Capitalism inherently veers towards a monopolistic and unequal society (ie, capitalists try to own all the means of production). This means that capitalists must understand that their own actions are the biggest risk to the system they love. This is because the labor class will not likely allow a persistent inequality to exist. This can either resolve itself via government action (greater redistribution) or the capitalists can resolve it themselves by ensuring that they aren’t obtaining an excessive surplus of wealth.
Now, the American system of capitalism is an interesting case study here because America is both the most giving country in the world and also runs a system of relatively large redistribution. And yet wealth inequality remains a tremendous problem. So we’re either not giving away enough of our wealth or we don’t have enough redistribution. The capitalists get to decide how to fix this in the end and being a free market kind of capitalist I’d like to think that they (we) will. But last night’s record breaking art auction has me considering that maybe this is a much bigger problem than we think – that perhaps there is a structural problem with the way we value things in our society which reinforces the inequality that is contributing to stagnant growth.
I am stepping into a minefield here projecting my own values on others, but I feel like this is a useful thought exercise. So, Da Vinci’s Salvator Mundi sold for $450MM.¹ That’s nearly half a billion dollars for a painting whose authenticity was in serious question. But think about this – there are a huge number of people in this world who have so much money that they will spend half a billion dollars on a painting that they will very likely hermetically seal and place in a vault. It will provide no value to the economy or even to its owner other than its potential appreciation. It likely won’t even sit on a wall so its owner can enjoy its intended purpose – to be looked at.