Most criticism of capitalism focuses on environmentalism and wealth inequality. I thought I would share others.
1. It’s inherently contradictory. It’s predicated on the belief or assumption that competition is good and weeds out bad products and unscrupulous players, yet the most successful capitalists (or individuals who are held up as exemplars of capitalism) are those who are able to eliminate said competition and have monopolies over their industries, such has Microsoft, Meta, Amazon, and Apple. Peter Thiel himself has said so: “Competition is for Losers”.
2. Just as central planning can allocate capital sub-optimally, capitalism is not immune to this either, such as scams and asset bubbles. Rather than value creation, it’s about selling an overvalued or worthlessness asset to a sucker by taking advantage of hype or incomplete information. Most people would be better off investing in index funds or large tech stocks, than chasing the latest overhyped fad/bubble. Way more people have gotten rich investing in Apple, Facebook, Microsoft, Google or real estate than crypto.
Blaming the government for capital misallocation, such as for the 2008 crisis, does not explain the herd-like behavior into now worthless cryptocurrencies/NFTs, or speculation in housing in 2005-2008 by upper-middle-class people (not the poor people who were the intended recipients of Clinton’s housing policies). Sure, the government can create incentives, but people also have free will in terms of how they choose to spend their money.
A lot of people think capitalism is about getting in early on an investment. That is only a small part of it. If capitalism means the attainment or centrality of capital above all else, what company generates more capital than something like Apple. Why would anyone waste their time and money on cryptocurrency, which produces nothing. I keep giving the same investment advice, because it’s true and it works.
3. It promotes a false sense of scarcity. The belief that there is scarcity leads to a scarcity mindset and a need to always have to compete and strive. “If I don’t make it, someone else will take my spot.” The possibility does not occur than there are enough spots, or that there are alternatives. It’s not like everyone needs to or should aspire to an upper-middle class or wealthy lifestyle. Outside of a handful of areas, it does not cost that much to live in America. This leads to overcompensating behavior such as careerism, overreliance on daycare, and delayed family formation to try to secure enough resources and social status. As discussed below, this is rational. Having kids at 32 instead of 22 adds up to many hundreds of thousands of dollars compounded returns down the road.
4. It has not solved credentialism and other barriers/frictions. It is commonly assumed that markets erode barriers. But the rational pursuit of self-interest leads to the situation we have presently, in which companies demand greater credentials to screen for better workers, and then people spend more time and money trying to procure said credentials in exchange for much higher wages than otherwise possible. Everyone benefits: better employees for employers and higher inflation-adjusted pay for employees with degrees, but at what cost.
To people who says “replace diplomas with IQ tests” companies do that too, often using both. Phone interviews, for example, are used to screen for intellectual suitability before the credential stage. Or the diploma is a proxy for IQ. A diploma not only screens for some baseline IQ but is also correlated with other desirable traits such as conscientiousness.
5. Tons of survivorship bias. For every person who succeeds, there are many unheard/hidden failures, yet such success is too often attributed to skill when maybe it was just luck. The lottery mindset is related to the first one, in which speculation in overhyped/overvalued crap is seen as a way of getting rich fast, when superior and safer alternatives for getting rich exist (like index funds, real estate, etc.).
6. Too expensive yet too stingy. Start-up costs have surged over the past few decades, such as advertising, rent, labor, websites, etc. Yet at the same time, except for a handful of big windfalls, VC and other backing is as stingy and cautious as ever. If capitalism and free enterprise is so great, why so tight with the purse strings? Don’t you trust your fellow capitalists to allocate capital optimally?
Funding is so meager and hard to obtain despite expenses being so high. Y Combinator offers $500,000 ($125,000 for 7% equity, plus $375,000 under other conditions), and Thiel’s Fellowship offers only $100,000. That sounds like a lot until you realize that $500k is about the salary for two Silicon Valley coders, let alone an entire business or developing and marketing a product (Meta and Alphabet/Google are worth a combined $2 trillion because online/mobile advertising is so expensive). How is that supposed to work. Try building a decent website or app and then marketing it for only $500k, and then also having enough money to live in the Bay Area too. It used to be that tech, such as software or websites, was assumed to be cheaper than ‘brick and mortar’, but not anymore.
Yet in the mid to late ’90s during the telecom and dotcom boom, funding was much greater–easily millions of dollars for the median-sized tech start-up–not these tiny, pathetic sums we see today. VCs in the ’80s and ’90s understood that creating companies costs money, and that this entailed risk. Now too much risk aversion, hence lots of tiny payouts for half-baked ideas instead of fewer bigger payouts.
7. Capitalism assumes the role of the state. In addition to government surveillance, said surveillance is by companies too, working together. Same for promoting the same politics and ideology, like DEI and wokeness.