Wealth Inequality in Capitalist vs Socialist Economies

The capitalist countries such as the US commonly get accused of having major wealth inequality. While it’s true that wealth inequality has grown in capitalist countries such as the US and is likely going to continue on that trend, socialist countries are even worse off. In the capitalist nations there is constant competition for those who have the power. There is constantly new people and businesses challenging the status quo and disrupting industries and leaders. Every year major companies get over taken by newer ones that grow faster and become better. Today the “FAANG” companies are thought to be the leaders of the business world. Facebook, Amazon, Apple, Netflix and Google have each grown to become the dominate player in their respective industries. As I write this in June 2018, earlier this month Netflix’s market cap overtook Disney, an industry leader in movies, TV and media for several decades. It was also just announced that General Electric, one of the greatest companies in American history will be removed from the Dow Jones Industrial Average. Sears, Kmart, Dillards, JCPenny and several other major retailers throughout the last century are all on the verge of bankruptcy. Even though the FAANG companies may be dominate today and it may seem as though they will last forever, their time will come. In 10, 20, or 30 years from now we will be talking about Jeff Bezos and Amazon the way we talk about Sears. Somebody will come along and totally disrupts the market and take down the giants. This capitalistic phenomenon is what balances out the inequality. Even the wealthiest people and businesses of today will get overtaken. The balance of power will reset and no one will continue to accumulate money and power forever. Even the wealthiest families throughout history rarely last for more than three generations. Money gets dispersed, businesses get broken up and new players enter the market.

This re-balancing that occurs constantly is what keeps the economy going and keeps one person or business from accumulating too much power. In socialist markets this doesn’t happen. The inequality in socialist countries grows even larger because the select few have ultimate control and monopolies over entire industries. If you are annoyed that Bill Gates has more money than you, imagine if you lived in Saudi Arabia where the primary industry is controlled by one family. Even the wealthiest families such as the Walton’s (Wal Mart) only control a small percentage of their industries market share. As much as you may not like companies like Exxon or Royal Dutch Shell, keep in mind that in places like Mexico, Pemex has 100% market share due to socialism.

These socialist countries also don’t produce any advances in technology. When there is no way to make a profit, there is nobody who will spend time or money researching and creating new technology to improve the products. Even though it’s uncomfortable to think that a pharmaceutical company is profiting from sick people, the alternative is that no medical companies exist and drug research stops completely. Today the US and a few other countries supply the world with 100% of the new medicines and treatment, mostly coming from the “evil” pharmaceutical companies.

Throughout all my experiences and everything I’ve studied I’ve learned one rule always exists. Nothing will ever change unless someone can make money by changing it. What I mean is that the systematic failures in society won’t be permanently fixed by donations or campaigns hoping that people want to make the moral decision. If a morally questionable opportunity exists, people will exploit it as long as they can make money. If you want quit selling drugs, you’re going to have to find something better for them to sell. If you want to end homelessness, you’re going to need to find a way to put people to work. Simply begging for donations or spreading awareness of a cause isn’t good enough. Until there is a better alternative, people will continue to act in the status quo.

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