You (Probably) Won’t Believe in Capitalism Anymore After This Thought Experiment
Not too long ago, I came across one of these silly online personality quizzes. One of the questions was: “If you ruled the world, would it be a better place?” Most of us intuitively have the feeling it would. If only we were the ones in charge, everything would be better. That is because we have a vision of how we would like the world to be. The real question is why we have this or that vision. But before we begin our investigation, let me ask you to take a moment to consider the original question: If you were in charge, what would you do? If you could reset your society, redesign it from scratch, how would it be?
Would you lower income taxes and let people keep more of their earnings? Or would you raise taxes and create a more comprehensive safety net for everyone? You might argue that lowering income taxes would encourage people to work harder. That tax cuts would make it easier for them to provide for their family. Or, you might think it’s better if everyone took on more responsibility for the common good. If we all worked together on creating equal opportunities for everyone.
Of course, there is a lot more to creating a good society than taxes. But taxation serves as an excellent example of your general view of how things are connected. So, take a moment to reflect on this question, because your answer will be critical as we get further into this exploration.
Confession time: I used to be a capitalist
Let’s get it out of the way: Once upon a time, I was a capitalist. I admit it. For years, I was a true believer. I argued for minimal taxation and ultimate personal responsibility. This means I understand the mindset. If you’re a fervent believer in capitalism, I really do get where you’re coming from. And I didn’t even grow up in the United States surrounded by the idea of the American Dream. I grew up and have spent most of my life in Denmark. Although far from the socialist country some Americans perceive it to be, it is a welfare state. And it’s a welfare state in which most people are happy to pay one of the highest tax rates in the world. I didn’t see the point when I was younger, but I do now.
Although I didn’t really get it till much later, the first step towards my conversion happened in college. I was in an Ethics class, and we were studying distributive justice: The question of whether and how we should (re-)distribute the wealth of a society between its people. It was in this class I encountered the thought experiment that was eventually going to change my mind about unrestrained capitalism. It might also change yours. But before we get into the details of the thought experiment, let’s investigate one thing first:
Why are you a capitalist (assuming you still are)? And why I used to be one
Ask yourself why you believe in capitalism. Assuming you still do. Line up the reasons and in a moment we’ll see if they hold up against your moral intuitions when you really take the time to think about it. Meanwhile, let me tell you why I used to be a capitalist. Maybe your reasons are similar?
Reason number 1: My parents are slightly upper middle class and my dad is a business owner. Growing up, my brother and I were spoiled and never went without anything. On top of this, we went to private school.
Reason number 2: Living in this bubble, I never even had a second-hand experience of poverty or unemployment. I never met anyone who would make me begin to question the inherent unfairness of some people having it all and others having to go without.
Reason number 3: As a result of the above, I couldn’t imagine myself walking in anyone else’s shoes. I didn’t really understand that poverty wasn’t most people’s own fault.
Also, I had yet to hear about the American philosopher John Rawls’ brilliant thought experiment. What Rawls recognizes is that if we’re to agree on one universal and just system, we have to take personal circumstances out of the equation. But how do we do that? We all find ourselves in a particular situation in our lives and the way we view our society is affected by it.
Working theory: Our ideological beliefs depend on our circumstances
It seems we hold the beliefs we do because of 1) our own circumstances in life and 2) the circumstances of those we associate with. There is one exception though. In welfare states such as Denmark, some re-distribution of wealth through taxation is taken for granted. Even by most of the people who are wealthy. Among my classmates who also lived a sheltered existence, many still thought a fairly significant re-distribution of wealth was a great idea. Because they were Danes. I still didn’t get it though.
My pro-re-distribution classmates were met by some adults in our social circles with an overbearing attitude. They thought that the students who held these beliefs were simply going through a phase and would grow out of these views. They firmly believed that once the young people had accumulated their own wealth, they would want to protect it. And to do so, they would vote for the politicians who wanted to lower the tax rates.
So, did my peers get ‘smarter’ with age? According to this logic, some did, some didn’t. A dividing line seems to be whether people graduated and got a job before the financial crisis.
For those of us who didn’t, there’s a good chance we won’t ever accumulate the wealth our parents and grandparents have. Even short-term unemployment sets you back considerably when it comes to lifetime earnings.
If we make the assumption that our ideology depends on our own circumstances, my post-financial crisis unemployed classmates and I should be pro-re-distribution and against capitalism. It seems there is a good chance that this actually is the case. I can testify to the fact that relative poverty and unemployment do have a way of opening your eyes to the pitfalls of a capitalist system. Despite significant re-distribution, Denmark is still a capitalist country, it’s just not a country in which unrestrained capitalism reigns supreme. It’s still no walk in the park to be unemployed though.
