The drive to turn too much into more. Capitalism can be defined as “an economic system in which private actors own and control property in accord with their interests”(Jahan and Mahmud). This system is prevalent in almost every country in the world, and has become such an integrated part of our lives that we don’t notice it anymore. The system is dominated by superpowers such as China, India, the UK, and the USA. The United States of America has the world's biggest economy, and dominates the stock market. Many countries are reliant on the value of the dollar and the economy affects the world. However, not all is perfect in this superpower. The current climate is set on the wealth of the few instead of the many. This system has issues in its history, its distribution of wealth and how the government chooses (not) to provide basic services for its people. This investigation will discuss the shortcomings of American Capitalism, and how the people are thereby affected
Connection to History
The impact of capitalism on the American way of life is incredibly prominent, with the ideology having an incredibly significant role in the American Constitution. When looking at the history of American capitalism, there are clear links between capitalism and slavery. Notably, James Madison, a significant architect of the constitution, vigorously advocated for laws that relegated black individuals to a three-fifths human status, setting white people on the highest pedestal. When slavery was abolished, black people were legally declared free citizens, but some ideals stayed.(Akavian).
Eric Williams' thesis on the post-slavery era further illuminates the transition from slavery to industrial capitalism. While considering a diminished capital landscape following the delegalisation of a major economic sector, Williams exposed a financial shift in relocating resources toward wages and labor safety. In the vacuum created by the decrease in agriculture, the Southern states had to rapidly industrialize. This system is still prevalent today, the manipulation and sale of natural goods. Despite considerable progress in the treatment of Black Americans during later years, economic aspects of the system such as the underpaying and overworking of workers remain significant aspects of American work culture in today’s society. In other words, slavery and the ways it produced wealth served as the foundation for modern American capitalism's labor force and technology. The introduction of machinery to replace the physical labor that was before provided by enslaved peoples and the rules requiring employers to pay their employees are the only things that have changed. Employers still aim to maximize profit, even in the wake of the transition from slavery to modern capitalism. Wages typically stay below what is livable in order to save on costs while having maximum profit(Mount).
Private Wealth Distribution
The USA has a net worth of around 135 trillion dollars, with exclusion of debts (Simko and Smith), powered by its capitalism and how it does allow the country to grow at an optimized rate. However, the distribution of this immense wealth is spread unevenly. In 2021, the top 1% of earners in the US held 16 times more of this wealth as a collective than the bottom 50%. Meaning, only around 1.8 million Americans hold 16 times more than 166 million Americans do together (Leonhardt). As is displayed in graph 1, the scale of inequality is almost unfathomable.
Fig 1: Distribution of Wealth (Leonhardt)
- Light blue= top 1 %
- Grey = 90-99%
- Red= 50-90%
- Purple= 0-50
The uneven distribution of private wealth speaks volumes about the economic climate of a country. One of the major reasons for this distribution is the unfair dominance of the top 1% of the stock market. In 2021, the top 1% held over 53% of all privately owned shares in the US. Stocks are a longstanding method for any citizen to invest and grow their net worth. However, with the intense influence of the uber-rich, it creates stigma as well as less opportunity in the stock market. Lower income brackets feel that the stock market is only a way for the rich to get richer, and the rich buy as many shares as possible, making obscene net worths even bigger (Frank).
Racial inequality
Racial inequality and the nation's widespread economic inequality are strongly related. In the last sixty years, the median wealth of White households has nearly tripled, where African-American households have seen barely any increase in median wealth. The above data has been presented as medians, as this can show the number of millionaires and billionaires per race. Higher median wealth among white households shows a number of millionaires and billionaires—a condition that is not the same for black households. The existence of systematic economic prejudices and opportunity discrimination is reflected in this fundamental difference (Siripurapu).
Another reason for the askew wealth division is the methods in which CEOs of most types of companies are inclined to gain wealth. Previously, CEOs gained most wealth through the company and the company’s profit. As was formerly mentioned, the private stock market has changed and grown. This change has allowed CEOs to go from earning an average of around 20 times more than their workers in the 60s to almost 275 times more. This is what sets the further divide between the ultra-wealthy and the lower and middle classes.
