David Leonhardt writes about Peter Georgescu, a “chairman emeritus” of Young & Rubicam.
Peter Georgescu — a refugee-turned-C.E.O. who recently celebrated his 80th birthday — feels deeply grateful to his adopted country. He also feels afraid for its future. He is afraid, he says, because the American economy no longer functions well for most citizens. “For the past four decades,” Georgescu has written, “capitalism has been slowly committing suicide.”
This is hardly news; a lot of people have noticed that capitalism as currently practiced is not sustainable. I certainly don’t think capitalism in its current form is sustainable. My only question is whether it will take the rest of us and the planet with it when it goes. See, for example, “Capitalism Is Devouring Itself” and “Destroying Capitalism to Save It” from The Mahablog archives. This is in the New York Times because a big-shot capitalist admits it’s true.
Georgescu’s life story is about how a Romanian boy who grew up with Nazi and then Soviet occupation escaped from behind the Iron Curtain and made good in America. He succeeded because he got a lot of help from people who were inspired by his story and opened doors for him.
“The hero of my story,” Georgescu said to me “is America.” Over and over, he said, people who didn’t have any obvious reason to care about him helped him: the congresswoman who didn’t represent his parents’ district; the headmaster who’d never met him; the ad executives who mentored him.
All of them, he believes, were influenced by a post-World War II culture that (while deeply flawed in some ways) fostered a sense of community over individuality. Corporate executives didn’t pay themselves outlandish salaries. Workers enjoyed consistently risingwages.
Things began to change after the 1970s. Stakeholder capitalism — which, Georgescu says, optimized the well-being of customers, employees, shareholders and the nation — gave way to short-term shareholder-only capitalism. Profits have soared at the expense of worker pay. The wealth of the median family today is lower than two decades ago. Life expectancy has actually fallen in the last few years. Not since 2004 has a majority of Americans said they were satisfied with the country’s direction.
Peter Georgescu also is the author of a few books, including Capitalists, Arise! End Economic Inequality, Grow the Middle Class, Heal the Nation. In 2015 he wrote an op ed for the NY Times titled Capitalists Arise: We Need to Deal With Income Inequality. So, up to a point, he gets it. Leonhardt continues,
He talks about the signs of frustration, in both the United States and Europe. He has seen societies fall apart, and he thinks many people are underestimating the risks it could happen again. “We’re not that far off,” he told me.
I agree; I think if current trends are not reversed pretty damn soon we face a national implosion, potentially followed by a planetary implosion. But Georgescu thinks that business leaders can fix this problem; I think he is hopelessly naive.
Georgescu may believe that the capitalism of the post World War II period was some kind of norm, but it wasn’t. Capitalism wasn’t a major factor in the U.S. economy until the mid-19th century, but from that time and until the Great Depression it was marked by its careless exploitation of workers and resources. It didn’t change into the generous and kindly capitallism Georgescu remembers until taken into hand by FDR’s New Deal. Paul Krugman wrote on his old New York Times blog,
The Long Gilded Age: Historians generally say that the Gilded Age gave way to the Progressive Era around 1900. In many important ways, though, the Gilded Age continued right through to the New Deal. As far as we can tell, income remained about as unequally distributed as it had been the late 19th century – or as it is today. Public policy did little to limit extremes of wealth and poverty, mainly because the political dominance of the elite remained intact; the politics of the era, in which working Americans were divided by racial, religious, and cultural issues, have recognizable parallels with modern politics.
The Great Compression: The middle-class society I grew up in didn’t evolve gradually or automatically. It was created, in a remarkably short period of time, by FDR and the New Deal. As the chart shows, income inequality declined drastically from the late 1930s to the mid 1940s, with the rich losing ground while working Americans saw unprecedented gains. Economic historians call what happened the Great Compression, and it’s a seminal episode in American history.