If you had asked me ten years ago, I never would have expected to ever join the ranks of the unemployed. Six months before I graduated I finished an internship in Paris at the Danish Delegation to the OECD. Within days after I had started the internship, Lehmann Brothers filed for bankruptcy. No-one had even the slightest idea of the sheer magnitude of the financial avalanche this would set in motion. Although I was surrounded by some of the world’s most accomplished economists every day at the Danish Delegation and the OECD headquarters, no-one had any idea of the destructive forces that would reverberate through the economy and just how much this would affect all of us.
All the way through the education system, I had achieved a lot of successes. My teachers and my parents cheered me on. I knew that I could accomplish anything I ever wanted. Until I found out that I couldn’t. When firms stop hiring it doesn’t matter how good your grades are, or how many internships you have completed. And so I ended up moving 2500 miles from my home country to secure a job I wasn’t over-qualified for. But while my personal conversion may have culminated in the aftermath of the financial crisis, it was a slow process that began long before, and I’m not entirely sure it would have had the impact it had on me, had I not known about Rawls’ thought experiment.
The thought experiment that might change your mind
In “A Theory of Justice” John Rawls claims that we need to exclude from the decision-making process all the things that divide us. He writes: “Somehow we must nullify the effects of specific contingencies which put men at odds and tempt them to exploit social and natural circumstances to their own advantage.”
Our circumstances inform our beliefs for a reason, however: It is challenging to look beyond our own views of the world and really empathize with people whose predicament we don’t understand. After all, we can’t remove our circumstances like a pair of sunglasses. Rawls urges us to attempt to do this anyway, through a thought experiment. He asks us to imagine that we are standing behind a veil, in an “original position.” This means that we’re to imagine that we know how the world works but not our place in it.
Rawls claims that imagining ourselves behind the “veil of ignorance” is the way to achieve the neutral starting point we need in order to re-think the fair distribution of wealth without bias. When you are behind the veil, you don’t know whether you will belong to a privileged or less privileged class. The majority or a minority. Whether you are a man or a woman. You don’t know your strengths and weaknesses. Your attitude to taking risks, or if you’re an optimist or pessimist.
Learning about this thought experiment had a shock effect of sorts on me. I could tell that my perceptions of the world were not consistent with the person I wanted to be. I didn’t want to be ignorant of the plight of others, but at the same time, it was a slow process to really understand it. I couldn’t immediately rid myself of my privileged upbringing. I wonder if you can, if you have a similar background and the same thoughts I had?
We need to accept the challenge though. The fact that it’s difficult to re-think, and perhaps eventually re-design our world shouldn’t keep us from doing it. So there you have it, your intellectual challenge of the day:
Your task: Create the best society for everyone
It makes sense to take everyone into consideration when you re-design society according to the thoughts laid out in Rawls’ thought experiment. After all, if you don’t know if you’ll belong to the wealthiest 1 % or if you’ll be among the poorest, what kind of society would you want to live in? One in which you could be one of the lucky few to make a fortune but risked having nothing at all? Or, a society in which the baseline was higher but in which you would also have more difficulty making it big time?
If you’re an ardent believer in capitalism, you could, of course, take the gamble. You could choose to preserve the current system in which the wealthy keep on accumulating more and more wealth, while the poor get poorer by the decade. But are you indeed behind the veil then? Do you really accept the possibility that you might end up with nothing? Or, do you take the gamble because you’re just like I was and you’re convinced you’ll succeed. If you are, I bet you will only really learn once your reality radically changes. But focusing so narrowly on your own chance of making it means you’re not following the thought experiment. You’re not accepting that you should contemplate distributive justice from the “original position” and you don’t know anything about your own situation in this new world. You could be anyone and this is why you need to consider everyone. After all, the issue of distributive justice is an ethical one and everyone needs to be taken into account when you’re making decisions on ethics.
But if you initially thought you’d want to take the gamble, it’s no surprise. We want to gamble on our own chance. At the same time, most of us will probably be somewhat affected by the thought experiment. Although we might have a hard time emotionally relating, we do understand from an intellectual point of view that we need to think differently. We would likely go so far as to create a system in which everyone has their basic needs met, so no one is too bad off. But we’ll probably still incorporate some inequality because we believe in our own ability to game the system and come out on top. Also, we’ve been conditioned into believing that the trickle-down effect is real. We think that inequality is a good thing because the more wealth the rich accumulate, the more will trickle down to the rest of us. It has been proven many times over that there are no guarantees that inequality has such an effect, however.
While the kind of self-confidence that leads us to (re-)create a version of our society quite similar to our current one is excellent, it is also a sign of the conviction we’ve all been brainwashed into having. We believe that we’re 100 % responsible for our own happiness. And we firmly believe that our happiness is tied to money. But there is only so much we need and why should anyone accumulate billions of dollars while others go hungry? No-one describes declining marginal utility better than psychologist Daniel Gilbert who writes that it’s “a fancy way of saying that it hurts to be hungry, cold, sick, tired, and scared, but once you’ve bought your way out of these burdens, the rest of your money is an increasingly useless pile of paper.” So, what makes wealthy people hold on to their money so tightly when they can’t even use all of it? Why not share the wealth and ensure that everyone has enough to create a comfortable life?
