History Professor Answers Capitalism Questions

I'm Eli Cook, historian of capitalism.

Let's answer some questions from the internet.

This is Tech Support: Capitalism.

[soft upbeat music]

QueenofElam asks, But like, what's the definition

of capitalism though?

It's an economic system

in which private people hold most of the assets,

the means of production, and they get to decide

what gets made, what do we invest in,

what our priorities are.

And usually they do so for one reason

and that's profit.

So the profit motive is a huge part

of what capitalism is.

And the way they make their profits

is usually through markets.

So they're selling, they're buying.

Markets existed before capitalism,

money existed before capitalism.

But really what happens in a capitalist society

is that markets go from kind of the margins to the center.

So almost everything becomes commodified.

Almost everything gets traded between people in markets.

And above them all are the capitalists.

They want to make money, they want to make profit.

Pepo asks, Hey Google,

what's late stage capitalism?

Since the 1980s or so, we've definitely entered a new era.

Sometimes it's called neoliberalism

where we're seeing very, very extreme forms of capitalism.

We're seeing kind of corporations get even more power.

We're seeing inequality rise at staggering rates.

And we're also seeing this kind of feeling

that everything is becoming commodified.

So when I read about people

who have to buy their insulin on GoFundMe,

I'm like, Yeah, that sounds like

a new form of capitalism,

a kind of meaner and more extreme version

than we've ever had before.

And I'll be talking more about late stage capitalism

in an episode of Rabbit Hole.

Samah_fadil asks, Who TF invented capitalism?

I would like a word.

So capitalism isn't something

that was just invented, but we can ask,

and this is something that historians do,

is where did we really begin

to see kind of capitalism emerge?

Some people say, Oh, you can really see it

in like 14th century city states of Italy

where there's like the Medices,

and there's banking,

and there's long distance trade.

Other people say, No, no, no, that's not capitalism,

because really only a small amount of people

are being kind of sucked into the market system,

and really you have to wait until the 17th, 18th century.

I personally, like a lot of historians,

really look at kind of England.

That begins a period where just normal people

no longer are growing food that they eat,

but rather they are forced to sell their energy,

their time for wages in a labor market.

And with that money, they go into other markets,

like the food market, like the real estate market,

and they buy the basic needs of societies.

It's something that kind of happens slowly,

and it's also not something that's inevitable.

Raeequaza asks, Does trickle down economics work?

Yes or no?

First of all, I'll say what trickle down economics is.

It's an idea that kind of came in the 1980s.

And basically the idea was that these capitalists,

these people who want to make a lot of money,

the corporations, they're the job makers.

So they should pay really low taxes,

and we shouldn't have any regulations

because if we do that,

then they're gonna make lots of amazing stuff,

and they're gonna create a lot of great jobs,

and then the unemployment rate is gonna go down

and people's wages are gonna go up.

First, all the money's gonna be on top,

but then it's gonna trickle down.

There have been a lot of studies that show that

basically trickle down economics did not work.

So I'm gonna go with a no on this one, Raeequaza.

When you cut taxes to the rich, when you cut corporations,

we actually didn't really see rises in wages.

We didn't see the unemployment rate drop that much.

It seems like a lot of that money

just kind of stayed at the top

and never trickled down to most of the people.

The opposite of trickle down economics

is actually something that existed

in this country from like the 1930s to 1980s.

It was usually called Keynesian economics

for an economist called John Maynard Keynes.

It was basically an idea that said

if you want an economy that grows,

you don't need to pamper the guys on top.

You need to give the money to the little guy.

America used to be really good at taxing rich people.

America had the highest tax rates

on the upper, upper, upper, upper

kind of billionaire class in the entire world.

If you do a comparison of the growth rates

in that period of the Keynesian economics

and the period since like the 1980s, 1990s

of trickle down economics,

Keynesian economics did way better on growth,

employment, things like that.

A lot of people moved to the middle class.

So there is an alternative and we used to have it.

Apparently some people forgot.

Another easy question.

Haider_please asked, What's the main difference

between communism, capitalism and socialism?

How they work?

So as we said, capitalism is an economic system

where most of the assets,

most of the means of production

are held in private hands,

and people are looking to maximize profits.

Socialism is usually a system

where the means of production

are in the hands of the public.

That can come in the form of the government,

that can come in the form of cooperatives,

that can come in the form of maybe municipalities.