Middle class America: That’s the country I grew up in. It was a society without extremes of wealth or poverty, a society of broadly shared prosperity, partly because strong unions, a high minimum wage, and a progressive tax system helped limit inequality. It was also a society in which political bipartisanship meant something: in spite of all the turmoil of Vietnam and the civil rights movement, in spite of the sinister machinations of Nixon and his henchmen, it was an era in which Democrats and Republicans agreed on basic values and could cooperate across party lines.
The great divergence: Since the late 1970s the America I knew has unraveled. We’re no longer a middle-class society, in which the benefits of economic growth are widely shared: between 1979 and 2005 the real income of the median household rose only 13 percent, but the income of the richest 0.1% of Americans rose 296 percent.
And, of course, the late 1970s were all about the rise of “movement conservatism” and Reaganomics. And, in a lot of ways, we’re back to the Gilded Age. And it has to be acknowledged that this is what capitalism is without a whole lot of government interention to keep it honest.
The mistake most people make in looking at the financial crisis is thinking of it in terms of money, a habit that might lead you to look at the unfolding mess as a huge bonus-killing downer for the Wall Street class. But if you look at it in purely Machiavellian terms, what you see is a colossal power grab that threatens to turn the federal government into a kind of giant Enron – a huge, impenetrable black box filled with self-dealing insiders whose scheme is the securing of individual profits at the expense of an ocean of unwitting involuntary shareholders, previously known as taxpayers.
Yep. And that’s pretty much what happened.
The young folks think “capitalism” is a dirty word, and I don’t blame them. I hope that the future can be saved for them.
Business leaders cannot be trusted to fix the mess they are making, even though a few of them see that it’s a mess and that it cannot continue indefinitely. Business never has fixed it in the past, and even now too many of them are happy to leave a dead planet to their grandchildren as long as they can make more money now. This cannot go on. If Republicans aren’t pried out of government in 2020 I despair that we will run out of time to prevent disaster.
A few comments – I was listening to a conservative lecture against socialism and she deftly (and deliberately, I think) conflated capitalism with free enterprise. Capitalism today is all about creating monopolies, assimilating competition, and screwing the consumer thereby. Free enterprise is a different animal altogether and frequently a better option than a gov't solution. Socialism is the system you insert to protect citizens from nescessary monopolies (water, electric, roads) and situations where the consumer is at the mercy of the capitalist system for an essential product/service (health care).
A corporation has been called a "legal fiction" – it's a device we invented to allow a large group to own a business enterprise w/out getting thousands of signatures for every contract. Corporations ONLY exist because we allow them to – if you believe the 50 states should in theory be the voice of the people. In other words, when Florida grants me the right to administer a 501 non-profit corporation, it's the people who inhabit Florida who granted that charter for the benefit of the people of Florida. Corporations are supposed to serve the people, not the other way around. The proof is that "we" allowed them to exist.
There's nothing inherently wrong with a corporation – it's when they get so big they can manilulate the governments and agencies that should be regulating and restraining abuses we get in trouble. (I like Liz Warren and her understanding of the theory and practice of limiting corporations. She's too wonky for most folks, which may be her undoing, but it's her strength. Flashy candidates usually don't get the underlying theory.)
The next election (not just the presidential contest) is going to put socialism on the ballot. Convincing low-information voters that socialism will put limits on the abuses of capitalism while preserving the benefits of free enterprise is the message that has to get out. Somehow.
JC said something about giving to Caeser what's Caeser's. That's applicable to socialism. Some systems work better when run by the government or tightly controlled by government. Other things are better able to serve the needs of people through a competitive free-enterprise environment. It's not that hard to understand.
"Socialism is the system you insert to protect citizens from nescessary monopolies (water, electric, roads) and situations where the consumer is at the mercy of the capitalist system for an essential product/service (health care)."
E.g. its needed government regulation, e.g. Glass-Steagall, the CFPB, anti-trust regulations, unions and other regulations put in place starting in the 1930s that put parameters on the excesses of capitalism leading to growth of the middle class and a check on income inequality.
