A frequent complaint I hear from those leaning more to the left about the "evils" of capitalism is the exaggerated "wealth gap" that results from "unfettered capitalism" along with the implied allegation that it is the result of the wealthy exploiting and even "stealing" from the poor. I will leave it for another discussion to explain why that isn't true, because the point of this post is to go into how "creative destruction" constrains the exorbitant wealth of those who do well under capitalism, absent government interventions.
The first thing it is worth noting, is that today's super wealthy are, by and large, not actually capitalists. At best, they are corporatists leveraging their relationships with politicians to get favorable tax rules, government contracts, and regulatory frameworks set up that put them at an advantage over their competition, much of which is small(er) businesses and new startups that would otherwise threaten their market share. Monopolies are bad for consumers, but any real monopoly requires government enforcement while "natural" monopolies that come into being without government intervention are few and short lived.
Past that, let's talk about bailouts. The most notorious bailout in recent memory is the TARP bailout at the tail end of the George W. Bush administration in the wake of bankruptcies at a number of prominent and previously respected Wall Street firms. More recently, we have the CARES Act, which though it included $1,200 for every tax filer with bonuses for dependent children, that charitably works out to about $360 billion out of a total of $6 TRILLION in spending and borrowing that was earmarked to bailing out businesses, most of which ended up being large businesses already blessed with a large market share.
This is NOT capitalism.
Many of these large businesses had been ducking attention in the financial press even before the COVID-related shutdowns for their profligate practices of using tax rebates and debt to buy back their stock in an effort to inflate their share prices. These were not healthy companies, though obviously they owned a lot of assets. Their balance sheets, however, left them in a poor position to finance any cash flow shortfalls resulting from the reduced consumption and mandatory shutdowns caused by the COVID pandemic. In a healthy capitalist economy, these businesses would have gone bankrupt. Their assets would have been sold off to satisfy the claims of their creditors, even if there were airlines selling off their Boeing passenger jets for the price of a luxury car and cruise lines selling their ships for the usual price of a ticket for a 7-day Caribbean jaunt due to market saturation and illiquidity.
Such a fire sale of assets would have narrowed that "wealth gap" pretty quick. The beneficiaries of those sales would be anyone with liquid assets. Given the state of these companies, there were probably a few high school students on a proverbial paper route with a healthier balance of assets to liabilities than these giant cornerstones of Wall Street stock tickers.
Creative destruction is not pretty. Immediately following the 1929 stock market crash and during the ensuing Great Depression, infamous stories abound of formerly "wealthy" titans of industry jumping from their high rises as their debt-financed fortunes evaporated around them. There are no such stories from the 2008 "Great Recession" and TARP can perhaps be credited with "saving lives" on that account, but at the expense of interrupting the natural unfolding of creative destruction and the narrowing of the wealth gap that would have resulted from the fire sale of assets, including homes and real estate, if bailouts and government mortgage modifications had not intervened.
Today is not 1929. Even without the largess of government bailouts to big businesses, a social safety net has been put in place to ensure that even the poorest among us has access to food, health care, housing, and assistance for other essential utilities and services. You may still find a few of those "titans of industry" preferring a long drop and a short stop to the humbling experience of clipping coupons and sending their children to public schools, but you would also find a new generation of entrepreneurs, homeowners, and true free market capitalists taking ownership of the hard assets to begin rebuilding from the ground up without the overleveraged, debt-ridden mismanagement that led to the initial meltdown, creating new jobs and wealth to replace that which was "creatively" destroyed.
It doesn't take long these days on social media to find leftists and proudly declared "communists" and "socialists" posting memes about guillotines and "eating the rich", because the government interventions of the past 12+ years have effectively entrenched the wealthy "1%" into a position of extravagant wealth and political influence while likewise entrenching the rest of us in a wage/salary economy of insecure employees without the "licenses", regulatory compliance, or direct line to federal funding of our failures to ever catch up to them. It breeds a radicalism and revolutionary sentiment waiting for a spark to erupt into violence. Any perusal of right-wing social media would, in isolation, convince you that the Black Lives Matter protests against police brutality are precisely that spark and that they are a thinly disguised conspiracy of "Marxists" intent on overturning the political order far more dramatically than a simple exchange of a Republican for a Democrat in the White House could ever entail.
A quote is attributed to JFK, "Those who would make peaceful evolution impossible will make violent revolution inevitable." Government interventions to protect established political and business interests, preventing creative destruction and a narrowing of the wealth gap, are making peaceful evolution impossible and are not overseeing a capitalist economic system. They are making violent revolution increasingly inevitable and it will not just be "the rich" who are eaten in the violence.