Because it's collectively owned,

they're less interested in making a profit

and more interested in just fulfilling the needs

and the wants of the broader public,

which they're part of.

In a socialist society, you'll usually see

certain basic needs, whether it's food,

whether it's housing, whether it's healthcare,

just kind of take it out of the market,

and there, it doesn't go to the kind of highest bidder.

It doesn't go to the person who has the most money.

It doesn't run on profit.

It runs on basically just supplying

these basic needs to the people.

So that's socialism.

Communism is one centralized state

where the decisions are definitely not made

through the profit motive,

but they're also not made by the people.

They're made by people who usually were not elected,

party holders.

It can get very corrupt.

It can be very, very hierarchical.

It can be very unequal.

You know, inequality is not something

that capitalists invented,

and it can be also an inefficient.

MindsEyeNFT asks, What system in human history

has performed better than capitalism?

If I look at the world today, for instance,

and I say, What is the most successful

economic project ever?

It might be China.

China just in the last 50 years

has taken 800 million people out of poverty.

Now don't get me wrong, I think there's a lot wrong

with the Chinese system.

I think it's undemocratic.

People don't have basic human rights.

It's not a place I would want to live necessarily.

But you can't argue with the fact

that if we were told that kind of capitalism

kind of creates the most growth,

it looks like China has kind of done better than capitalism.

Now, some people say, Eli, but China is capitalist.

I don't really think so.

One of the really important things about capitalism

is who gets to decide what we make and what we don't.

In capitalist societies, those are usually banks, right?

A bank just kind of sits there

and says, Okay, should I invest in this and that?

You're looking for profit.

On the other hand, the whole banking system

almost entirely in China is run by the Communist Party,

and they really make the big decisions

about where things are gonna be invested.

If you ask me what's the country I'd most want to live in,

it would probably be a country in Western Europe,

maybe Norway or one of the other Scandinavian countries.

These countries have capitalist elements,

but they're usually called social democracies,

because really enormous amount of the assets

in that country, the actual capital is owned by the people.

In Norway, more than half the capital

is owned by the people.

They have a sovereign wealth fund

in which they kind of put in a lot of their investment,

but that wealth fund isn't owned by,

like, you know, a few rich people,

but it's owned by all of the Norwegian people.

It pays for a lot of their social funding.

Oftentimes in capitalist countries,

the richer you are, the better education you get.

The richer you are, the better healthcare you get.

In the United States alone,

I know that the life expectancy

between the poorest women

and the richest women is over 10 years.

You don't see that in these kind of countries

because it doesn't matter how much money you have,

your basic needs are fulfilled.

Similar-Taste-5028 asked,

Why isn't there a purely capitalist society?

I'm gonna answer this question by referring to

kind of the OG of historians of capitalism, Karl Polanyi,

who really answered this question,

and he said that if you ever had

a purely capitalist society,

it would be like hell on earth.

You can't do it because in the end,

if you just treat people fully as commodities,

if you treat nature fully as a commodity,

it's gonna fall apart.

Barbara K. Janik asks, Can capitalism

and socialism coexist?

There's definitely a term called a mixed economy,

and mixed economies usually have a mix

of socialist aspects,

and they have a mix of capitalist aspects.

When I mentioned those Scandinavian countries before,

or Western European countries,

or even the United States,

social security is a socialist system within America,

which is a capitalist society.

On the other hand, we're talking about isms here.

We're talking about the entire systems.

Who is really gonna be calling the shots?

Is it gonna be the people democratically?

Is it gonna be the communist party,

you know, through some kind of dictatorship?

Or is it going to be a few rich people

who make kind of the big investment decisions

by wanting to maximize their own profits?

Who's gonna own most of the wealth in a society?

Who's gonna own most of the assets?

In the end of the day, there's definitely a tension here

between capitalism and socialism.

So while certain elements can coexist for sure,

and you can have mixed economies, I feel in the end,

you're gonna get either a capitalist

or a socialist society.

It's really hard to have both.

So Joe Portagee asked,

Do corporations have more power

than governments in the world?

Short answer, I think they might.

Even in the history of capitalism,

there have often been periods where, you know,

there were capitalists,

there were corporation, there were businesses,

but still, you know, the state had power to kind of tax

and power to regulate them and that still exists.

But as a lot of people in the States know today,

you know, it's getting harder and harder

to sometimes tax these rich people.

Globalization has really made corporations more powerful,

because if there's a certain state

that they don't like what they're doing,

they just get up and they can leave.

