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How Capitalism Made Americans Poor, and Socialism Made Europeans Rich

Capitalism Doesn’t Make Us Rich, and Socialism Doesn’t Make Us Poor — Socialism Makes Us Rich, and Capitalism Makes Us Poor.

Of all the funny, strange, and backwards myths that need undoing in America, none is more deeply ingrained — and hence more fiercely held — than this one. Capitalism makes us rich, and socialism us poor!! Hence, if I say “socialism”, many Americans — maybe even you — probably see an image of a bedraggled person in rags, wearing sandals, walking down an unpaved street, in a dust, decrepit, ruined town. And yet one of the simplest and truest fact in the world today is this.

Capitalism doesn’t make us rich, and socialism doesn’t make us poor — socialism makes us rich, and capitalism makes us poor. (Or at least the “social” part of “social democracy” does, if you want to indulge in hair-splitting.) Yet while many Americans these days have grown skeptical of capitalism these days, I think many American still associate socialism with poverty. And that’s funny — because nothing could be further from the truth.

Capitalism is what made Americans poor, and socialism is what made Europeans rich. Do you see how ironic that is? How funny — reality is precisely the opposite of the myth Americans are told to believe. In economic terms, we’d say that capitalism immiserated the average American — and he doesn’t even quite know it, but I’ll get to all that. Perhaps you yourself don’t believe me, though. That’s OK. Let me prove it.

America has the world’s first two trillion dollar companies — Apple and Amazon. Go capitalism! The problem is that while corporate profits have never been higher, the average American’s life has fallen apart. In every single way that you can think of. The majority of Americans now live perched right at the edge of ruin, atop a razor blade of disaster. 80% percent live paycheck to paycheck, 70% can’t raise $1000 for an emergency, and so on. The average American faces a new kind of poverty — precarity. Hence, depression and suicide are skyrocketing, while extremism is rising, as people have lost faith in their society to ever really improve their lives again — the vast majority of Americans now expect their kids’ lives to decline, too.

Are these two things related? Capitalism booming — and life declining? Of course they are. It’s hardly a coincidence. Capitalism grew so rich precisely by exploiting the average American, leaving them in a state that Marx would have called “immiseration” — being paid just enough to subsist, and having all the cream of your labour, which is to say, your energy, creativity, ideas, passion, or just plain hard work, skimmed off the top. You can think of “immiseration” as something like “being offered the lowest price possible for your labour, and having no choice but to take it — while also having to pay the highest price possible for the very things you create.” What a beautiful trap — if you’re a capitalist, that is. But what if you’re not?

Hence, Amazon has made Jeff Bezos the richest man in the world. And maybe his top lieutenants are millionaires, too. But the average joe working the warehouse is never going to be rich. He will be working, most likely, until the day he dies. He’s immiserated — he lives a life that’s not very good, but one which he can’t escape from, either. Capitalism has him right where it wants him — both as a consumer and a producer. What do I mean? Let’s start with the immiseration of Americans as consumers.

So how did Americans get so poor? The reason is that their incomes have been flat since the 1970s — but the costs of life have exploded. Everything that is essential to life has gone by up by hundreds, if not thousands of percent. Healthcare — 2000%. Education — 1000%. Rent — 500%. Food — 400%. The result is that Americans are deep in debt. Debt that is charged at exorbitant interest rates, because it mostly put on credit cards. Their net worth has declined, as a result. Who can afford thousand percent increases for the essentials of life — while incomes stay stagnant?

And yet this is something like capitalism’s ultimate and most joyous dream come true. You can’t do without these things, really. You have to buy them. Healthcare, education, food, shelter. You must pay for them. But they have mostly been monopolized, which is to say, the market has been cornered by capitalists. That was smart of them — because now they charge Americans through the nose, on the one side, as consumers, for the things they cannot do without, but also on the other side, as employees, capitalists don’t ever really pay them any more. Bang! Life implodes while capitalism gets rich. That is how the American middle class imploded — now, for the first time in history, it’s a majority. Marx would have laughed — because to him, that would have been a sure sign of immiseration growing as capitalism began to fail (or succeed, wildly, depending on your viewpoint).

So capitalism is not a magic formula for riches. It is for capitalists, sure — but the dirty secret which American economists and thinkers never discuss is that most Americans aren’t capitalists, and they never will be, and hence, it doesn’t just not benefit them — it has hurt them badly over the last few decades. And that is because it has left Americans in the pincers’ grip of immiseration — they are charged exorbitant, absurd prices by the very capitalists who barely pay them enough to subsist on any more, and who never raise their wages a dime. LOL — do you see how sad and funny all this is?

