These are political days, and hot takes on capitalism are everywhere. Jeff Bezos doesn’t pay enough in taxes, Modern Monetary Theory (MMT) is good, inflation is good, and the #1 problem with kids these days is they don’t read Marx. At least that’s what my TikTok feed would have me believe.
I disagree, but why I disagree doesn’t matter. These are armchair quarterback debates. Virtually all participants have only ever lived in one economic/political system, so their views of “the other side” are theoretical. In a qualitative debate of pure theory and infinite wiggle room for caveats and gotchas, no-one will change their mind.
I believe that capitalism is an amazing vehicle for wealth creation. I believe that the distribution of created wealth is equitable, too: there’s a lot of concern about income and wealth inequality, but income and wealth are abstractions. The real-world outcomes are equitable.
The most important caveat here is that these outcomes are equitable over time – the future is here, just not evenly distributed. The market dynamics mean that today’s innovations become accessible to all over time as competition drives the prices down to their minimums.
But how do I argue this in practice, and get out of the realm of theory where no-one would change their mind? Well, let’s put you into historical counterfactuals.
Would you trade places with a King in the 1400s? Even as the mightiest man in all the lands, there’s no education, no healthcare, no information – just collecting taxes from the peasants, eating boiled sheep, and maybe listening to your jester play the lute. Most of your children will die before age 5, you have little protection from cold winters, you don’t have a sewage system, and your castle has less livable square footage than the average modern American house. No thanks.
Would you trade places with John D. Rockefeller in 1900? Arguably the wealthiest man of modernity, your empire controls 2% of US GDP. But if you need surgery, you won’t have anesthesia. Your children won’t have vaccines. Tap water is not really safe to drink. It takes months to travel any meaningful distance. You’ve never had Thai Food in your life. You don’t even have a TV.
Would you trade places with Bill Gates in 1990? You’re running one of the most important companies in the world, and you’re on the cutting edge of everything. But your entertainment is constrained to mediocre TV shows. There’s no internet, so it’s still hard to stay in touch with friends. If you need to look something up, you have to ask an assistant who will get back to you in hours or days. Recording a home video actually takes effort and planning. Nobody has heard of avocado toast. Most cancers and rare diseases are death sentences. You can’t even take a spontaneous photo unless you’re carrying a clunky camera.
A powerful way to measure your quality of life is to ask who in the past you would trade lives with. You wouldn’t trade with anyone in the past unless they were extraordinarily powerful, and even then – their quality of life may be so much worse that it’s not worth bothering. Polio? No anesthesia? Can’t even get mango slices for breakfast on a whim? No thanks.
Even recent years like 2005 are missing a lot of modern essentials. You won’t have a smartphone. For me, that’s like losing a limb. Cancer is ~20% deadlier than today. To get music or movies, you have to buy and lug around CDs and DVDs. Physical shipping is still immature, so it’s harder to get stuff. That affects your food, too – restaurants are much worse. You have to be at home to receive physical mail. Sharing photos with your friends is an ordeal. Staying in touch isn’t easy either. Travel is expensive and has to be planned carefully. Moving back to 2005 is like paying some gigantic tax of inconvenience.1
The practical magic of capitalism is that things that nobody had fifteen or thirty years ago are now broadly accessible to all.2 The iPhone is the most egalitarian invention of them all: a minimum-wage worker and a billionaire can both own exactly the same object, which is probably the single most useful and powerful thing in their day-to-day lives. That’s incredible.
It’s easy to construct theoretical arguments about wealth and income inequality, but the real-world outcomes matter: elites and poor alike own iPhones. They take Uber. They Google when they need to find something out. If they want to watch a movie, read a book, or listen to music, it’s easy to find. Costs in the digital world are very low – passing electrons around circuits is cheap. Competition means that prices of those digital goods and services approach their costs – zero. The digital world is highly equitable, and as we keep innovating in the realm of bits, everyone’s quality of life continues to improve significantly.
The realm of atoms has more price floors, but even here, the world continues to improve for everyone. Medical treatment continues to progress. Fifteen dollars will buy you meals that did not exist thirty years ago.
The amazing result that even modern-day communists should appreciate is the equality that comes out of modern capitalism:3 competition in the markets works so well that for new inventions, the best is available to all in the span of a few years.4
Personally, I wouldn’t trade places with a billionaire in 2000. The loss of time (and, to a lesser extent, quality of life) is just too severe. I might trade places with one in 2005 or 2007. ↩
Some people like to make arguments about incremental changes, e.g. the average American house is now twice as big as it was 70 years ago. But marginal changes usually affect rich and poor alike, so the semblance of inequality persists. What’s most interesting to me are innovations that become (effectively) equally available and lifechanging to everyone. ↩
The underlying premise here is that the products of modern capitalism, i.e. running water, smartphones, air travel, etc. are worthwhile and beneficial in their own rights, which is a separate debate. Some people argue that under capitalism, people have traded their time for worthless tchotchkes. This argument of worthwhileness deserves study. ↩
Self-driving cars and synthetic meats will be among the next big innovations in this category. ↩