The power of these corporations,

even culturally, is just crazy.

You can think of Facebook

and you think of kind of like, you know, online,

just the way they can kind of, you know,

shape our feelings, our identity.

The forces of corporations today

are more intrusive in many ways than governments.

TorEkelandPLLC asks,

Can capitalism even survive

without government subsidies

and preferential government right grants?

When has it ever historically functioned without them?

It's really wrong to think of capitalism as a society

where governments are really, really small

and they don't do anything.

Capitalists need governments.

In fact, the rise of capitalism pretty much coincided

with the rise of big national governments,

and I don't think that's a coincidence.

In many ways, they go hand in hand.

I would say that oftentimes capitalists

aren't really going to be able

all on their own to create the economy

that they want and they're gonna need subsidies.

Let's take example, for instance,

of the railroads in the United States in the 19th century.

So the government, and the state, and the people,

and everybody really wanted these railroads to happen,

but America by that point was a capitalist country.

Capitalists don't want to take risks.

They want a sure thing.

They want to make money.

So what happens in those situations?

If the capitalists are strong enough, they're like,

You're gonna have to give me something.

Okay, so the government gave huge subsidies

to these corporations.

For instance, they gave them all the land

that ran alongside the railroads

to kind of sweeten the deal

in order to allow them to make them,

to incentivize them to build the railroads.

And I don't think that's a unique example.

I think oftentimes the profit motive is just too narrow

to create the things we want to create.

And sometimes these subsidies can be a good thing.

I'm not saying it's bad.

I think oftentimes we should do that

because then we can make capitalists

build the things that we want them to build.

To me, the real interesting question is, in the end,

is the state working for the capitalists,

or is capitalists working for the state?

King_TrueStory asked,

Do you think there are ethical billionaires

that it's possible to acquire that level of wealth

by completely honest means?

What's the cap on wealth

that you think you can acquire ethically?

I think this is more of a question

for philosophers than for historians,

but I'll try to answer it anyway.

Capitalism is a social structure,

and it creates situations where even people

who are good people can be kind of placed into a system

where they make a lot, a lot of money

that they didn't necessarily completely earn.

There has been a kind of cultural shift

amongst billionaires.

So in let's say the end of the 19th century,

the beginning of the 20th century,

it really wasn't legitimate to be a billionaire.

Americans didn't like billionaires.

They didn't like corporations so much.

So even though someone like an Andrew Carnegie

or a Rockefeller probably did some pretty evil things

in their lives, they then did try to correct that

by doing good things.

Billionaire is a policy decision, okay?

If you don't want billionaires to exist,

you can tax them out of existence,

or you can create stronger antitrust roles,

because usually if you hire a billionaire,

that probably means you have

some kind of monopoly on the market

because otherwise it'd be really hard to make so much money.

No single person is that productive.

There have been periods in American history

where, you know, the people just decided

we don't want these kind of billionaires anymore

and they taxed them.

A user on Reddit asks,

What good has capitalism brought to humanity?

When did its usefulness run out?

It's funny because, you know,

when people think of the criticism of capitalism,

the first person they think of course is Karl Marx,

but Karl Marx would have been the first person to admit

that capitalism did a lot of great stuff for humanity.

It took us out of the idiocy of the village, he called it.

It was like, you know, we're living

as these kind of super feudal peasants

and, you know, capitalism creates

kind of like big cities,

and it can create more opportunities.

So even Karl Marx thought that capitalism

had done a lot of good,

but then he also thought we shouldn't stop there

and we can do even better.

I think capitalism is really good at reducing the cost

of these kind of basic goods.

But if you look kind of at what capitalism

is doing in recent years, you know,

with where are the big investments,

and, you know, I'm not so sure

that Facebook, or TikTok, or Google,

or even, you know, oil companies

or other insurance banks, I'm not sure

that they're making the world a better place.

I'm not sure that the growth we're getting today

is actually improving people's lives.

Attlee asks, How can capitalism survive total automation?

Very relevant question in the age of AI.

To Marx, profits come from exploitation.

They come from the fact that people are working

and creating more than they actually get in their wages,

and therefore, if everything becomes automized,

you can't exploit the machines

like you can exploit the people,

and you won't have profits anymore.

In fact, that's how Karl Marx

thought capitalism was gonna end.

He thought that there was gonna be such competition

between the different capitalists

that they would all shift more of their investment

to machines and less to people.

