Capitalism Kind Of Is The Problem

In the course of browsing the interwebs, I’ve again found an article that I think is worth responding to, though this one is a great deal more thought provoking and better written than my previous target. It’s a sort of open memo from Nick Hanauer, an ultra-rich investor/businessman, directed to his fellow multimillionaires and billionaires. If you haven’t yet read it, I recommend it—it’s certainly interesting enough. Hanauer’s thesis is basically that for the rich to continue to enjoy their prosperity, a strong middle class must exist. Fair enough.

Unfortunately, though, we end up being reminded that the mythical super-rich guy looking out for the less fortunate is a pretty rare species, and Hanauer is not really a member of it. He might think he is, but that image doesn’t hold up after a close reading of his article. He admits early on, “I’m not the smartest guy you’ve ever met, or the hardest-working. I was a mediocre student. I’m not technical at all—I can’t write a word of code.” Yet he’s not trying to overhaul the economic system that allows people like him to get obscenely rich because bets they make on companies pay off—quite the contrary; he’s trying to preserve the wealth and power of those like him. I suppose that’s understandable—who would really surrender that sort of advantage willingly? But it’s not exactly doing much good for the rest of us.

Hanauer’s support for reforming the current capitalist system is based on fear of rebellion and/or revolution (not an unfounded one, at that). But that his fear is ultimately self-interested is a fact he’d like to gloss over, as he talks about how the rich can “help the 99 percent and preempt the revolutionaries and crazies”—the “crazies” being, presumably, anyone who calls for some fundamental challenge to the system of corporate capitalism we’ve all come to know and Nick Hanauer and his friends have come to love. Interesting that helping the 99 percent involves preempting the people who most fervently champion their cause. Of course, in Hanauer’s view abandoning corporate capitalism would probably mean the downfall of the United States or something like that, because clearly allowing immense concentration of power and wealth in the hands of a few is best for everyone (as long as workers are paid enough to keep them from revolting, of course).

Hanauer then goes on to praise Henry Ford, observing correctly that his high wage policy allowed his workers to buy the cars they made, fueling his business (no pun intended). Left unsaid, unsurprisingly, is how Ford had hired goons use violence against labor activists, and considered unionization the “greatest disappointment” of his business. Naturally, these facts would make Hanauer’s talk of how trickle-down economics has “so screwed the American middle class” seem slightly less than sincere.

Hanauer goes out of his way to make the fifteen-dollar-an-hour minimum wage he proposed in an older article seem like some radical new idea, despite the fact that fifteen dollars is actually about two-thirds of what the minimum wage would be if it had kept up with productivity over the years. His case for raising the minimum is convincing enough, but it’s laced with a pretty substantial amount of intellectual dishonesty, as Hanauer talks about how “the capitalists” have always been opposed to higher wages—unlike Henry Ford and Nick Hanauer, who are clearly not part of that class at all, since they’re on your side and want higher wages. They’re practically socialists, even (but of course they’re not socialists because capitalism is the only economic system that works, obviously). In talking about companies that set a “bad example” by paying their employees low wages, Hanauer undermines his point even further when he notes that two offenders, Wal-Mart and McDonald’s, “thankfully” have said they wouldn’t oppose a minimum wage hike. So where are “the capitalists” that Nick Hanauer is talking about? It’s almost like he made them up so he could look pro-worker in comparison—but that’s crazy.

After talking about how many Wal-Mart employees are so poor that they have to depend on government programs, Hanauer comments that “Wal-Mart won’t (and shouldn’t) volunteer to pay its workers more than their competitors.” Why they “shouldn’t” isn’t explained, and that idea is particularly baffling when one considers how shrewd Henry Ford was to pay his workers higher, by Hanauer’s own account (among others). In fact, the sentence I quoted comes immediately after he makes the same point, essentially. Hanauer goes from being a champion of “middle-out economics” to an apologist for underpaying workers and then back again, all within a paragraph. Apparently even the façade of being pro-worker is too hard to maintain.

Still harping on his fifteen dollar minimum wage proposal as if it’s some magic cure for every ill of modern capitalism, Hanauer talks about how many government programs would be unnecessary with it: “If people are getting $15 an hour or more, they don’t need food stamps…rent assistance. They don’t need you and me to pay for their medical care.” A person working a forty-hour week at a fifteen-dollar wage would make around 31k a year (not taking taxes into account). Based on the Economic Policy Institute’s Family Budget Calculator, a family of four in a major city would quite possibly barely be kept out of poverty, assuming both parents made this amount. Single parents wouldn’t be so lucky. But these facts—which take a few minutes of research to ascertain—don’t stop Hanauer from talking as if his minimum wage proposal would virtually eliminate the need for welfare programs, as he cheerfully adds that the higher wages would also help reduce the deficit through payroll and sales taxes (two taxes that overwhelmingly hit the poor).

Hanauer faults the Democrats for failing to emphasize the economic growth policies like his would create, claiming that they’ve used social justice as their talking point, allowing the Republicans to promise growth and win. This claim, like his minimum wage claims, is pretty out of touch with reality. In 2012, Barack Obama won reelection over Mitt Romney—who promised better economic growth than had been seen under Obama—by appealing to the desire for a more fair economy. In the nineties, Bill Clinton had similar success in talking about how he felt the pain of those struggling to pay their bills. In contrast, George W. Bush won reelection after a campaign mostly focusing on foreign policy. Perhaps Hanauer’s understanding is approximately what happened in the Reagan years, but the American people have long ago begun to recognize the economy isn’t serving them. Trying to shift the debate to economic growth is doing them a disservice at this point.

In wrapping up his argument, Hanauer asserts that capitalism is not the problem, but actually “the greatest social technology ever invented to create prosperity in human societies.” But why shouldn’t we blame capitalism—using that term to refer to the state-corporate capitalism we’ve had for many decades—for the problems we see? Do we really have to settle for a system that lets people get filthy rich off of successful investments, while we have inner cities rank with poverty and violence? “Capitalism,” as Hanauer is using the term, refers to a system that concentrates control of the economy in the hands of a small elite—people like himself, not coincidentally. This system allows the few to live off of the work of the many; their fortunes have to come from somewhere, after all. Why not aim for a system that actually lets the workers keep the fruits of their labor, and manage their businesses cooperatively?

Hanauer’s article is a very interesting one, and it’s all very shrewd advice if one takes it to be only what it explicitly claims to be—a memo to his fellow super-capitalists. But if you read between the lines, it becomes pretty clear that isn’t all it’s intended to be. Hanauer talks about a “New Deal” and appeals to the memory of FDR—not exactly great ways to win over CEOs and investors, but a great way to convince liberals he’s on their side—and not surprisingly, they’ve already fallen for it. Perhaps Nick Hanauer and the liberals happily agreeing with him think that higher wages really are a solution to the problems we face, but the logic is ultimately not convincing. Until they are given real control, the workers of America remain, essentially, slaves. Hanauer’s solution is not to abolish slavery, but rather for plantation-owners to treat their slaves a little more nicely—after all, we don’t want any of the “crazies” convincing the slaves they could be better off free.

It’s time for those who really are devoted to the cause of the middle class and the workers to wake up to a simple fact: their interests are not in alignment with people like Nick Hanauer’s. As long as investors and businessman like Hanauer remain extremely rich, the rest of us have to settle for less. Only when we wake up to the fact that we don’t need billionaires and multi-millionaires can we really address the problems of capitalism. Some may call that class warfare, but I call it simple economics.