Billionaire Ability
However, what does all of this mean in relation to the shortcomings of American Capitalism? This can be simply represented when looking at the example of Elon Musk. Elon Musk is a world-famous billionaire, and a common household name. His father owned a diamond mine, which helped Musk to gain enough opportunities to eventually create Tesla, an electric car company based in Texas. In April of 2022, he very famously bought Twitter, for 44 billion dollars (Counts and Maloney). According to the American Department of Housing and Urban development, 20 billion dollars are needed to house all of the USA’s homeless. Elon Musk is worth a total of 244 billion dollars. With the money that one man spent to buy one website, he could have solved the current homeless problem in the US twice over. There are people on the streets freezing, dying, while there are people like Elon Musk. People who have enough money to easily solve the problem of people living on the streets across a country as big as the USA. If a market is so intensely profit based, it will lead to a select number of people with more money than they know what to do with, and millions of people unable to meet their basic survival needs.
Government Provided Services
One of the roles of a government is to assure safety and opportunity for its citizens. This often will take form in services that it must make accessible to every citizen. Healthcare is for safety while university is for opportunity. How well a government is able to do this is a reflection on how it spends its money, and how much it cares for its people. However, the US government spends its money in a way which is not optimal for citizens in lower economic classes, giving these citizens a higher burden.
Healthcare
The amount of healthcare debt amassed in 2022 is 195 billion dollars. Healthcare debt is the leading cause of bankruptcy in the US, with it being the cause of 66% of all bankruptcies. 50% of all POC (People Of Color) are in medical debt, and 68% of people who make less than 40k per year are in some form of medical debt (Third Way). These figures show that medical debt is incredibly significant in poorer communities. This problem comes from the system of medical costs and medical aid. In order to not be saddled with thousands of dollars of costs after a treatment, most Americans have some form of medical insurance. However, the average American spends around 400 dollars a month for individual health insurance, and 1100 dollars for a family (Shepard). Although Medicaid continues to provide aid for underprivileged families facing huge medical bills, it does not cover debt. Programs like Medicaid do try and help these families, but it does not solve the systemic root of the problem; the capitalization of the health and pharmaceutical industry. UnitedHealth Group, one of the leading health insurance companies in the US, reported $20 billion in profit in 2022 (Humble et al.). Additionally, in 2021, the American pharmaceutical industry generated an estimated $550 billion in profit. Both these industries provide necessity goods and services, yet are sold as luxury goods. The problem comes from a lack of government regulations on the maximum price that a hospital can charge for a service, which tends to go towards 5 to 10 times the hospital's expenditure (Murray). The need for profit is so ingrained into the system that it even takes place in services for basic human needs.
University and Student Debt
Capitalism in the US is good in that the free market turns it into the land of opportunity. However, most well-paying positions that the market provides require skill, which is found in the form of a university degree. As in most other developed nations, university degrees are required to get a job that is considered high-paying. In the USA, student debt has reached a total of $1.75 trillion in 2022. This is a problem that affects many students each year. When fresh out of college and just starting jobs at a lower level, many fall behind on payments, resulting in low credit score although they are just starting out in adult life. Furthermore, around 50% of these borrowers owe $20,000 or more 20 years after initial borrowing. Student loans continue to rise as tuition fees continue to rise at a rate 3 times higher than inflation, which is a crisis in it’s self. The problem can be traced to the same core point as healthcare. University has changed from costs to cover resources to fees to put in the pockets of directors. The problem also lies in the government having provided 28% less funding to universities since 2001 (Hanson).
Services which the people need, such as healthcare and university, have become points of profit further empowering the ultra-rich, while the poor continue to suffer. This is highly reflective of the government that enables this and the system that allows for this.
The American Capitalist system is deeply flawed, and this reflects on the citizens. The roots that it holds in slavery in the past are still incredibly prevalent in the current environment of worker exploitation, although less extreme. The rich dominate the stock market, many generating a disgusting amount of private wealth. The poor are stuck in a system that makes it almost impossible for them to change that, and necessary services for survival and opportunity are made unaffordable. The whole system is set up for rich success and further growth of their net worths. Therefore, it can be concluded that the poorer citizens are negatively affected by capitalism and how it confines them to their current economic bracket, setting them up to fail at real economic success. The American Dream is depicted as being full of opportunity and wealth, but the current US is only making the rich even richer.
Bibliography
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