We need to think beyond our own society
In his thought experiment, Rawls takes it even further, making the veil thicker yet. He removes the individual from the society he or she is part of: “I assume that the parties do not know the particular circumstances of their own society. That is, they do not know its economic or political situation or the level of civilization and culture it has been able to achieve.”
The question of re-thinking society just became infinitely more complex. You now need to take everyone in the entire world into account. Would you accept the status quo if you didn’t know which part of the world you’d grow up in? Would you accept the global distribution of wealth if you ran the risk of growing up and parenting your children in Sub-Saharan Africa? If you ran the risk of your children starving to death? You might accuse me of being hyperbolic. I’m not. Children are still starving to death in Africa. Some are even going hungry in the United States and in other developed countries. Still, billionaires continue to pile new pieces of paper onto their ever growing, useless pile.
The whole point of Rawls’ thought experiment is that there are no certainties for anyone on this planet. We don’t choose where we’re born, to which parents and how wealthy they are. And it’s time to take this seriously. It’s time to change the international distribution of wealth and begin to take moral responsibility for every individual in the world.
The zero-sum game has to end
Despite the allure of capitalism, we need to bear in mind that capitalism is by and large a zero-sum game where you can only profit more than average if someone else loses out. Why is Jeff Bezos the richest man in the world? Because he has a lot of people working for him and because their wages don’t remotely reflect their productivity. You might think people who created their own business and fortunes deserve them, but do they really deserve to have everything when other people have nothing at all? After all, people never create their success independently of opportunity and chance. And, mostly, the hard work and (relatively) cheap wages of their employees.
A friend recently said to me: “The trouble is you dislike capitalism, but you like money.” I’ve thought about that pretty hard. Money is a necessity, so of course, I’d like to have enough to live a comfortable life. What I don’t like about capitalism is the competitive spirit it instills in all of us. Everyone is at odds with each other. We can only be on top of the game if someone else loses out. I don’t think that is a very moral system and it makes it impossible to achieve a more peaceful, stable world.
For all its ills, the financial crisis was also a constructive challenge to unrestrained capitalism. When Bernie Sanders entered the election race and began speaking about Denmark it felt new and exciting to many Americans. While Denmark is not perfect, it is a country in which people feel more obligated towards each other. The general idea is that the majority of Danes feel that re-distributing wealth results in a better society. A free society in which everyone has the same opportunity to succeed. Which makes it sound a lot like the American dream but it’s not. It’s a Danish or Scandinavian dream.
40 % of the Danes who earn enough to pay 60 % tax on their last earned dollar in the progressive tax system are happy to pay their taxes. That is a significantly lower number than in the average population, but it still speaks of a society in which re-distribution is taken for granted to a much greater extent. The American dream values personal responsibility while the Danish dream values commonality: We all benefit from the success of other people. We believe it creates a better society with a bigger revenue for all of us.
I understand just how enticing the American dream is to a lot of people. We want to beat the system. We want an incentive to be successful. But what we need to understand is that capitalism is only a successful venture for very few people, and that these few earn their profit from the rest of us. So the question remains: How come a lot of us still believe in capitalism and the American Dream?
History has conditioned us to believe that we can beat the system. And if we’re not among the poorest and used to not having any options open to us, we’re probably convinced it’s our own responsibility to change our life if we’re not happy with our situation. Why is that? Well, one reason is that in developed countries children have, on average, almost always accumulated more wealth than their parents. For the first time in recent history, this progress has been stilted. This makes our present day an exciting and nerve-wracking time. And it makes it the right time to contemplate a change of direction.
People have been desperately poor before and we’ve seen what can happen when enough people don’t have enough resources. This was exactly what made it possible for Hitler to implement Nazism in Germany. Author of ”The New Capitalist Manifest: Building a Disruptively Better Business,” Umair Haque has written extensively on the dangers of the United States being on the verge of fascism right now in 2018, .e.g, in his article Why Capitalism Degenerates Into Fascism. This is essential reading for anyone skeptical about capitalism, and it will probably make you feel uneasy. But it’s important to entertain the thought that yes, a Fascist collapse can indeed happen again. Because we need to ensure that a plunge into such an amoral abyss will not happen. This is the time to learn from history and stop expecting different results from the same recipe.
And, if you think about it: Which system do you prefer, if you’re not sure your children will have a better life than yourself? Would you accept the risk that you might not be able to feed them, buy them school supplies or the risk that they will grow up and become homeless? This choice is yours to make.