They would automize everything,

until they didn't make any profits,

because remember, he only thought you could make profits

from exploiting people, and in the end,

capitalism would collapse.

One of the reason why, you know,

capitalists make sure that we have clean water,

and a nice place to eat,

or basic needs is because they need us

to get up every morning and go to work.

Okay, this is something that kind of historians

and experts call social reproduction.

They need us to reproduce ourselves

because they need our labor.

In a world where it's just machines,

I mean, that's kind of scary to me.

Can't they just be like, Oh, maybe we'll just, you know,

move to our capitalist world on Mars

and, you know, let everyone else behind.

Maybe the worst thing

to be in a capitalist society is not to be exploited

because then no one even cares about you at all.

You become completely invisible and who knows?

Maybe they're like, You know what?

I don't need you anymore. Goodbye.

I'm just gonna be using the robots now.

[Producer] Yeah. [laughs]

Yeah, things are getting dark.

Squirtstain asks, MFs will use capitalism

interchangeably with like 2,937,933 other terms.

Did you mean consumerism, monopolization,

rent seeking, wealth disparity?

One can only guess.

Capitalism is a term that can get a little sloppy,

and people can begin throwing that term around

and not really defining what it is.

I do think you're right that we need

to talk about different aspects of capitalism.

You can have wealth disparity in non-capitalist societies.

We get it all the time.

So we need to be careful oftentimes how we use that term.

We also shouldn't blame all the bad things

in the world just on capitalism.

Madras Cat asks,

How do we regulate capitalism

when the ones in power have no interest

in being regulated?

Indeed, they have a vested interest

in deregulation and corruption.

You really need to create a very powerful infrastructure,

culture, society,

otherwise these rich corporations,

they're just gonna kind of tear it all down,

and that's pretty much what we've been seeing

in the United States since the 1980s.

If you look at like the period in United States

after the World War II

and until around the 1970s when things were very regulated,

those were the periods in which the growth rates

were the highest, that Americans' wages were going up,

inequality plummeted during those years,

and, you know, a lot, a lot of people

made the jump to the middle class.

And this all happened in a highly regulated economy.

Regulations aren't just good about protecting people.

They're actually also oftentimes good

at making sure the economy is working for us

and not for the billionaires.

EA123abc, who identifies as an older Gen Zer asks,

Was capitalism different back then?

There have definitely been moments in American history.

People talk about the First Gilded Age

at the end of the 19th century,

where there really weren't a lot of regulations.

For instance, there was child labor,

and the conditions in the factories were awful,

and people could work 16-hour days,

and you could have your arm get cut off

while you're working at the railroad

and you wouldn't get any compensation for that.

So definitely there have been moments in American history

that have been really, really bad,

and really cruel and really tough.

I'm not even talking about, you know,

the history of slavery that is also a huge part

about the history of capitalism.

But on the other hand, definitely if you look at

kind of the periods after World War II,

after the Great Depression, the 1940s to the 1970s,

you had job security, you had a living wage

where you could kind of, you know,

send your kids to college.

You could have social mobility,

and there were a lot more regulations or laws.

There are a lot more taxes on rich people in place.

So people, for instance, born in the 1940s, 1950s,

that's the boomer generation,

90% of them made more money than their parents.

Today, the Gen Zers and even some of the millennials,

for the first time really in American history,

less than half are making more than their parents.

So in that sense, this feeling that something's gone wrong

with the American dream is absolutely true.

Avneet Kaurdhami asks,

Capitalism promotes competition? Where?

Because all I see are monopolies

or duopolies or triopolies.

A lot of times when people

give like definitions of capitalism,

they say, Oh, competition.

But remember, capitalists don't want competition.

Competition is hard.

It means you constantly have to work at getting better.

And I think there definitely are a lot of moments

in the history of capitalism

where we see that competition declines

and what we get are monopolies, duopolies, oligopolies.

So at the end of the 19th century, for instance,

there were a lot of small businessmen

who said to themselves, Why are we killing each other?

Why are we competing against each other?

Why don't we just take our money,

instead of building a small factory,

let's create a big corporation,

and that way we don't have to compete anymore.

Another thing that's happened really in recent years

is something called mergers and acquisitions.

That's where one corporation buys another corporation

and begins to swallow up more and more corporations

until you get these giant corporations.

For instance, the amount of corporations

on the American stock market

has declined dramatically in the last 40 or 50 years

because we're seeing a massive concentration of the economy.

