Email of the day - on how we meet in the middle
Comment of the Day

December 09 2020

Commentary by Eoin Treacy

Email of the day - on how we meet in the middle

I have a simple view. There are many political systems that determine how the wealth in a society(economy) is distributed. There is only one economic system that works, and it is called capitalism


In an economic system that works there can’t be any ‘working poor’...

Eoin Treacy's view

Neither of these emails represent the extremes of the current discussion on how rewards should be divided and social inclusion. However societies decide to settle their differences is going to shape the evolution of the financial markets and geopolitics for decades to come.

Capitalism is by far the most effective system of ensuring resources flow towards the most attractive opportunities. It is hard to argue that point. The challenge is that capitalism also trends towards concentration. The wealthy become wealthier because they have greater access to investment opportunities and large companies tend to consume weaker ones. Taken to its logical conclusion that would result in monopolies.

The challenge for democratic capitalist structures is to create a level playing field which supports meritocracy. There will always be people who are more productive, smarter and luckier than others. It is in the interests of society to give these people every opportunity to succeed since they inevitably end up paying the majority of taxes. That drive is always curtailed by special interests who protect their individual fiefdoms.

Since capitalism cannot eternally trend towards concentration, there are occasional resets where leverage is squeezed out. The losers from the existing system become less willing to accept their lot and rebel. The fact that the winners in the system have ensured they get bailed out for risks that go wrong but keep the rewards of risks that go right only lends fuel to a feeling inequity.

The governmental answer to these challenges is targeted, headline grabbing taxation of the elite and lavish spending on crowd pleasing social programs. We are only at the dawn of this process today and it is unlikely we have seen the peak in polarisation.

The fact that Newsmax is winning the rating war over Fox is a case in point. It is an example of how crowds are emotional at extremes, how they will not tolerate any wavering in commitment to a theme and how even a mild wavering of support is viewed as betrayal. Retribution tends to be swift and agressive. 

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