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America: ruled by the rich?

By Judy Martel · Bankrate.com
Friday, April 8, 2011
Posted: 2 pm ET

Before the recession, in 2005, Ajay Kapur and his team of analysts at Citigroup came up with the term "plutonomy" to describe the U.S. economy. It defines a country where most of the wealth is controlled and owned by a minority of the population. Kapur has predicted that capitalism will continue to fuel the U.S. plutonomy, making spending and debt levels by the wealthy more important to the economy as a whole.

But Americans' belief in capitalism is waning, even as other countries are embracing it, according to The Economist. In 2010, polling firm GlobeScan reported that 59 percent of Americans agreed "strongly" or "somewhat" that the free market was the best system for the world's future. That's down from the results in 2002, when 80 percent agreed with that statement. Among poorer Americans (under $20,000 income), faith in capitalism fell from 76 percent to 44 percent in one year.

Germany now has the greatest support for capitalism, followed by Brazil and China, which both enjoyed strong economic growth in recent years, according to The Economist. Even Italy shows more favor toward the free market than the U.S.

Perhaps as the economy improves, so will belief in capitalism. I, for one, cannot think of a better alternative. As Winston Churchill reportedly said in a speech to the House of Commons, "the inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries."

Which would you rather have?

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5 Comments
Mark
April 11, 2011 at 8:44 am

The increasing concentration of wealth into fewer and fewer hands is cause for concern. But the wealthy pay far more taxes that people realize, the wealthy just don't feel it as much because, well, they are so wealthy! If you look at the average standard of living in strongly capitalistic countries versus more socialistic countries you will find two seeminingly contradictory things co-exist: the average standard of living is higher in capitalistic countries but the wealth concentration is in fewer hands. So, what to do about it? You can't raise taxes much more on the rich under the foolish notion that they won't do anything about it...they'll just move themselves and their capital to a more inviting environment if they deem it necessary. There needs to be a much stronger effort to bring capitalism/entrepreneurialism to the masses...simply "taxing the rich" more will not achieve the goal.

Paul
April 11, 2011 at 7:13 am

Many years ago I lived in a communist country. Over several years there I never once felt that the miseries were equally shared... A nice soundbite for Churchill at that time, but perhaps only to scare the British people - I presume he said it to the Brits! In fact, Churchill saying that then reminds me now of some people labeling the current US administration as 'socialist'. Same aim, to frighten people into thinking, "The Russians are coming!"

Weiwen Ng
April 10, 2011 at 7:02 am

I agree strongly that capitalism is the best system for the world's future. Frankly, I expect to be one of the beneficiaries of capitalism. However, I also recognize that insufficiently regulated free markets can cause great harm to people with low incomes. The Republican Party's present policy seems to be that we need to redress the great harm inflicted on the rich by confiscatory taxation and that almost all regulation is bad.

I'm not well off but not rich, although I would expect to be. I would say this to my future fellow (I hope!) rich people: you didn't make it on your own. At every step of the way you benefitted from good public services: schools, a stable government, a good legal system, clean air. Public policies enabled all these - in fact, our historically very strong investments in education are one of the big factors that enable us to live in such a prosperous nation. You also benefitted from the labor of your non-rich fellow citizens. You need to give back. OK, so many of our public services could use education. Work to improve them, not to elect a party which wants to gut them. And yes, our nominal tax rates seem high - but you don't actually pay a 35 percent tax rate, you pay less thanks to our morass of deductions that distort economic decisions. Be prepared to give some of those up.

To fellow progressives, I'd say this: The rich work hard. They deserve the fruits of their labors. Our tax system definitely ought to be more progressive than it is presently. However, we can't solve the nation's budget problems by taxing just the rich. The middle class also wil have to pay more.

Amy
April 09, 2011 at 8:52 pm

Why does it have to be one or the other? Why can't there be a balance?

Dmitry
April 08, 2011 at 7:55 pm

Perhaps having 2 major disasters in less than 10 years that was a result of uncontrolled greed and “free market” manipulations by a wealthy few, that lead to great financial pain or ruin of “poorer Americans” could be the reason?
Recall Enron’s energy crisis?