Over the last several weeks, I’ve written a series of columns about political candidates – and Marxist economists – who promise to reinvent capitalism.
Their common complaint is that capitalism is in crisis and must be “fixed” in order to serve the American people.
Let’s stop for a moment and do a sober assessment.
U.S. GDP has never been greater. Unemployment is at a half-century low. The stock market is near record highs. Household income has never been higher. Household net worth has never been higher. And the country now has a record 11.8 million millionaire households.
Fidelity Investments reported last month that it had 200,000 401(k) participants with $1 million or more in their retirement plans. And that was just 401(k) assets… at one investment firm.
If capitalism is in crisis, do me a favor. Don’t fix it.
The critics charge, of course, that while some people are doing well in our capitalist system, others are not.
According to the Census Bureau, the median household income in 2018 was $63,179. In 1999, in inflation-adjusted dollars, it was $61,526.
That makes it look like household income – and our material well-being – has hardly budged.
However, official figures don’t consider a number of important elements.
For starters, they don’t count health insurance, whether provided by employers or the government (Medicaid and Medicare).
Healthcare costs – and health insurance premiums – have risen dramatically over the last two decades.
If you include the value of private or public health insurance, median income rose 68% from 1970 to 2016. By this definition, the typical household has enjoyed a steady increase over the last half century.
And because so many products and services have become cheaper over the years, it has translated into a much higher standard of living.
In 1985, for example, the average computer cost $2,495. Today it’s $632.
The average TV – which was not flat, thin or high definition – cost $1,200. Today it’s $160.
The average 30-year fixed rate mortgage was 12.43% back then. Today it’s 3.95%.
The average cell phone in 1985 cost $1,495. Today it’s $363. And a mobile phone in 1985 was not “smart.”
Today’s phones have a feast of standard features, including a clock, stereo, calculator, camera, video camera, voice recorder, GPS, video teleconferencing equipment, web browser, books, games, films and music.
(An $8 million supercomputer from three decades ago now sits in your pocket and costs about two hundred bucks.)
A family with a flat-panel TV and a $12-a-month Netflix subscription entertains itself in a way that John D. Rockefeller – a titan worth more than $340 billion in today’s dollars – could never have imagined.
How can you live in the richest country in the world at the most prosperous moment in history and imagine that the economic system is broken?
There is only one way: by comparing your own abundance with those who have more.
Politicians who bang on about “economic inequality” seek to promote envy to gain votes.
Yet of all the dissatisfactions we face, surely none is more menial than envy.
It is a waste of time, denies us contentment and is an insult to ourselves. Worst of all, envy is entirely self-imposed.
Comparing yourself with others keeps you from appreciating your own uniqueness and self-worth, things that, not incidentally, actually do lead to greater happiness.
The folks who promise to “fix” capitalism insist that politicians know better than business owners and shareholders how capital should best be deployed.
They offer no evidence to back this up.
In fact, the track records of government tweaks to capitalism are not encouraging.
Minimum wage laws price workers out of jobs (and encourage employers to automate or outsource). Subsidized student loans inflate college tuition. Welfare payments remove fathers and encourage the breakdown of the family.
Smart people with good intentions introduced these programs. What they couldn’t foresee were the unintended consequences.
It stretches credulity that your financial circumstances could dramatically improve thanks to the election of a man or woman who promises to reinvent our economic system.
The system, as I pointed out at the beginning, works fine. The real question is, are you making the most of it?
I’ll address that important topic in my next column.
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