There are many people who point out that the capitalist system is synonymous with inequality. Libertarians suggest that governments should set up and maintain the structures of society which allow the capitalist system to flourish and allow people to go about their business of earning income unencumbered by unnecessary government interference.
This implies that governments can act independently of the capitalist system, maintaining an objective view on the system and tweaking laws and institutions to ensure that the system operates as efficiently as possible.
However, this ignores the potential for government to be subjective in its operation and, in the words of Karl Marx, become a ‘committee to manage the affairs of the bourgeoisie’. Far from society being the ‘liberal meritocracy’ that Smith’s invisible hand might suggest, it becomes a system where power becomes concentrated in the hands of those who seek to further their own ambitions and who have the social and political connections to be able to do so.Branko Milanovic´, the author of a book entitled Capitalism Alone (Harvard University Press, 2019), noted some issues facing capitalism:
one is a rising share of capital income as a proportion of total income. This not only runs counter to the idea of a meritocracy but also casts doubt on the idea of a property-owning democracy. In addition, the increase in the share of capital income further increases inequality and presents barriers in the way of attempts to overcome inequality and poverty.
If these traits in capitalism are taking place, and their consequences as noted by Milanovic´
are correct, the implication is that someone or something needs to intervene to correct these problems and help those who find themselves in poverty or subject to the problems which arise from inequality. That, of course, further implies that there is an assumption that inequality is a social ill and needs to be reduced.
Assuming we accept that inequality is a ‘bad’, the perhaps obvious focus of attention on correcting this bad is the government. But if the government has evolved to become a ‘committee to manage the affairs of the bourgeoisie’, then how confident can we be that policies such as minimum wage laws, welfare benefits and tax policy to redistribute income, are designed and implemented with the interest of those who need them most in mind? Indeed, if a meritocracy is desirable, then to what extent is any interference by government warranted? Should people not be left to pursue their own interests and well-being with government designed to ensure that those who work hard get the full benefits of their efforts?
Critical Thinking Questions
1 What do you understand by the term ‘liberal meritocracy’? Given the discussion in this chapter, to what extent do you agree that this should be a fundamental principle underlying how we view our society?
2 Why might an increase in the share of capital income to total income lead to an increase in inequality?
3 What do you think Marx meant by government becoming a ‘committee to manage the affairs of the bourgeoisie’?
Do you agree that this is the case?
4 The article notes that inequality can be assumed to be a ‘bad’. Do you agree that inequality is ‘bad’ and that there should be steps taken to reduce inequality? In thinking about your answer, consider your response to Question 1 and the idea of a meritocracy.
5 To what extent would you agree with the view that policies to address inequality and poverty, such as those mentioned in the article, should be pursued by governments? In framing your answer, take into account the points raised in the article about the nature of government, meritocracy and the issues in capitalism as noted by Milanovic.