What do you think of when
you hear the word capitalism? Stuff. Capitalism is essentially
the only economic system around in the world today, and it’s at a bit of a crossroads. How it evolves will effect the
lives of billions of people. There’s no exact moment
when capitalism started. In the 16th and 17th
centuries, feudalism gave way to something new, particularly in what is now the UK and the Netherlands. Before that, the majority of
people stayed close to home, never really moving more than 5 miles from their birth place. They tilled fields owned by a feudal lord in exchange for a place to live and protection. Land was the most valuable
commodity, not money. But that started to change
after a plague swept across the continent, wiping
out 60% of Europe’s population. A new class of merchants emerged and started expanding trade
across and outside of Europe. Gradually, countries in
Europe began transitioning from rural feudalism to urban capitalism. The main thing that sets
a capitalist system apart from previous systems is the reinvestment of money made from selling
things back into production. This is called growth, and it is the main economic
goal of capitalism. For example, a feudal lord only had need to create as many shirts as
he would imagine wearing. Consumption was the limit. But under capitalism, the
Dutch East India company could take the money from selling cloth to buy a fleet of ships. Then it will use the ships to sell even more cloth
to even more people. Accumulation becomes the goal. In capitalism, the resources needed to make things are mostly controlled by companies in competition
with one another. What gets made, and how much it costs you and me, well, that’s determined
by supply and demand. And in this system, there
are two ways of making money. You can either rent out your labor, or you can own things like
property or equipment. For the shirt you’re wearing, the people who own the land and cotton and sewing machines take a cut, and the wage laborers who do
the farming or sew it together make a set fee for their time. Historically, it’s much easier and faster to make money by owning
things rather than by working. Which is why the richest
people in the United States, for example, make 75% of their money from passive ownership or investments. We’re talking upwards of $21 million per rich person every year. The accomplishments of
capitalism are impressive. From an era of peasant farmers, capitalism brought us here: where a tiny robot vacuums
your floor every day. On average, people have an easier life
than a few centuries ago. Literacy has gone up,
the child mortality rate has gone down, and today
you are much more likely to die from obesity than from starvation. But capitalism has facilitated
atrocities along the way. All that cotton used to make those shirts that help drag the world out of feudalism? A good chunk of it was
picked by people kidnapped from Africa, turned into slaves. This is a major criticism of capitalism: It doesn’t look out for the
vulnerable and disadvantaged. Another criticism of capitalism is that it’s not very good at
choosing what to produce. Why is it that in the United States, it’s much easier to hire robot vacuum, than it is to get health care? Or consider Brazil: One-fifth of the Amazon
rainforest has been burned or cleared to make room for
soy fields and cattle pastures. If we keep this up, we could
lose the Amazon forever. In this case, the market is choosing to benefit a handful of beef companies in the short term, at a
potentially grave cost to those who rely on the
rainforest for oxygen. The truth is, you cannot
have infinite growth on a planet with finite resources. Capitalism thrives at
mass-distributing luxury goods. It’s less adept at meeting basic needs or long-term planning that
requires curbing growth. What this tends to mean for laborers is a lower quality of life- and a shorter one. In the U.S. again, men
in the richest 1% live almost 15 years longer
than men in the poorest 1%. And the gap between the rich
and the poor is widening. These stats are devastating,
but they’re not new. In the 1900s, the richest
1% in France and England owned over half of their nation’s wealth. And throughout history, the bottom 50% of capitalist societies
own essentially nothing. And this hasn’t changed. Well, at least not yet. One way to address the problem will be to adopt a kinder capitalism built with stronger safety
nets that can help look after the disadvantaged
and the vulnerable. This could involve
universal basic incomes, which would pay a set
amount to every person to make sure the poorest don’t
fall too far into poverty. Recently, Finland did a trial run with 2,000 unemployed people, paying them a small stipend
every month for two years. The early results showed
negligible impact on employment but gains in health and happiness. Another option is for capitalism to evolve into something else- like socialism. Countries could establish
social wealth funds like Norway has done. In that system, each
citizen owns an equal share of a fund that buys up capital. By now, the state owns almost 60% of the country’s wealth. In the U.S., Alaska’s done something
very similar with its oil. The state puts aside a
quarter of everything it makes from its mineral royalties
into a wealth fund. It’s worth over $60 billion now and pays out between $1,000 and $2,000 to each citizen every year. It’s cut poverty by up to 20% and is wildly popular even
in conservative Alaska. Of course, a viable option
is to continue on the path that we’re currently on: to prioritize growth over everything else. However, in doing that,
it could mean the deaths of billions of people
when the worst effects of climate change hit. Capitalism has upended how
societies are structured. It’s improved the lives
of tens of millions, hugely reducing poverty,
illiteracy and infant mortality. But it’s not working for everyone. What capitalism evolves
into will effect nearly every human being on the planet. The good news is that we can choose how society is structured. But we need to decide carefully and soon.