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Historian of American capitalism Professor Eli Cook joins WIRED to answer the internet’s burning questions about capitalism.
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00:00I'm Eli Cook, historian of capitalism. Let's answer some questions from the internet. This
00:04is tech support, capitalism. Queen of Elam asks, but like, what's the definition of capitalism
00:14though? It's an economic system in which private people hold most of the assets, the means of
00:19production, and they get to decide what gets made, what do we invest in, what our priorities are,
00:25and usually they do so for one reason, and that's profit. So the profit motive is a huge part
00:29of what capitalism is, and the way they make their profits is usually through markets. So
00:33they're selling, they're buying. Markets existed before capitalism, money existed before capitalism,
00:38but really what happens in a capitalist society is that markets go from kind of the margins to the
00:42center. So almost everything becomes commodified, almost everything gets traded between people in
00:47markets, and above them all are the capitalists. They want to make money, they want to make profit.
00:53Pepo asks, hey Google, what's late stage capitalism? Since the 1980s or so, we've definitely entered a
00:59new era. Sometimes it's called neoliberalism, where we're seeing like very, very extreme forms of
01:04capitalism. We're seeing kind of corporations get even more power. We're seeing inequality rise
01:09at staggering rates, and we're also seeing this kind of feeling that everything is becoming
01:15commodified. So when I read about people who have to buy their insulin on GoFundMe, I'm like, yeah,
01:20that sounds like a new form of capitalism, a kind of meaner and more extreme version than we've ever had
01:26before. And I'll be talking more about late stage capitalism in an episode of Rabbit Hole.
01:31Samaphadil asks, who TF invented capitalism? I would like a word. So capitalism isn't something
01:37that was just invented. But we can ask, and this is something that historians do, is where did we
01:41really begin to see kind of capitalism emerge? Some people say, oh, you can really see it in like
01:4614th century city-states of Italy, where there's like the Medicis, and there's banking, and there's
01:51like long distance trade. Other people say, no, no, no, that's not capitalism, because really only
01:56a small amount of people are being kind of sucked into the market system. And really, you have to
02:00wait until the 17th, 18th century. I personally, like a lot of historians, really look at kind of
02:04England. That begins a period where just normal people no longer are growing food that they eat,
02:10but rather they are forced to sell their energy, their time for wages in a labor market. And with that
02:17money, they go into other markets, like the food market, like the real estate market,
02:20and they buy the basic needs of societies. It's something that kind of happens slowly,
02:25and it's also not something that's inevitable. Rayquaza asks, does trickle-down economics work,
02:31yes or no? First of all, I'll say what trickle-down economics is. It's an idea that kind of came
02:35in
02:35the 1980s. And basically, the idea was that these capitalists, these people who want to make a lot of
02:39money, the corporations, they're the job makers. So they should pay really low taxes, and we shouldn't
02:44have any regulations, because if we do that, then they're going to make lots of amazing stuff,
02:48and they're going to create a lot of great jobs, and then the unemployment rate is going to go down,
02:53and people's wages are going to go up. First, all the money is going to be on top, but then
02:55it's
02:56going to trickle down. There have been a lot of studies that show that basically trickle-down
02:59economics did not work. So I'm going to go with a no on this one, Rayquaza. When you cut taxes
03:04to
03:04the rich, when you cut corporations, we actually didn't really see rises in wages. We didn't see
03:08the unemployment rate drop that much. It seems like a lot of that money just kind of stayed at the
03:12top
03:13and never trickled down to most of the people. The opposite of trickle-down economics is actually
03:17something that existed in this country from like the 1930s to 1980s. It was usually called Keynesian
03:22economics for an economist called John Maynard Keyne. It was basically an idea that said,
03:26if you want an economy that grows, you don't need to pamper the guys on top. You need to give
03:31the
03:31money to the little guy. America used to be really good at taxing rich people. America had the highest tax
03:35rates on the upper, upper, upper, upper kind of billionaire class in the entire world. If you do a
03:40comparison of the growth rates in that period of kind of the Keynesian economics and the period
03:45since like the 1980s, 1990s of trickle-down economics, Keynesian economics did way better
03:49on growth, employment, things like that. A lot of people moved to the middle class. So there is an
03:54alternative and we used to have it. Apparently some people forgot. Another easy question. Hader,
04:00please, asked, what's the main difference between communism, capitalism, and socialism? How they work.
04:05So as we said, capitalism is an economic system where most of the assets, most of the
04:10means of production are held in private hands and people are looking to maximize profits.
04:15Socialism is usually a system where the means of production are in the hands of the public.
