Since the 1970s, the economic philosophy that has dominated the United States and much of the world has been relatively unchallenged. Both Democrats and Republicans swore oaths to protect the “Free Market” and agreed that government promotion of private interest would create the best public good. We were told that high taxes would kill jobs and stifle innovation.
Yet following the 2008 financial crisis and the subsequent bail-out, the hands-off approach to business was re-examined. Phrases like “income inequality” and “wealth gap” became common in political discussion. It seems that the era of taxes being “taboo” may be coming to an end.
Jamie Dimon, CEO of J.P. Morgan, said recently in a letter to investors that, “I am not an advocate for unregulated, unvarnished, free-for-all capitalism. (Few people I know are.) But we shouldn’t forget that true freedom and free enterprise (capitalism) are, at some point, inexorably linked.” Dimon and many of his fellow billionaires have even called for raising taxes on the super-rich like themselves, something that would have been considered heresy just a few years ago.
It’s encouraging to see the super-rich admit that, when we work together, everyone benefits. “A rising tide lifts all boats,” only if all the boats are in the same body of water. The tension between public and private is still in full swing. Some see privately-run but publicly-funded charter schools as a way of privatizing America’s public school system or the growing popularity of “medicare-for-all” as a horrid extension of government bureaucracy. But on all sides, there is an acceptance that the system as is isn’t working.
This newfound-acceptance of taxes on the wealthy doesn’t necessarily stem from purely altruistic impulses. Better schools means a more qualified workforce, which means companies have to spend less time (and money) looking for and training competent employees. Some reports have even claimed that a medicare-for-all system could in fact lower the overall cost of healthcare in the US.
Founder of the Bridgewater Investment Fund, Ray Dalio, has called the lack of investment in public education and infrastructure an “existential threat” to the US. He went so far as to publish a paper on his website entitled: “Why And How Capitalism Needs to be Reformed.”
Dimon and Dalio are not alone in their openness to taxes. Berkshire Hathaway CEO Warren Buffet has said for years that he believes the American tax code to be unfair. He and his friends Bill and Melinda Gates, along with several other prominent billionaires, have agreed to the “Giving Pledge” to give away the majority of their wealth.
Though many billionaires have expressed openness towards taxation and government spending for a social safety net, they caution that the money must be well spent. Therein lies the problem. The government can, and does spend money effectively...when all sides agree. Think of the military and related research. But it’s all too easy for politicians to use the legislative process to weaken or even pervert a certain bill or program and doom it to failure. It’s a self-fulfilling prophecy. That failure is then used as justification for why the government shouldn’t attempt such things in the first place. Too often, the neediest among us are caught in the crossfire, particularly the children of low-income families.
Hopefully, this growing critique of American capitalism will result in more money going where it needs to go. It’s not unprecedented in American history. The phrase “good enough for government work” started during World War II when there was broad support for government efforts because government work was top quality. It was only when we came to rethink the role of the state, and the quality of government work declined, that the phrase became derogatory.
In his letter to investors, Jamie Dimon evoked the Marshall Plan, the post WWII plan to rebuild Europe. FDR’s New Deal built infrastructure still in use today and put hundreds of thousands of people to work. Communities in the mid-west invented public high school for everyone in the 1920’s. It has been done, and can be again. All we need is the political will. It seems we’re on the cusp of having it. As Dalio said in his paper on capitalism, “One might say that I lived the American Dream. At the time, I, and most everyone around me, believed that we as a society had to strive to provide these basic things (especially equal education and equal job opportunity) to everyone” [my emphasis].
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