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Thoughts on capitalism
I am writing this letter in response to DJ Brooks’ letter (Aug. 18), “What’s wrong with seeking profit.” I disagree with his opinion that the recent demonization of capitalism is unwarranted. Capitalism and free markets can certainly be a force for economic growth and social value. But what’s desirable in theory does not always have corresponding value in practice. American capitalism has certainly been good over the past 25 years for the top 5 percent of the income distribution, which would include a large proportion of working Mercer Island adult residents. But for the other 95 percent of the population, capitalism has not been as good. Real wages (adjusted for inflation) of the middle class have decreased, not increased, over the past 25 years.
Mr. Brooks asserts that wealthy individuals can always divert some of their wealth to the less fortunate through charity, but in practice this is a dubious solution. The growing income inequality in America is becoming a cause for alarm. Further, the argument that charitable contributions are more effective than government programs at providing for the disadvantaged is simply erroneous. Charity is vital, and individuals who have attained an elevated socioeconomic status have an obligation to give back to those less fortunate, but this cannot suffice in providing for the needs of the less fortunate.
One of the recent trends that I am tired of is the demonizing of government. Government has an important role to play in society, a role that is well known and discussed in every economics textbook. It provides services not furnished by the private sector such as health insurance for the poor (Medicaid) and the elderly (Medicare). It also has an important regulatory function, for example, to ensure that market competition is not artificially restricted and to limit damage from pollution arising from business activity. Government activity and intervention is vital for society. We need more effective government, not less government. In the long run, effective government may be as important as effective markets in creating opportunities for future generations.
State University of NY