Inequality II: Social Capital

What capitalism is good at allocating capital to exploit market opportunities. In particular, it has done a good job at exploiting the technological opportunities opened by the scientific revolutions of the past centuries. In the Seventeenth and Eighteenth Centuries, the big profit center was using the African slave trade to staff the sugar plantations of Brazil and the Caribbean, and the cotton plantations of the American South. Europe's taste for sugar and rum was sated, but this was not a rising tide that lifted all boats. Sugar productivity was increased but millions of slaves were worked to death in abysmal conditions.

The narrowly economic minded, especially libertarians, think that a productivity increase that distributes 99% to the few and 1% to the many is a good deal all around, but is it? The clearest evidence against that is assessment of the effect on social capital. Wikipedia:

Social capital broadly refers to those factors of effectively functioning social groups that include such things as interpersonal relationships, a shared sense of identity, a shared understanding, shared norms, shared values, trust, cooperation, and reciprocity.

Inequality destroys social capital, breeding hatred and distrust among citizens. It facilitates autocracy and fascism.

The kind of drastic inequality seen today in the US is also destructive of capitalism, by breeding monopolies and cartels and consequent elimination of competition. Libertarians, again, I think systematically underestimate the anti-competitive effects of vast wealth.

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