How could the average American end up a capitalist, instead of an immiserated prole? Why would capitalists ever give him or her a share of those jealously guarded profits? They’d only they’d do that if society forced them to — with a little dose of socialism.

And that brings me to Europe. Europe doesn’t have any Amazons or Apples. It doesn’t have any trillion dollar companies. Capitalism operates at a smaller scale. And yet, Europeans have grown richer than Americans. Yes, really, click that link. While American incomes flatlined in the 70s, and never rose, and American net worth went into freefall, no such thing happened in Europe. In most of Europe (by which I mean Western Europe, of course, not post-USSR Eastern Europe), the middle class grew over the same time period. In France, middle incomes rose, and the middle expanded. The same was true in most of Europe. (Only in Germany did incomes stagnate, and that was because unions struck a deal in 2000 to put more (good, with benefits) jobs above raises — and even that is better than what Americans got.)

(Hence, Europeans don’t live like Americans. They live like richer people. Wait, what do I mean when I say “richer”? That Europeans all live like Bernie Madoff? Croesus, perhaps? Of course not. I simply mean the most minimal and bare-bones definition of rich you might imagine. That you can put food on the table, educate your kids, afford healthcare, pay your mortgage, and one day retire — all in relative safety and security. Without a sense of crushing anxiety, every day, that you probably can’t afford those things. To be “rich”, in the most basic way, is a kind of freedom — not just freedom to buy yachts and mansions so forth, but simply freedom from anxiety and dread of poverty, as genuine ruin, of ending up on the streets because you didn’t pay that bill, and once you’re homeless, well God knows what might happen.)

Europeans don’t face the strange, crazy, terrible, immoral dilemmas Americans do — do I pay for chemotherapy, or my kids’ education? Maybe I should just let myself die. Should I pay the mortgage this month — or go without healthcare? And so on. Do you see what I mean by the difference between “rich” and “poor? It’s not about material things, so much as the experience that one is genuinely living a life free of control, domination, punishment, for the merest, slightest misstep — a life of anxiety, fear, stress, trauma, and despair, which is what the experience of “poverty” really is. Immiseration, remember?

Now. Why don’t Europeans live lives at the edge of ruin like Americans do? Why didn’t they get immiserated, too? Remember how capitalism, funnily, charges Americans the highest price possible for the essentials of life, things you can’t go without, and pays them the lowest amount possible, at the very same time — my definition of immiseration? In Europe’s that exactly backwards — and it’s because Europe invested in public goods, otherwise known as “socialism” (the “social” part of “social democracy”, if you want to be precise.) Europe built great public systems of healthcare, education, housing, finance, media, retirement, and so on. Those systems do the precise opposite of what capitalism does in the States — they provide the essentials of life at the lowest cost possible, and usually, at the highest reasonable wage too.

Take healthcare as an example. Because it’s publicly provided, the costs are far, far smaller than in America. Sure, they come out of your taxes — but that’s just accounting: at the end of the day, whether you pay for a thing through “taxes” or “consumption” is just a different bucket. Where Americans pay $300 for a vial of insulin, because capitalism has jacked the price into the land of the absurd, public healthcare means that the same thing ends up costing a European maybe $20, probably closer to $10. Hence, overall European healthcare spending per person is about $5k, but in America, it’s $10K.

Yet Americans barely get any real healthcare at all for that money (hence, declining life expectancy and rising mortality and illness), while Europeans live longer, healthier lives. Now extend that example across all the basics of life — education, retirement, finance, housing, transport, and so on. Pretty soon, over time, because they weren’t paying capitalism through the nose for the essentials of life, Europeans grew richer. Their incomes rose, their savings accumulated, their net worth rose. And most of all, they didn’t live with the crushing fear and anxiety that they’d end up abandoned, on the streets, homeless, ruined. Immiserated.

Do you see how capitalism can make people poor, and socialism make people rich? But we’re not done yet. We have only talked about people as consumers so far — what they pay. What about people as producers — what they get?

Because Europe built great systems of social goods for the essentials of life, it also employs vast numbers of people to provide those very essentials. Hence, one of the biggest employers in the UK is the NHS, and in France, the pension system, and so on. But these jobs are good jobs. They are not dead-end- go-nowhere, “I’m making Jeff Bezos the world’s richest man but I can’t even go to the bathroom” jobs. They come with abundant benefits. What benefits? Why, the very same social goods we’ve just been discussing. They pay steady and reasonable incomes, for decent and sane hours. They offer security and stability of a kind that is barely left at all in America.