And really when we get to the problems

with the American economy today,

a lot of it is about the fact

that there just isn't a lot of competition.

Corporations can kind of walk all over us.

There used to be something called antitrust regulations

in this country where, you know,

if one company, for instance,

if Facebook wanted to buy Instagram, you know,

if you had tried to do that like in the 1950s

or even earlier, they'd be like,

No way we're letting Facebook buy Instagram.

You're gonna become a crazy monopoly.

Today, as we know, Zuckerberg could do that no problem,

and now we have this giant social media monopoly

called Meta that, you know,

controls enormous amounts of our attention and our time,

and, you know, all the information that we get.

I think another argument that you'll hear sometimes

between economists or between people from the left

and people from the right,

is competition something that just kind of happens,

or do you really need to work on it?

And I would say that actually it's kind of funny

because you think, oh, capitalism creates competition.

Actually, a lot of times you need governments

to create that competition,

because if the governments aren't there

to intervene and create that competition,

you're just gonna get very big monopolies.

Spiritual_Big_9927 asked,

How would life in the US look

if it weren't a capitalist society?

What would change?

What would stay the same?

I would argue that America wasn't always capitalist.

If you go back to kind of the 18th century,

obviously things were very different.

Much of America was family farms.

There were markets, for sure,

but there weren't, you know, a lot of people

who were selling their energy in the labor market.

Also, there are certain moments in American history

where things are less capitalist.

World War II is an interesting case

where, you know, it was so important

for us to beat the Nazis and save the world

that we had a lot of things going on

that really wasn't a capitalist society anymore.

You had crazy price controls.

The government was intervening with everything.

They were building factories.

They were deciding where we invest

and where we don't invest.

I would say that those years,

America's was actually in many ways

more socialist than it was capitalist.

And you can see that things actually really did change.

You saw inequality drop tremendously.

And so if capitalism were to end in the United States,

we'd see certain things change.

I do think it's important though,

and this gets back to an earlier issue,

not everything can be blamed on capitalism,

not all the problems are capitalism.

And, you know, there are a lot of good things

we might also miss if a capitalist society goes away.

So, you know, would you have your 17 kinds of vitamin water?

Would you have these giant TVs? Maybe not.

So, you know, beware of what you wish for.

The Poll Pot asks, Can capitalism stop climate change,

stop the worst of its effects?

Well, this is an important question

because it's only the future of society in our hands.

I'll give you the optimist version

and then the pessimist version.

The optimist version is that

capitalism is good at innovating,

and at some point they're gonna realize

that we have a huge problem on our hand

and that we're burning the world,

and there are gonna be very kind of rich,

greedy billionaires who are gonna want to make

a lot of money and they're gonna create

some technology that, I don't know,

somehow sucks all the heat out of the air

and global warming is solved.

So that would be the positive optimistic version.

I don't think capitalism is going to save us,

and the reason I don't think capitalism

is going to save us gets back to the profit motive

and how the profit motive works.

So even now, just so you know,

when a bank wants to give a loan

to like a green energy company,

if that wasn't subsidized by the government,

chances are they wouldn't get that loan

because it's just not profitable enough, okay?

The most profitable thing to do right now

is still to dig up oil from the ground and burn it.

That's the problem with profits,

it only sees what you're going to get out of it.

It doesn't see the other damages

that can't be priced into forms of money,

these costs that we all have to pay,

but that you don't see them come up

when you're looking at your ledger

or at your balance sheet

and trying to think how much money you're gonna make.

And so because of that, I really do feel that

if we want to save the planet,

we are going to have to seriously, seriously intervene

and force companies and corporations

to stop doing certain things

and start doing other things,

because the profit motive isn't enough.

It's not a coincident, I think, that in China now,

we are seeing by far the industry

that has become the most green,

it's investing the most in solar energy, in electric cars.

And this doesn't mean it's all just about, you know,

oh, I want the world to be a better place.

A lot of it also has to do

with national security issues, okay?

China just saw what happens

when, you know, there's a war in the Middle East

and all their oil that they got from Iran is suddenly stuck.

So they have other reasons to do this as well.

But I definitely think that capitalism

is not going to save the planet.

This kind of reminds me of the New Yorker cartoon

where there's this dystopian future,

and all these kids around a bonfire with this guy,

and he says, Sure, we destroyed the planet,

but before that, we made a lot of money

for our shareholders.

Well, that's everything for today.

I hope you learned something,

and thank you for watching Tech Support:Capitalism.

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