Is capitalism broken? Today, as experts digest the warnings of billionaire investor Warren Buffett, many are wondering if the system that dominates the globe is working for everyone. In ancient Rome, before making an important decision, people would often consult a haruspex: a fortune-teller who could forewarn them of the dangers of each choice. Today Warren Buffett plays a similar role. The 90-year-old investor is sometimes called “the oracle of Omaha”, after the Nebraskan city where he lives. Investors, economists and other experts flock to hear his opinions on the future of the economy. But in his most recent meeting on Saturday, Buffett was troubled. He complained that the app Robinhood, which was at the centre of the GameStop controversy in January, is encouraging small investors to see trading stocks as a form of gambling, instead of a way of directing funds towards productive businesses. He also railed against the cryptocurrency bitcoin, calling it “useful to kidnappers and extortionists” and “contrary to the interest of civilisation”. He had equally harsh words for Spacs (special purpose acquisition companies) – firms set up solely to raise capital to buy other companies – which he described as a “moral failing”. What seems to worry Buffett is the idea that capitalism is not working in the interests of the majority of people. He believes that capitalism should uphold civilisation – not destroy it. This is a debate that has been raging since capitalism first developed in the 18th Century. At that time, some people were concerned that access to luxury goods was corrupting morals, making people greedy and materialistic. In response, philosopher Bernard Mandeville argued that greed was good for society. He claimed that everyone benefits from the lavish spending of the rich because it creates employment for others. But by the early 20th Century, capitalist societies had become deeply divided between rich and poor, and many protested that the system was not working. In response, some politicians argued that capitalism had to be made fairer. They set up the welfare state, paid for with taxes on the highest incomes, to redistribute wealth from the richest in society to the poorest. This lasted until the 1970s when economists began to argue that cutting taxes and welfare would stimulate economic growth and therefore benefit everyone. This idea, known as “trickle-down economics”, was adopted by governments across the world. Once again, conventional wisdom held that greed is good. Now the pendulum seems to be swinging the other way. Even those like Buffett who have benefited from laissez-faire capitalism are concerned that it is deepening inequalities and eating away at the fabric of society. This problem has been compounded by the pandemic: between 2020 and 2021, 150 million people around the world fell into poverty, while billionaires increased their wealth by more than 25%. It has prompted some to argue that capitalism is once again in need of reform to make it work towards a moral purpose and serve the interests of society, instead of benefiting a handful of people. Is capitalism broken? Breaking point Yes, say some. The promise of capitalism was that ordinary people could, through hard work, earn enough for a comfortable life. Yet today, while people are working harder than ever, incomes are stagnant, and many young people cannot even dream of owning their own home. Greed and self-interest have not caused wealth to trickle down to the many; it is being hoarded by the few. Not at all, say others. If capitalism really were failing the majority of people, we might expect people to start resisting it. Yet there is no sign that the popularity of capitalism is waning. In recent years, politicians across the Western world have promised to reform capitalism in favour of ordinary people, and they have all been rejected by the electorate. KeywordsBernard Mandeville - A Dutch-born philosopher who lived most of his life in England. His most famous work is The Fable of the Bees, in which he argues that immoral behaviour is good for the public.
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Is capitalism broken? Today, as experts digest the warnings of billionaire investor Warren Buffett, many are wondering if the system that dominates the globe is working for everyone.
Breaking point
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Keywords
Bernard Mandeville - A Dutch-born philosopher who lived most of his life in England. His most famous work is The Fable of the Bees, in which he argues that immoral behaviour is good for the public.
Capitalism failing, warns investment kingpin
Glossary
Bernard Mandeville - A Dutch-born philosopher who lived most of his life in England. His most famous work is The Fable of the Bees, in which he argues that immoral behaviour is good for the public.