” he argues.
Because AEI is filled with PhD thinkers, they can present very convincing stories with lots of data to seemingly back up their arguments. Being hooked on capitalism, this analyst finds it difficult to break away, however, we must break from capitalism as we must break from petroleum dependency. Both are life threatening drugs for which the end is near.
Dr. John Ikerd, an agri economist argued that capitalism has reached a state of entropy because it is based upon maximizing profit and ever expanding consumption that is driven by ever expanding population. The trouble is that all of that expansion has filled the earth with too many people who have spoiled the air and water in the process, making the planet uninhabitable.
Global warming and carbon pollution are symptoms of the problem. Skewed wealth into the hands of a few and the widening gap between rich and poor is another symptom.
Income redistribution through some sort of socialistic reallocation isn’t right. However, addressing a new model for economic sustainability that balances social and environmental responsibility with the pursuit of a good life for all people should be the goal.
Pethokoukis suggests assisting poor, and those falling from the middle class with assistance so that all can become capitalists. That is a trap because the fundamental problem is unbridled pursuit of profit at the expense of social and environmental responsibility.
Needed is an optimized sustainment model that produces the correct balance. It must begin with the economy being powered by renewable energy, principally solar power, and ending the use of fossil fuels unless mining and using it can be made 100% clean. We have a damage deficit and the earth must be made clean again.
We must address the issue of population size and demographics to resources ratio.
As Pethokoukis indicates, smartly prepared and educated workers will succeed, and the rest had better find ways to be self-sustainable. That should be the focus. Maybe the answer will include more small farmers. People must live with smaller and more sustainable footprints. Let’s pursue that before going off the deep end embracing more capitalism.
The pearl in Pethokoukis' river of fact-filled data is his love for entrepreneurship. Yes, entrepreneurship for the masses is the ticket. (Read the story at the link to see the charts and data)
“The solution to income inequality and immobility? It’s been right in front of us all along
James Pethokoukis | January 14, 2014, 10:25 am
Maybe it really is this simple. Maybe the solution (or at least a big part of the solution) to concerns about income inequality, stagnation, and immobility is to turn more workers into capitalists. Since the mid-1980s, as the below chart shows, owners of capital have been gobbling up an ever bigger share of national income at the expense of labor. Among the possible reasons: (a) the offshoring of labor, (b) automation, (c) the entry of women into the labor force.
The left-of-center response is to redistribute from a tiny slice of wealthy workers and owners to middle-and-lower wage workers. Obamacare and the tax hikes financing it are one example. But as technology makes it ever easier to substitute machines for man, this narrow redistribution strategy hardly seems sustainable, either economically or politically.
In Average is Over, economist Tyler Cowen depicts a future where the tech-savvy 15% get fabulously wealthy, while the rest of us make do with flat wages and free online games. In their excellent new book, The Second Machine Age, MIT’s Erik Brynjolfsson and Andrew McAfee argue that while “there’s never been a better time to be a worker with special skills or the right education … there’s never been a worse time to be a worker with only ‘ordinary’ skills and abilities to offer, because computers, robots, and other digital technologies are acquiring these skills and abilities at an extraordinary rate.”
Follow James Pethokoukis on Twitter at @JimPethokoukis, and AEIdeas at @AEIdeas.