Menanteau Serfontein – 12 November 2021
I believe that the free-market capitalist system remains the best economic model there is. None of the other systems have worked nearly as well, e.g. communism and socialism.
Through the years, the free-market system has provided great opportunities for those who have used their talents to succeed economically through entrepreneurship, hard work, sacrifice, risk taking and perseverance to the benefit of themselves, their families and society.
On the other hand, there are many people who, with the best will in the world, are unable to genuinely compete and succeed in the free-market system as a result of their lack of ability and their significant disadvantaged circumstances compared to others.
There are many unintended consequences/outcomes flowing from what Nick Hanauer, Author, Entrepreneur, Venture Capitalist and Billionaire refers to as Neo-liberal Economic Theory (Neo-liberalism in short). The term Neo-liberalism is a term used to describe the 20th century resurgence of 19th century ideas associated with free-market capitalism. It is generally associated with policies of economic liberalisation, including deregulation, globalisation, free trade, lowering trade barriers and reducing state influence in the economy, especially through privatization and austerity.
Many of these ideas are sound, however according to Hanauer, in a Talk entitled “The Dirty Secret of Capitalism – And A New Way Forward” that was delivered on TED Talks on YouTube, the reality is that the Neo-liberal system works only for the super-rich and the big corporates, at the expense of the vast majority of employees and citizens.
There is rapidly growing inequality between rich and poor with no end in sight. Hanauer says that over the last 30 years, the wealth of the top 1% in the USA alone, grew by 21 Trillion US Dollars compared to the bottom 50% of the population that jointly grew by 900 Billion US Dollars. An increasing number of people feel excluded and marginalised, because they believe and experience that they do not enjoy the same opportunities and advantages as others, particularly the super-rich and the big corporates.
Hanauer argues that Neo-liberalism is inherently unjust and non-inclusive. I am of the opinion that we are sitting on a time bomb waiting to explode in the form of the social and political upheaval – similar to events such as the French Revolution which was sparked amongst other things, by inequality and extreme disgruntlement about the struggle of the masses to make a decent living compared to the bourgeoisie and the aristocracy.
I believe that the raw, brutal and lopsided form of “extreme” capitalism that is currently in place in many countries will have to change, “without throwing the baby out with the bathwater”.
According to Hanauer, there is an increasing number of economists who, based on empirical findings are coming to the conclusion that various assumptions inherent in Neo-liberalism are mistaken. In fact, he describes some of the assumptions as morally corrosive and scientifically wrong.
Neo-liberalism implies that greed, selfishness and inequality are good and that the only purpose of a business is to enrich shareholders/owners and executives – the gospel of selfishness and greed underpins the ideology, thinking and policies related to Neo-liberalism.
Hanauer suggests the following principles to enable us to progress beyond the pitfalls of Neo-liberalism:
- Successful economies are not jungles; they are gardens that need to be tended. Markets cannot be left alone without attention – a good example of where market intervention took place was the 2008 economic crisis when quantitative easing and other measures were implemented. Economic intervention also took place during Covid-19.
- “Inclusion” creates economic growth. The economy consists of people and by including people on a much bigger scale, economic growth will be stronger.
- The purpose of a business is not purely to enrich shareholders/owners and executives, but the welfare of all the stakeholders.
- Greed is not good. Being rapacious (i.e. aggressively greedy, grasping or acquisitive) does not make you a capitalist – it makes you a sociopath. (A sociopath is someone who has antisocial personality disorder (ASPD). People with ASPD can’t understand others’ feelings. They’ll often break rules or make impulsive decisions without feeling guilty for the harm they cause.)
- Unlike the laws of physics, the laws of economics are not an exact “science”, but a choice and the world should choose to adopt these principles.
Hanauer says that if we truly want a more equitable, prosperous and sustainable economy as well as high functioning democracies and civil society, we must have a new approach to the principles and application of capitalism.
Click here to watch Nick Hanauer’s insightful and entertaining Talk entitled “The Dirty Secret of Capitalism – and a New Way Forward” that was presented on TED Talks on YouTube in which he calls out the faults of “neo-liberal economic theory” and highlights alternative economic hypotheses.
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