What’s the result? Well, the private sector has to compete with all that. It can’t just offer dead-end, go-nowhere jobs with no benefits to the same degree that it can in America — because in Europe, there is a vast pool of decent jobs to be had. So people do not have to make what Marx might have called “wage slaves” of themselves. They can say, instead, “Thanks but no thanks, capitalism — I don’t need to sell my labour to the lowest bidder. There is a bidder in this labour market who genuinely values me, and there always will be.” Hence, European incomes have a kind of hard floor — not just quantitatively, but also qualitatively — and the private sector, if it wishes to have the best people, cannot simply treat people like it does in America, overworking and underpaying them, constantly.

And that brings me to the third and final effect. Because Europeans didn’t fetishize capitalism as the only road to riches, they weren’t afraid to regulate the quality of jobs, either. They didn’t destroy their unions — in fact, in France, whole sectors bargain to set wages and benefits, like waiters and chefs with restaurants and bistros. They didn’t let capitalists alone define the rules of the game, laws and codes, knowing full well that if they did, capitalists would do what they were going to do — turn “jobs” right back into something resembling grim, unrelenting, Victorian era “work”, paid by the piece, with no protection, safety, guarantees, or rights for workers at all, all of which are what European countries provided generously — which means that Europeans enjoy higher incomes, because, as a result, European companies have to invest more in workers, which means that they cannot merely see them as short-term things, to be tossed aside and discarded, the moment their “marginal productivity” drops below their “cost”.

(And all that is again because Europe wanted people to live lives of dignity — it was very careful and deliberate that people not be left immiserated, its intellectuals debated it and its thinkers reflected upon how to do it. Americans, instead, never having thought about or really considered all this, ended up precisely there. What else do we call the prole who dreams futile dreams of one day being a capitalist, but never will be, and one day will choose between healthcare and food for his kids but immiserated? That’s a life of pretty crushing misery — dread, pressure, stress, fear, anxiety, guilt, shame, all of it. Capitalism has him right where it wants him.)

So. America has the world’s first trillion dollar companies. Europe doesn’t. America is the greatest capitalist nation ever, bar none — that much is true. But that has come not at the benefit of the average American — but at a great cost to them. Their lives have gone into reverse gear. They aren’t just seeing no benefits from capitalism — the costs and risks are being passed right back to them. Without social investment in public goods, Americans pay skyrocketing prices for the essentials of life — which capitalism charges them: the very same capitalism which won’t ever pay them higher wages, with which to afford those skyrocketing prices. Bang! The capitalists grow ultra rich. The average America’s life falls apart. He’s been immiserated, thanks to capitalism — not left richer.

In Europe, though, the story was very, very different. Socialism, not capitalism, organized the provision of the essentials of life — and both paid people fairly and protected them carefully, in the very jobs of providing things like healthcare, education, finance, retirement, media, transport, and childcare to one another. The result is that people grew richer over time. Their incomes grew into accumulated savings, and their net worth rose. They began to live with a genuine feeling of safety and security and happiness. Europeans were liberated — not immiserated.

Hence, today, most Europeans look at Americans, and can’t bring themselves to imagine — really, can’t quite understand — how someone in a nominally rich country would have to choose between their own chemotherapy or insulin, or their childrens’ healthcare, food, or shelter.

The answer is as sad as it is simple. They may live in a rich country, but Americans are not rich people anymore. They are poor people. It is American capitalists who are rich — but they are a tiny handful, Bezos and Gates and Brin. The average American is impoverished now, living at the edge of ruin, spending most days in a haze of anxiety, dread, and slow despair. In immiseration.

(What was the real difference between Europe and America, at a macroeconomic level? Europeans were reinvesting their own surplus in each other — that is all that “socialism” really is. Americans were handing their surplus over to capitalists — and hoping capitalists would reinvest it in them. After all, that is what their economists and intellectuals said would, could, should, must happen. But why would capitalists ever invest in people — instead of skimming off the cream? They are not in it to be nice to people, after all — their motives are not benevolence, social development, justice, or even a sense of decency. Capitalism’s goal is simply maximizing profit — and so those surpluses weren’t reinvested in people, they were handed over to owners and heads of companies, mostly, in the form of spectacular payouts and IPOs and parachutes. For what work, precisely? Figuring out ways to maximize profit, relentlessly, every single month — at any cost to anyone else, not to anyone’s benefit. Hence, capitalists got mega-rich, while the average American’s life began to decline into misery.)

Yet what is saddest — and funniest — of all is that that very same American still believes in the old, foolish myth. Capitalism makes us rich! Socialism makes us poor! No, my friend. Capitalism only makes capitalists rich — and you will never be a capitalist. Socialism makes us rich. Capitalism makes us poor. Just as Marx said, it immiserates us. If, at least, the us we are talking about is the opposite of capitalists, which is to say, the rest of us.

Umair
September 2018


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