COMMENTARY: In mathematics there is a concept called Pareto efficiency, which describes the impossibility for one side of an equation to keep taking without depriving or diminishing the other side. It’s a commonsense idea in which the losing side inevitably goes to zero.
Because of the finite quality of available resources, namely money, capitalism is a Pareto-efficient economic system — the rich get richer and the poor get poorer. In other words it is a zero-sum game — I win and you lose.
This raises an interesting question: How can a so-called “democratic” society tolerate or thrive within a anti-democratic economic model? As a consequence of too few having too much, too many have too little of this stuff to spend. It doesn’t require a PhD in economics to figure out that if too few have to little to spend the general economy will suffer. So a truthful Economics 101 should tell us that the imbalance caused by greed is a foundational cause of economic failure and, eventually, social collapse.
It is important to understand that aside from accumulating as much as possible, there is no moral or ethical code associated with the capitalist belief system. To understand this, consider: A pharmaceutical company acquires the rights to a vital medicine that has been selling at $56.64 per dose. It raises the price overnight to $317.82 for the same amount and, at the same time, raises the compensation of it CEO from $2,453,456.00 to $18,931,068.00.
The drug went up 461 percent and the CEO’s salary went up 671 percent. As they say, nice work if you can get it, and pity the people who need the drug to survive.
Pick up any economics texts and you’ll be treated to an amazing variety of theories explaining why we had a crash in 2008 or why the world’s (and our) economy has failed to regenerate from said crash in spite of various governmental interventions. One theory after another is generated by learned professors at various universities and think-tanks.
Of course none of this wisdom accords with what we experience in our everyday lives, but it sounds profound. The reason why the economy isn’t recovering is actually quite simple — we live in a Pareto-efficient economic system; that is to say, too few people have too much of available monetary resources and too many have too little.
The totality of economics can be expressed this way: 2+2=4 and 4-2=2, but, more importantly, 4-4=0. That’s it; that’s the whole story in a nut shell. For all of us unwashed, economics is a simple matter of you either have it or you don’t.
As of July of this year 13 percent of men between the ages of 25 and 54 have dropped out of the labor force; consequently, they don’t have any “it” to spend.
The unemployment rate continues to hover around 4.9 percent, of which 26.6 percent are considered long-term unemployed.
Also, what the numbers don’t tell you is what kinds of jobs are available and what wages they are paying. Do they pay minimum wage? Can people support their families on this level of income? Can employed people afford health care? Is there such a thing as “disposable” income? Did you know that a large percentage of enlisted military families rely on food stamps or that the U.S. has one of the highest rates of child poverty in the entire world? That’s real-world economics, folks.
Capitalism is a dualistic belief system which, while promising fair distribution of material and social wealth, delivers quite the opposite. Now that 1 percent of the population owns 40 percent of the United States’ wealth, it seems plain to see things are out of balance. Although many writers such as Thomas Piketty and Charles Lehmann have produced incontrovertible evidence of the imbalance, the general public seems to be in denial. To argue against inequality earns you various imprecations such as, you are a socialist or, even worse, a communist.
Most using these terms don’t have a clue as to what socialism is or means. It becomes name-calling because communists, are, as we all know, evil and totalitarian — and who knows what socialists are?
Given the Pareto-efficient aspect of capitalism, the imbalance cannot be treated with doses of feel-good Kumbaya or patriotic exhortations; eventually something has to give. A bigger question remains. When there is nothing left for the majority, how long can belief in the social contract survive? Are we circling the drain? Inevitably we are going to find out.
Emanuele Corso’s essays on politics, education, and the social contract have been published at NMPolitics.net, Light of New Mexico, Grassroots Press, World News Trust, Nation of Change, New Mexico Mercury and his own — siteseven.net. He taught Schools and Society at the University of Wisconsin-Madison where he took his PhD. His bachelor’s was in mathematics. He is a veteran of the U.S. Air Force’s Strategic Air Command, where he served as a combat crew officer during the Cuban Missile Crisis. He has been a member of the Carpenters and Joiners labor union, Local 314. He is presently working on a book: Belief Systems and the Social Contract. He can be reached at [email protected].