Is Capitalism Failing?

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Chile Protests
Protests in Chile

Government sources continue to report current US economic statistics showing low unemployment, increases in consumer spending, and gains in the stock market.  However, beneath political rhetoric there may be more than meets the eye. As Bloomberg.com reports, “The middle-class Americans who are the main targets of Trump’s economic pitch aren’t sharing much in the gains of U.S. growth.”  

Despite the story of a strong and stable economy, we may have a weakened one. Some evidence can be more easily observed through our South American little brother, Chile, which is currently experiencing a capitalism crisis. As a defender of socially responsible capitalism (which ought not be an oxymoron), this concerns me.

I am currently in Chile and witnessing a world-proclaimed prosperous capitalist economy unravel.  Over the past two weeks, I have run from scores of angry protestors being chased by military tanks shooting water cannons and tear gas (never had such burning in my lungs, eyes, and nose), saw restaurants where I dined one day being burned to rubble the next, and now flee raging fires (suggested to be arson) that are consuming thousands of acres and spawning flames within a few feet of my car.  See it all for yourself on my facebook page: https://facebook.com/raviunites

Hong Kong, France, Lebanon, Venezuela, Bolivia, Ecuador, Iraq, and Iran are also currently experiencing outbreaks of protest, violence, and destruction. Inequality, healthcare and education access, and intolerance for corruption within government, police, and military are common, and they also all evolve into violence and destruction that originates not from the bottom of the socio-economic spectrum, but rather, “the middle-class.” 

is capitalism failing?
Recent Photo take in Chile during protests

Yet each of these various movements have different political opponents. Hong Kong and Venezuelan protests are fighting socialist/communist governments while Chilean and French protests are turning against capitalist/neoliberal ones. If we dig deeper into history, Hong Kong was controlled for years by some of the most aggressive imperialists ever (the British) while Chile had the first democratically elected socialist president (Allende in 1970, who was overthrown in 1973 by the US backed military coup that put dictator Pinochet into power for 17 years, during which he established a capitalist economy).  Today, some Chileans call for a “Pinochet” style of leadership to return in order to curb violence and secure the economy while the other “half” accuse the current democratic government of increasing disparity and implementing a Pinochet style of military oppression in response to protests. 

To be clear, no socialism or dictatorship exists in Chile today.  In fact, it is extreme capitalism and very much a democratic republic. Like in France, “the people” are standing up against capitalism. In reality, the post-Pinochet strengthening of Chile’s economy left many people behind which is why the US must take note even though our media does little to cover the “fall of capitalism” in favor of the more palatable “fall of communism” in Venezuela, Bolivia, and Hong Kong. 

So, let’s examine three underreported factors that expose our weakening economy.

Underemployment: Double the Rate of Unemployment

While quick to report the U.S. economy’s low unemployment rate of 3.7% (as of June), the media generally overlooks the rate of under-employment which is 7.2%—double the June 2019 unemployment rate of 3.7%. 

According to brookings.edu, “The unemployment rate is in some ways a narrow measure of the labor market that misses important aspects of labor market distress. A broader indicator of labor market weakness called the underemployment rate—and in Bureau of Labor Statistics jargon referred to as the U-6 unemployment rate—takes into account some of this additional distress. Examining both unemployment and underemployment is useful for analyzing different aspects of the labor market.”

While a relatively small percentage of people are out of work, there is still considerable underutilized labor and many for whom the labor market is not providing adequate opportunities. This also means fewer are tapping into social programs designed to help those in need, which is positive except that under-employing people creates a proverbial doughnut hole where working families are still not able to sustain themselves yet no longer qualify for help.  When fewer get social help but experience social mobility, they become victims of credit and predatory lending. How can this equal a healthy economy? Would there even be a middle class if it were not for credit cards?

Increasing Credit Card Debt

The middle class exists largely due to credit which eventually causes a credit crisis in the economy. We saw it in 2008 with subprime mortgages.  We see it today in Chile with low wages and high costs of goods including education and healthcare accessed through predatory lending—two issues facing many US citizens.

Cnbc.com reported that outstanding consumer debt exceeded $4 trillion for the first time, according to the Federal Reserve.  The average American has a credit card balance of $4,293. At an average of 17.41%, interest rates have never been higher. 

Massive Educational Debt

If those are not enough, the middle class also carries massive student debt.  The average per adult now exceeds $37,000 with a loan-repayment average timeline of 19.7 years, according to nitrocollege.com.  

Cnbc.com reports, “Outstanding student loan debt has tripled in the last decade and is now $1.5 trillion. A college education is now the second-largest expense an individual is likely to make in a lifetime-right after purchasing a home.”

With 7.2% of U.S. citizens underemployed and with credit card and student loan debt at an all-time high, our economy cannot be as politicians would have you believe. 

In Conclusion

There is a lot more to our economy than headlines tell us. Poverty alleviation as a key objective of an economic system is misleading because one also must make sure that when moving people into a middle-class, it cannot be one that ultimately collapses in debt.  Is it really a middle-class if it lacks financial literacy, independence, and sustainability? Is it ethical to move people out of social assistance programs only to expose them to predatory lenders that saddle them with debt? 

I believe that whether capitalism, socialism, or something else prevails, we now live in a sharing economy that relies less on vertical economies (tickle up or trickle down) and more on lateral networks.  Capital itself has transitioned from financial to social. 

Moreover, I see the greatest enemy of every society being polarization.  Lack of civil discourse is our greatest obstacle yet is also the most necessary opportunity to create today.   If we can achieve that, everything else will begin to fall into place. We should debate economic theories, cultural differences, environmental concerns, and more, however, until we bring most people back toward the middle, is there any system that can be implemented successfully? 

For more regarding this discussion, check out my most recent interview with Jim Blasingame on the Small Business Advocate, at smallbusinessadvocate.com

 

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Ravi Unites Schools Update

We had planned to set up multiple interactions during Ravi’s current stay in Chile, however, due to the social unrest and violence, schools have been closed for multiple days causing unpredictable schedules and a high work load to catch up before summer vacation (which begins next week in the southern hemisphere). We hope to schedule more interactions globally soon, but possibly not before 2020. Nevertheless, please keep an eye on your inbox as we will contact you as soon as an opportunity arises.

Other News and Announcements

Ravi and Britannica have extended their partnership into 2020.  This means we can partially subsidize the cost of a keynote to qualifying educational events which will amount to a generous 40% savings for you.  To secure your partially subsidized keynote, please reply to this email with your planned date and location so we can let you know the details and hold the date for you.  Don’t delay, as the funds are limited and allocated on a first come-first serve basis.

Ravi has been in Chile facing the extreme social unrest head on (as highlighted in this month’s blog post). He will fly straight from there to give the keynote in December for VASCD (Virginia ASCD) in historic Williamsburg VA, and will speak on Cultural Competence as a Pathway to Equity in Education.

 

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