It wasn’t on the scale of Martin Luther posting his 95 theses on the door of a Catholic church in 1517. But last week, in “UPDATE: Hedge-fund billionaire Ray Dalio says capitalism needs urgent reform”, it seemed to be in the same category.
Mr. Dalio – and other capitalists of like mind – are invoking economic philosophy, social justice and a political warning in calling for a re-set of the system that has raised the standard of living for many millions of people over many generations around the world. With that achievement – what’s not to like?
Mr. Dalio responds that in the U.S. today:
. “The system has produced little or no real income growth for most people for decades… .
. “The wealth gap is at its widest point since the thirties… .
.”Most people in the bottom 60% are poor .. .
. “US economic mobility rate [for the bottom 60%]is now one of the worst in the developed world.”
He stresses that this is producing a widening,and very threatening “income/education/wealth/opportunity gap”. He fears a resulting volatile environment like the economic and social distress of the Great Depression. So he has some very ambitious, sweeping suggestions for “great double bottom line investments for the country”.
These major “resource re-distributions”, as he calls them, would significantly buttress early childhood education and school finance; preventive healthcare; infrastructure; and microfinance.
And here’s Howard Marks, Co-Chairman of Oak Street, a leading investment management firm with his highly-regarded newsletter in which he often addresses the tension between those who prioritize growing the economic pie and those who stress fair distribution of it slices.
Recently, he wrote in his “Latest Memo from Howard Marks: Growing the Pie” this observation: …
“In the last 10-20 years, the rising economic tide had stopped filling all boats. In addition, major social and economic trends contributed to increases in economic inequality. These developments were largely behind the rise of populism … “Today, too few Americans feel they might own[ a] Cadillac. Taken to the logical extreme, that has the potential to bring the American miracle to an end.
“Thus,business should do all it can to arrest the trend toward stagnant and unequal incomes … not just to be fair or generous … but to assure perpetuation of the system that got us here.
“Capitalism is the most dependable route to prosperity. And it has to be responsible capitalism”.
Of course, neither Mr. Dialo nor Mr. Marks are naïve. They fully realize that a national change of course of such dimensions will require a near-epic bi-partisan political transformation.
Mr. Dialo: “We are now at a juncture in which either (a) a people of different ideological inclinations will work together to skillfully re-engineer the system so that the pie is divided and grown well or (b) we will have great conflict and some sort of revolution that will hurt most everyone and shrink the pie.”
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* Adapted from “Capitalism Under Fire: Is Corporate Social Responsibility a New Business Model?” Manhattan College Financial Services Advisory Council reception, Harvard Club NYC, April 11th 2019