Kevin O’Leary’s recent comments on about how half the world living in poverty as “fantastic news” are disconcerting to say the least.
According to O’Leary, “It gets them motivation to look up to the one percent and say I want to become one of those people. I am going to fight hard to get up to the top.”
“I celebrate capitalism,” he said.
You can see the video here.
Let’s just take a work at what exactly he is celebrating:
Wikipedia defines capitalism as an economic system in which trade and production are controlled by private parties with the goal of making profits in a market economy. Capitalism.org, a website dedicated to promoting capitalism, posits that capitalism is comprised of: a social system based on individual rights; a political system premised on freedom, and a legal system with the rule of law – all of which, when applied to the economy (the sphere of production), result in the free-market. Investopedia supplements these explanations, stating that capitalism is generally characterized by competition between producers. It also provides some criticism:
“Capitalism has been criticized for its underlying focus on profit, and how that focus can lead to social and economic inequality. Further, it is also criticized for its emphasis on consumption, as the constant purchase of goods and services is necessary for capitalism’s success.”
The second criticism clearly is an issue, especially on the money markets (the collapse of which kicked off 2008 financial crisis). In a closed economic system, systemic risk is ever present. Where the system is premised on making returns on investment and where returns are related to risk, riskier investments will be made; but when a single cog in the system jams, the system can no longer sustain itself because the system was sustained on its continued generation of money. If capitalism is a competition, based on free market principles, then those who made bad investments will fail and those who didn’t will succeed. But that wasn’t possible and massive bailouts had to be implemented throughout the world. In essence, the financial institutions are cheating the system that allows their function and undermines the sociocultural movement on which free market capitalism is premised. I will get back to this point.
The first criticism fits much more closely to O’Leary’s comments. He supports capitalism, not in spite of it causing social and economic inequality, but because it does. He believes that it is necessary as a motivational tool to keep the system running. Does he not realize the impossibility of his claim – that the current iteration of capitalism makes the rich get richer and the poor get poorer? That there are inherent disadvantages that some people face just because of where they were born or the socioeconomic class of their family or their race or gender? Sure, those stories of rising out of nothing and climbing to the upper echelon of society, to become part of the fabled 1 per cent, are inspiring, but that is by far not the norm. Could he really mean that those who do not achieve success in life are meant to live in abject poverty? Perhaps, but that is beside the point. What I want to get at is something deeper that often goes unsaid: the socioeconomic costs that mass social and economic inequality brings about.
Put simply, social and economic inequality is the root cause of a lot of bad things in the world. The incidence of crimes of power, such as murder and rape, are strongly correlated with inequality. Several studies have demonstrated that rising inequality is the number one predictor of crime. This is troubling. If the solution is right in front of us, why aren’t we using it to cure the world of its ills? Why are we limited to implementing tough on crime legislation and social movements to combat our troubles?
Well, the answer is obvious: capitalism alone cannot solve the problem because capitalism is the cause (though, to be clear, I am not proposing the abandonment of capitalism; with proper constraints it works just fine). The distribution of wealth in a capitalist system necessarily becomes differentiated, based on a variety of factors. In an ideal world, this can be attributed generally to variations in human capability. Statistically, one would expect a normalized curve: the majority of the population would fall somewhere in the middle, with the tail ends representing the rich and poor. This would be fine and it coincides with common conceptions of justice and fairness. In a perfect meritocratic system where everyone begins on equal footing, there is no objection. But such a world does not and will never exist; historical, social and psychological factors preclude this. As a result, we do not see a normalized distribution of wealth. What we see is that the majority of global wealth is concentrated in the hands of the few. According to the Oxfam inequality report that O’Leary’s cohost, Amanda Lang, brought up, the wealth of 85 richest people in the world is equal to poorest 3.5 billion. And that is a function of many competing factors, the most obvious of which is the socioeconomic institutions that our society continues to support.
This brings me back to my earlier point. The capitalism of our age situates itself in postmodernity. The basic premise of postmodernism is that it is a game, based on experimentation and the removal of a centralized authority. In theory, it pushes all actors within a society onto the outside to oppose the tyranny of an overriding voice silencing all others. It concerns itself with decentralization and innovation. Success is determined by how well those innovations are received by society; that goes to the heart of the entrepreneurial spirit of our age. When an actor fails, their encouraged to try something new; when they succeed, their encouraged to continue their contributions to the betterment of society. I hope the thrust of analysis is becoming clear. When financial institutions become “too big to fail”, when socioeconomic success is dictated by those with power, they have become the tyrannical force that was removed in order to allow them to succeed in the first place. This is where the system breaks down and where the system, eventually, can no longer be sustained when something goes wrong.
The truth of the matter is that postmodernity is on its way out. The spread of hipster culture into popular media is the strongest evidence of this: postmodernity has exhausted all possible sociocultural recombinations such that we resort to material irony in its stead (I could argue that society is progressing into a new historical era, but that’s a whole other article). Life is no longer grounded; meaning is generated through intersubjective cultural references that must be constantly renewed in order for our culture to sustain itself. This works out just fine; the plurality of voices and ideas gives rise to an endless stream on content. While our current cultural situation can, at times, result in a crisis of “meaning”, failures in our economic system are much more far-reaching and detrimental to our livelihoods: we’re still feeling the aftereffects of an event that happened over five years ago.
A proper functioning economic system should not have to rely on bailouts in order to avoid total collapse. But resistance to reform, either by breaking up the banks, increasing taxes on the rich, etc., is the direct result of the recognition that those with financial power have elevated themselves into a position where they can take risks without real consequences. This holds true for both financial institutions and wealthy individuals.
What O’Leary fails to recognize is that not everyone can engage in the economic game. All those people who must serve as pawns in the economy, the workers, receive a measly share of the profits that they are integral in generating and are the parties most adversely impacted by declines in the financial markets. In other words, the 99 per cent is punished by the actions of the 1 per cent.
As a consequence, when O’Leary says, “I celebrate capitalism,” he is celebrating an illegitimate system that exacerbates social and economic inequality, a system that is on its way to inevitable collapse.
A capitalism that can be celebrated, in my opinion, is a sustainable and robust capitalist system that is resilient enough to resist downturns in the economy, functions to reduce inequality and strives to realize human potential. What is clear is that a postmodernist system, left alone to work itself out, cannot provide that. Instead, it results in the problems we’re faced with now.
The question is: “Do we wait until we’re at the event horizon, with no possible way of escaping the black hole of our creation, or do we try to change our trajectory before it’s too late?”
I suppose the “fantastic news” is that it’s just a matter of time until that question is answered for us.