Late Stage Capitalism, Its Characteristics, and Why the Term Is Trending
What It Is and Why It's Trending Today
Late stage capitalism is a popular phrase that targets the inequities of modern-day capitalism. It describes the hypocrisy and absurdities of capitalism as it digs its own grave.
It spotlights the immorality of corporations using social issues to advance their brand. An example is Budweiser spending $5 million on a Superbowl ad to advertise how it donated millions of cans of clean water for disaster relief efforts. Another example is Starbucks' #racetogether campaign.
Characteristics of Late Stage Capitalism
Late stage capitalism describes the unrealistic perspectives of the wealthiest 1%. In the same vein, it highlights how the middle class is largely oblivious to the struggles of the poor.
It's the sense that monopolies, and the oligarchs that run them, have rigged the system in their favor. They hired well-paid lobbyists to influence politicians. They won Supreme Court cases, such as Citizens United v. FEC (2010), that give corporations the same rights as people. This allows them to spend untold millions on political ads that benefit them.
Many feel that capitalism's winners may even favor inequality. With it, they have fewer competitive threats. They "rig the system" by creating barriers to entry. They send their children to private schools while cutting funds for public schools.
There is a sense that the U.S. income inequality created by capitalism is unsustainable. It's a prelude to a more equitable way of life. That includes animals, plants, and the natural world as well.
For this reason, many who use the term late stage capitalism believe the next phase is socialism. Most agree the new system could include universal basic income. It would subsidize those who lost their jobs to technology. At the very least, the new system should include universal health care. The United States is the only developed country without it.
- Luxury retailer Nordstrom sold jeans with fake mud on them.
- Congress wouldn't appropriate enough funds to restore Puerto Rico after Hurricane Maria. But it spends $700 billion on defense every year.
- Big money to be made with international shipping routes through the Arctic as the ice caps melt.
Why the Phrase Is Popular Now
The phrase late stage capitalism is becoming more popular. It expresses people's frustration with the "indignities and absurdities of our contemporary economy," such as increasing inequality, the shrinking middle class, and the rise of super powerful corporations.
The 2008 financial crisis made inequality worse. As a result, the far left found new traction. First was the Occupy Wall Street movement that arose to protest Wall Street. Second was Bernie Sanders' popularity in the 2016 presidential campaign.
New publications arose or expanded, such as "Jacobin" and "The New Inquiry." The popular novel, "A Young Man's Guide to Late Capitalism" came out in 2011. These leftist publications further popularized the term late capitalism.
Is the United States in Late Stage Capitalism?
Before deciding if the United States is in late stage capitalism, we need to identify if it is in capitalism at all. That requires a quick review. Capitalism is an economic system where private entities own the factors of production. The four factors are entrepreneurship, capital goods, natural resources, and labor.
Companies own the first three factors. Private ownership gives them the ability to operate their companies efficiently. The individual owns his or her labor. All entities derive their income from their ownership. As a result, they have the incentive to maximize profit. This incentive is why many capitalists say, "Greed is good."
It distributes goods and services according to the laws of supply and demand. The law of demand says that when demand increases for a particular product, prices rise. When competitors realize they can make a higher profit, they increase production. The greater supply reduces prices to a level where only the best competitors remain. Competition keeps prices moderate and production efficient.
Capitalism requires the free operation of the capital markets. It relies on the laws of supply and demand to set fair prices for financial products. These include stocks, bonds, derivatives, currency, and commodities. Free capital markets allow companies to raise funds to expand. Companies distribute profits among the owners. They include investors, stockholders, and private owners.
Many of the components that capitalism requires are no longer in effect.
Monopolies destroy the free market in their industries. The largest holders of stocks are hedge funds, retirement funds, and institutional investors. The individual investor can no longer determine the true value of companies. Derivative, currency, and commodity markets are unregulated and not transparent.
Some say the problem is not with capitalism, but with what it has become. They claim that government regulations that favor corporations are the real problem. For example, Obamacare relies on private health insurance companies instead of Medicare for All. Similarly, the U.S. government has increased the use of private corporations to provide prison services. Some say that's the reason for rising prison populations.
It may be satisfying to blame the problems with modern society on a phase in capitalism. It implies that capitalism's demise is an inevitable phase in its evolution. It argues that the only solution is to endorse socialism.
But the problem with socialism is that it replaces private ownership of the factors of production with state ownership. It increases the problems with monopolies without guaranteeing needed regulation. Governments that own companies are not going to be the ones to regulate them. Like many issues in today's U.S. economy, the real problems are more complicated.
How to Fix Late Stage Capitalism
Capitalism has advantages not found in socialistic or command economies. It results in the best products for the lowest prices. Consumers pay more for what they want the most. Businesses provide what customers want. Competition keeps prices low. Firms make their products as efficiently as possible to maximize profit. This rewards innovation and leads to productivity and greater economic growth.
Instead of socialism, elected officials should use their regulatory authority to modify capitalism so it can evolve.
This fits the vision of capitalism laid out by the Founding Fathers in the U.S. Constitution. It protects private property and innovation through copyrights. It also prohibits the government from taking property without due process. But it allows the government to promote the general welfare. Our Founding Fathers charged the government with protecting the American Dream. It should defend the rights of all to pursue their idea of happiness. It's the government's role to create a level playing field to allow that to happen.
Capitalism does not care about equality of opportunity. It ignores those who lack the proper nutrition, support, and education. They won't even make it to the playing field. Instead, the government should provide equity in education. That makes sure everyone is trained to the best of their ability. The economy will benefit from a strong and talented workforce.
Capitalism does not encourage quotas or welcome refugees. Companies only encourage immigration if it allows highly-skilled tech workers or poorly-paid laborers. It has allowed the racial wealth gap, initially created by U.S. slavery, to continue. As a result, society misses out on diversity and the innovation it creates. Government leaders should celebrate America's diversity that has fostered business innovation. Research shows that a diverse business team has profound financial and social benefits for companies and society at large.
Capitalism ignores external costs, such as pollution and climate change. This makes goods cheaper and more accessible in the short run. But over time, it depletes natural resources. It lowers the quality of life in the affected areas and increases costs for everyone. The government should impose Pigouvian taxes. They will monetize these external costs and improve the general welfare.
Corporate taxes can be raised to around 50% without harming growth, according to the Laffer Curve. The government can use the revenue to support those who lack competitive skills. This includes the elderly, children, the developmentally disabled, and caretakers. Government policies should value the family unit to keep society intact.
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