Doug: " The next election (not just the presidential contest) is going to put socialism on the ballot"
I agree with yours and maha's general points, but putting socialism on the ballot in this country is a loser. The word itself garners all sorts of stereotypically (is that a word) bad feelings. Regulated capitalism is a more palatable term? The problem with branding something socialism is that the entire information system in this country is run by for profit corporations, I don't think they can be trusted to explain that the nuance? I think most people hear the word socialism and they think about the dull days of the Soviet Era, they hear the word Capitalism and they think back to the Baby Boom 50's in this country, it isn't necessarily true it's just how many Americans are wired? Americans love social security, medicare, national highways, they love all the stuff that socialism brings but if you call it socialism they just won't buy it.
I like Bill Maher’s rebranding: Capitalism PLUS.
uncledad – respectfully, let me say this. The GOP is putting 'socialism' on the ballot. Fox is doing it now. The economy is weakening. Job growth was anemic last month – the feds continue to downgrade the expected GDP growth. I predict that long before the primaries are over, Trump is not going to be able to run on the economy because all indications will be negative – mild job losses and flat growth. (The fed will continue to raise rates.)
The wall and racism will only carry Trump so far. Opposing health care (despite claims to the opposite) is not going to win the middle. Climate change denial thrills Trump's base and nobody else. If Trump can't be for something that resonates, he has to strike fear into the middle class worker.
Socialism is it. I don't care who we select – Trump is going to brand them a radical socialist. That's going to excite our base unless our candidate runs as a capitalist corporatist. If he/she does that, we will bleed to death from the loss of new young voters. The issue for our candidate to clarity, and voters WILL be listening, is the degree and manner in which our Democrat will use the power of government to improve lives (and who will pay the bill). There is no love in the middle for the ultra-rich.
EVERY country with better health care than the US is socialistic (to a degree). Every country aggressively fighting climate change is socialistic (to a degree). Every country with safeguards to protect the citizens from pollution, who guarantees clean air and water is socialistic (to a degree). Every country with the infrastructure to be an industrial powerhouse so free enterprise can thrive is socialistic. The failure of Venezuela is not that they went to socialism – it's that the government became a complete puppet of the ultra-rich who wanted all the wealth from the oil-rich country and would share none with the people.
We have to beat the GOP at the word games and assign meaning to what the Democratic candidates want to do. Make their accusations resonate with voters as the Democrats commit to using power to do good. We have a good group running. Thay all embrace using the power of government to improve our lives. (They differ in the degree and manner thay'd do it.) The GOP is running on dismantling the power of government to regulate big business and deprive citizens of the benefits. (Look to Trump's last budget and where he proposed cuts.)
Just prior to the Great Depression the voters of this country were ultra-conservative. Loosing everything while the ultra-rich continued to thrive turned voters radically to FDR's policies. The New Deal worked (something I was taught in school.) The timid candidate who won't call the national condition for what it is plays directly into the Fox narrative!
My observation is that capitalism has become sacred in some people's minds and socialism is equated with communism. Until people's perceptions change, there will be a battle in politics and this country. I believe it will change but it will take time and it may require actual physical fighting. Remember the Revolutionary War and the Civil War. Even with the Civil War, there are still some people who believe whites are superior to blacks and browns. Even though Abe Lincoln opposed slavery, he did believe in the superiority of white people. From what I learned in my education on genetics, it is inevitable that if the races mix, the "pure" white race will eventually disappear. This all has to do with dominant genes.
As far as our country's dominance, I really believe it has to go also. All great nations run their course and another takes over. Look at Rome and Great Britain. I am not an expert on history but it looks like either China or Russia will be the next. Anyway, those are my thoughts and now I need to rest my brain.
My observation is that capitalism has become sacred in some people’s minds and socialism is equated with communism. Until people’s perceptions change, there will be a battle in politics and this country.
Or the people themselves will change. Young people don’t have these perceptions, and view socialism more favorably.
This is an excellent post. I too think that capitalism (or neoliberalism is more like it, since it's far from actual free market) is destroying itself. I'm also a BIG fan of Elizabeth Warren, strictly because of her understanding and previous work she done. – – Ranch Chimp Journal