Capitalism, democracy and human resources

I’m a small business owner, and like most Americans, I believe in capitalism. There’s no better economic system for taking advantage of every person’s ability to create value for society. Also, like most Americans, I believe in democracy: government by and for the benefit of all citizens; that grants every individual the opportunity to strive for life, liberty and the pursuit of happiness.

There is, however, an inherent conflict between our capitalist economic system and our democratic political system that requires constant attention to keep one from subverting the other.

Capitalists use their talents and creativity to maximize profit. Of course, in pursuing that profit, capitalists benefit all of society through the goods and services they produce and the innovations they create. But, when overwhelming economic success creates overwhelming political power, capitalism can come into conflict with democracy.

The democratic political system offers capitalists the freedom and opportunity to pursue their profit. However, in attempting to maximize benefit for all people, government can at times act to stifle the creativity and innovation of capitalists through over-regulation, thus setting in motion another conflict.

Balancing these conflicts requires an equitable regulatory and tax framework with strict government oversight to, on the one hand, prevent run-away capitalism from undermining democracy; while, on the other hand, preventing a “tyranny of the majority” from stifling innovation and economic growth.

So, how is our current framework working? I did some research on that subject recently. Bottom line: It’s working really well for the top 1 percent of households on the income scale, and fairly well for the next 19 percent. For the remaining 80 percent, however, not so much . . . literally!

I doubt most people are aware of how concentrated wealth distribution in this country has become. I know I wasn’t. According to government statistics for the year 2007 (the latest year for which detailed analysis was available), the top 1 percent of households owned approximately 43 percent of the country’s “financial wealth” (net worth, less owner-occupied home equity). The next 19 percent owned an additional 50 percent. That left only 7 percent of the country’s financial wealth for the remaining 80 percent of households. 7 percent! And, the gap has likely become more dramatic since the recession that began in 2008.

With the top 1 percent controlling such a large percentage of the country’s financial resources, the democratic system has become distorted. A capitalist oligarchy has biased the political system through large donations to, or should I say investments in, political representatives in need of campaign funds. As a result, many of our political representatives have become beholden to the few, rather than the many.

Control of major banks, media outlets and corporations (the top 1 percent owned almost 40 percent of all corporate stock), and the ability to pay an army of lobbyists and attorneys, has perpetuated the oligarchs’ ability to preserve and increase their wealth. This power to influence both the financial and political systems trumps the ability of 80 percent of households to access the resources (i.e. education, healthcare, financial stability) needed to fully realize their talents and creativity for the benefit of society.

For many people, borrowing through credit cards and home equity loans became the only route to the middle class lifestyle that they expected to be able to attain as citizens of the “world’s richest country”. Now, debilitating debt has virtually crippled their ability to contribute to our economy. We’re ALL the poorer for it.

A new regulatory framework, with strict oversight, that restores balance between our economic and political systems is imperative. Achieving that will require strong governmental action, and it won’t happen unless the corrosive influence of “big money” is removed from politics.

Logically, the first step must be to reform the way our representatives are elected. Any system that requires candidates to constantly pander to the wealthy for campaign funds will never produce the balance required to tap the talents and creativity of the majority. Structural change is required so that elected representatives can freely represent all constituents equally, without quid pro quo pressure from campaign benefactors or their agents.

Every citizen, every human being, if given the opportunity, is capable of being innovative and creating value for society. But, people can only do that if they have access to sufficient capital and financial security to enable them to unleash that creativity.

We live in a highly competitive world. As a country, we can’t afford to continue wasting such a large percentage of our human resources.



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