Today, we live in the world where everyone follows the same rules and understands the same language of profit making. Recently, I was reading a book “Capitalism Alone” by Branko Milanovic, where he pictures how capitalists have ruled the world in terms of politics, economics, finance and power. And it makes a lot of sense.
Let’s dissect this capitalism:
Today, we all live in the world which follows Liberal Meritocratic Capitalism. It addresses how goods and services are produced and exchanged, how they are distributed and how is its social mobility. They early 21st century, after the tech boom, this capitalism took power in America and is spreading all around the world.
To clearly understand this, let’s go back to the history of capitalism.
Before 1914, rich people were capitalists and their source of income was capital and poor people were labor and their source of income was a wage. Don’t get me wrong, capital and labor income are completely different. Capital income is the income obtained as a interest of capital or dividend of stock, or royalties or anything that multiplies while the labor income is just the trade of time for money. So before early 19th century, Capitalist receive no income from labor and labor receive no income from capital, which hence resulted in high income inequality. This era was a classical capitalism era for which most of us say the era when rich became more richer and poor became more poorer.
But today, we think we have become wise. With human rights being well respected and gender inequality no longer exists (except for some cases or even theoretically), we respect all kind of jobs resulting to liberal system. Today capitalists also work as a labor and labor also make capital income. For an instance, a highly paid (labor income) engineer can make capital be investing in stock markets or real estate or can even start his own private firm (capital income). and a manager of the company also work with his/her employees.
Based on this we think, we made a lot of improvement and we can reduce the income inequality. But the sad truth is that it’s not. On both sides, it’s is increasing with same proportion making the inequality constant.
But hey, there is a positive sign, many research reveals that before 1914, 70% of the British wealth was accumulated by top 1% but now it’s accumulated by around 20%.