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Capitalists’ worries about capitalism

What happened?

Both the Financial Times and the Guardian recently wrote about how an increasing number of Western billionaires and wealthy CEO’s have started to address the widening gap between the rich and the poor. Indeed, a recent Oxfam report shows that the world’s 26 richest individuals own as much as the poorest half. In 2017, that number was ‘still’ 43. Last year, the wealth of the world’s billionaires increased by 12%, while the poorest half of humanity saw their wealth shrink by 11%.

What does this mean?

Billionaires in the West realize that growing inequality and discontent with capitalism can lead to societal pressure, forcing them to change the way they do do business. “Maximized shareholder value” and CEO wages 500 times the wage of their employees may thus not remain “business as usual”. Companies like General Electric have begun to list negative sentiment toward multinationals in the “risk factors” section of their corporate filings. As we wrote earlier, billionaires are perceiving the risk of a “billionaires backlash”. The political debate in the U.S. has already shifted: socialism is on the rise in a country that is capitalist by nature. Socialist Bernie Sanders is currently the second most popular Democratic candidate for the 2020 elections and the majority of young American voters (both democrats and republicans) support democratic socialist policies around health care, education, and jobs. This points to a potential deep political transition in the U.S. that could indeed alter the current capitalist socio-economic paradigm.

What’s next?

In an analysis of 22 major world economies, the average CEOworker pay gap in the U.S. far outpaces that of other industrialized nations. Also, in comparison to other Western countries, the rise in wealth inequality has been extreme in the U.S. Americans are starting to reject the ideathat rising inequality is natural and inescapable, demanding politicians and CEO’s to take measures. European social democratic systems are attractive alternative as inequality has not been rising as fast as in the U.S. or in the U.K. It might become another domain where Europe could show moral leadership.