Capitalism has Lost its Way...

But there is still hope.

1776 was the birth of capitalism, not because that’s when the United States of America was born but because that’s when Adam Smith published “An Inquiry into the Nature and Causes of the Wealth of Nations”. 

According to Smith’s theory the most prosperous way forward was a free market accomplished by reducing government intervention specifically reducing trade tariffs…. a sharp contrast to the current approach!

He also wrote that prosperity comes from reinvesting profits rather than hording them and that sustainable profits come from doing business with a long-term perspective. 

The current tariff situation feels like a short-term bump in the road of capitalism.  The current approach to reinvestment and long-term planning however is more concerning.  Modern day capitalism is focusing more and more on individual accumulation of money as soon as possible which the left side of the political aisle would argue has widened the wealth gap unfairly enriching a small number of individuals.  The same group might also argue that this desire to increase wealth quickly increases consumption with the downstream effect of climate change and other forms of environmental degradation.

What anyone on the right or left should be focused on is the lost opportunity.  Rather than executives taking way more than they need and rather than spending money on creative ways to jack up the share price – they should be using that money to pay employees more money, hire more people and build better products as a more effective way to increase and maintain profits.

Could the elusive reason for a slowdown in U.S. productivity growth be because more of the profit is going into executive and shareholder bank accounts rather than to the employees?  Are business’s prioritizing profits ahead of their mission and product quality? Is an unsatisfied work force the reason for the current political turmoil in the U.S. and around the world?

Steering the capitalist ship back to the course Adam Smith directed not only makes good business sense but also social and environmental sense.

What can we each do?  Reinvest in ourselves by reducing unnecessary spending, doing quality work (different than working a lot) and investing in business that are doing the same.

P.S. “It will be found, I believe, in every sort of trade, that the man who works so moderately, as to be able to work constantly, not only preserves his health the longest, but, in the course of the year, executes the greatest quantity of work.” – Adam Smith