Capitalism provides a classic example of a double edged sword (Will Hutton, in his book Them and Us calls it a “tightrope”).
On the positive side, capitalism has been a dynamic engine of innovation, economic progress, and material improvements for more than two centuries. It encourages entrepreneurship, risk taking and hard work and it produces socially valuable personal achievements. At its best, it abundantly rewards “merit” (Will Hutton calls it “due deserts”) — one of the three cardinal principles of fairness. Contrast this to the societies where birth, social class or political influence have been (are) the route to wealth, privilege and power.
The other edge of the sword (when people trip and fall off the tightrope) is that capitalism can easily become corrupted. It can become a rigged game in which wealth and power combine to undermine the role of merit and can lead to exploitation and great social harm. Capitalism can easily morph into predatory capitalism, crony capitalism, mafia capitalism, casino capitalism, and more. As Hutton puts it, “Capitalism without fairness thus becomes toxic.”
In practice, capitalism has often led to a tremendous concentration of wealth among a small percentage of the population, coupled with a spreading wasteland of poverty among the masses. In this country, the top one percent now receives about 24 percent of the total personal income, and the top 10 percent receives 49 percent. Likewise, the top 20 percent owns 87.2 percent of the total personal wealth, while the bottom 80 percent owns just 12.8 percent. Meanwhile, at least 30 million and perhaps as many as 75 million Americans are living in more or less extreme poverty. Some 50 million Americans experienced hunger at various times last year. Capitalism can only be justified if it lifts all boats. Today, many of the boats are sinking.
To make matters worse, most of the rich think they deserve it (after they’ve earned it) and think that the poor are impoverished through their own failings; it’s their own fault for being poor. Indeed, wealthy capitalists are in denial about how much of their wealth depends on various kinds of luck, or favorable rules of the game, or a society that provides the knowledge and resources and markets for their wealth creation – not to mention our inheritance laws.
Hutton concludes: capitalism without fairness as its guiding principle is likely to be corrupted and become dysfunctional. Fairness is an indispensable moral value. “Sustainable capitalism and society beyond it cannot function without a moral core….Only fairness can keep it on the tightrope.”