A Message from Christina Elson
American society is at a critical turning point. We are reacting to a global pandemic, economic distress, a long legacy of race and gender inequality, a stressed planet, and growing political polarization. We know we need to create a better relationship with the environment and establish clear goals for health and education, while recognizing that innovations such as Artificial Intelligence (AI) and synthetic biology are having an unprecedented impact on society.
People are rightly concerned about the repercussions of leveraging technology to forge new tools and systems. Given this situation, how should business, civic organizations, and government work together in 2020 and beyond? What should each contribute if we want to build a system that allows individuals to achieve their creative potential in a free and flourishing society? These core questions will drive the agenda for the Wake Forest University Center for the Study of Capitalism (CSC).
In my view, when we talk about the American System, we are essentially talking about our political economy. Our system is both democratic and capitalistic in nature.
Democracy simply means that the government is run by its citizens. The people have a voice in deciding what rules govern the collective behavior of everyone. As citizens of a representative democracy, Americans value ideals enshrined in our Constitution: equality before the law and such specific rights as freedom of speech, press, and religion, and the right to assemble and petition the government.
Capitalism, on the other hand, simply means an economic system based on private ownership and market exchange. In a capitalist system, market participants must be able to own the labor, ideas, and goods they trade. The truth is that capitalism cannot properly function without a government that supports the concept of private ownership and enforces property rights and contracts.
The premise undergirding market exchange is that free and voluntary trade results in the betterment of the trading partners. It also directs resources to things that truly solve problems. Over time, markets create two issues with which society must contend: economic inequality and broadly shared prosperity.
Free markets generate economic inequality because resources are not evenly distributed; they are directed to products and services that are perceived to work best. Moreover, as society evolves, the problems we need to solve change. Innovators find solutions that attract capital and workers, sometimes at a fast pace. Businesses that don’t innovate feel the cold gale of creative destruction and go bankrupt. Workers wedded to old skill sets and ways of doing things fall out of a dynamic economy, creating financial and psychological stress.
Why is broadly shared prosperity an issue? It’s generally accepted that innovative producers capture just a small fraction of the profits they create from innovative activity. The vast majority, some 96 percent, of the benefits from technological advance, are captured by society.
Consider this: for much of the 1800s, people considered it eminently possible to live a long, safe, and happy life without many of the necessities we take for granted today, including electricity. The discovery of the incandescent light bulb created wealth for Thomas Edison and inventors like Lewis Latimer who improved on it. More importantly, it spurred a massive influx of private and government resources to create a new industry focused on energy generation and grids to widely distribute electricity. The light bulb allowed safer streets. It brought time-saving appliances into the home, relieving stress and strain on the human body and providing healthier refrigerated food. For factories, it facilitated the adoption of shift work and night work, creating new jobs and lowering the cost of production and, not incidentally, triggering concerns about the mental and physical impact of this kind of work.
Most of us can’t image living without light. For us, our very definition of living a long, safe, and happy life means access to electricity. But globally, millions of people live without light. In the US, poverty still creates situations where people don’t have access to electricity, or it could be cut off.
As Americans, we must continually update our perspective on what broadly shared prosperity looks like – or, more accurately, what it should look like – in our homes, communities, nation, and world. Should everyone on the planet have light? Does a lack of access to electricity contribute to economic inequality? If so, what do we do about it?
We need to be more aware of how technology is impacting us now and how amazing and complex innovations in AI, synthetic biology and other emerging fields will change the way we think about prosperity in the future. Is society still capturing the vast majority of the benefits from technological advance? What does a long, safe, and happy life mean for us now? What will it mean a generation from now?
Our nation is at a point in its history when both our democratic institutions and capitalism are perceived as not functioning well. The critiques range from being bloated or out of step with the times, lacking in quality, devoid of real leadership, unable to define a common purpose or direction, and more.
Can our current system help us face multiple crises and make smart decisions? It’s critical that we act quickly to create a national dialogue about how the American System can work better before extremism on the left or right make those decisions for us – by default. Democracy and capitalism vest immense power and responsibility in individuals for their role in maintaining a well-functioning system. We cannot deflect this responsibility to anyone else, including business leaders and elected officials.
CSC believes that we have a profound and shared responsibility to consider what well-functioning capitalism looks like and to champion whatever solutions emerge from our studies and dialogue. We’re confident that democracy and capitalism is a winning combination and the keys to a flourishing future for everyone.
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Christina Elson is the Executive Director of the Wake Forest University Center for the Study of Capitalism