04:20That can come in the form of the government, that can come in the form of cooperatives,
04:24that can come in the form of maybe municipalities. Because it's collectively owned, they're less
04:28interested in making a profit and more interested in just fulfilling the needs and the wants of the
04:33broader public, which they're part of. In a socialist society, you'll usually see certain basic needs,
04:38whether it's food, whether it's housing, whether it's healthcare, just kind of take it out of the
04:42market. And there it doesn't go to the kind of highest bidder. It doesn't go to the person who
04:46has the most money. It doesn't run on profit. It runs on basically just supplying these basic needs
04:51to the people. So that's socialism. Communism is one centralized state where the decisions are
04:59definitely not made through the profit motive, but they're also not made by the people. They're made
05:03by people who usually were not elected, party holders. It can get very corrupt. It can be very,
05:08very hierarchical. It can be very unequal. You know, inequality is not something that capital is
05:12invented. And it can be also inefficient. Mind's Eye NFT asks, what system in human history has
05:18performed better than capitalism? If I look at the world today, for instance, and I say, what is the
05:23most successful economic project ever? It might be China. China just in the last 50 years has taken 800
05:30million people out of poverty. Now, don't get me wrong. I think it's a lot wrong with the Chinese
05:35system. I think it's undemocratic. People don't have basic human rights. It's not a place I would
05:39want to live necessarily. But you can't argue with the fact that if we were told that kind of capitalism
05:44kind of creates the most growth, it looks like China has kind of done better than capitalism. Now,
05:49some people say, Eli, but China is capitalist. I don't really think so. One of the really important
05:53things about capitalism is who gets to decide what we make and what we don't. In capitalist societies,
05:58those are usually banks, right? A bank just kind of sits there and says, OK, should I invest in this
06:02and that? You're looking for profit. On the other hand, the whole banking system, almost entirely in
06:07China, is run by the Communist Party. And they really make the big decisions about where things
06:12are going to be invested. If you ask me, what's the country I'd most want to live in? It would
06:16probably be a country in Western Europe, maybe Norway, or one of the other Scandinavian countries.
06:20These countries have capitalist elements, but they're usually called social democracies,
06:24countries because really enormous amount of the assets in that country, the actual capital,
06:29is owned by the people. In Norway, more than half the capital is owned by the people. They have a
06:34sovereign wealth fund in which they kind of put in a lot of their investment, but that wealth fund
06:39isn't owned by like, you know, a few rich people, but it's owned by all of the Norwegian people. It
06:44pays
06:44for a lot of their social funding. Oftentimes in capitalist countries, the rich you are, the better
06:49education you get. The rich you are, the better health care you get. In the United States alone,
06:52I know that the life expectancy between the poorest women and the richest women is over 10 years. You
06:58don't see that in these kind of countries, because it doesn't matter how much money you have,
07:02your basic needs are fulfilled. SimilarTaste5028 asked, why isn't there a purely capitalist society?
07:09I'm going to answer this question by referring to kind of the OG of historians of capitalism,
07:15Karl Polanyi, who really answered this question. And he said that if you ever had a purely capitalist
07:19society, it would be like hell on earth. You can't do it. Because in the end, if you just treat
07:24people
07:24fully as commodities, if you treat nature fully as a commodity, it's going to fall apart.
07:29Barbara K. Yannick asks, can capitalism and socialism coexist? There's definitely a term called
07:34a mixed economy. And mixed economies usually have a mix of socialist aspects and they have a mix of
07:39capitalist aspects. When I mentioned those Scandinavian countries before, or Western European countries,
07:44or even the United States. Social security is a socialist system within America, which is a
07:49capitalist society. On the other hand, we're talking about isms here. We're talking about the
07:52entire systems. Who is really going to be calling the shots? Is it going to be the people democratically?
07:58Is it going to be the communist party, you know, through some kind of dictatorship? Or is it going to
08:03be a few rich people who make kind of the big investment decisions by wanting to maximize their own
08:09profits? Who is going to own most of the wealth in a society? Who's going to own most of the
08:12assets?
08:13In the end of the day, there's definitely a tension here between capitalism and socialism.
08:17So while certain elements can coexist for sure, and you can have mixed economies,
08:21I feel in the end, you're going to get either a capitalist or a socialist society. It's really
08:26hard to have both. So Joe Portigy asked, do corporations have more power than governments
08:32in the world? A short answer? I think they might. Even in the history of capitalism,
08:35there have often been periods where, you know, there were capitalists, there were corporations,
08:39there were businesses. But still, you know, the state had power to kind of tax them,
08:43power to regulate them. And that still exists. But as a lot of people in the states know today,
08:49you know, it's getting harder and harder to sometimes tax these rich people. Globalization
08:52has really made corporations more powerful. Because if there's a certain state that they
08:56don't like what they're doing, they just get up and they can leave. The power of these corporations,
09:00even culturally, is just crazy. You can think of Facebook, and you think of kind of like,
09:04you know, online, just the way they can kind of, you know, shape our feelings, our identity. The
09:09forces of corporations today are more intrusive in many ways than governments.
09:14Tor Ekeland PLLC asks, can capitalism even survive without government subsidies and preferential
09:20government right grants? When has it ever historically functioned without them? It's really wrong to think
09:25of capitalism as a society where governments are really, really small and they don't do anything.
09:29Capitalists need governments. In fact, the rise of capitalism pretty much coincided with the rise of
09:35big national governments. And I don't think that's a coincidence. In many ways, they go hand in hand.
09:40I would say that oftentimes, capitalists aren't really going to be able all on their own
09:44to create the economy that they want, and they're going to need subsidies. Let's take an example,
09:49for instance, of the railroads in the United States in the 19th century. So the government and the state
09:53and the people and everybody really wanted these railroads to happen. But America, by that point,
09:57was a capitalist country. Capitalists don't want to take risks. They want a sure thing. They want to
10:01make money. So what happens in those situations? If the capitalists are strong enough, they're like,
10:06you're going to have to give me something. Okay, so the government gave huge subsidies to these
10:10corporations. For instance, they gave them all the land that ran alongside the railroads to kind of
10:15sweeten the deal in order to allow them to make them to incentivize them to build the railroads. And I
10:21don't think that's a unique example. I think oftentimes, the profit motive is just too narrow to create the
10:27things we want to create. And sometimes these subsidies can be a good thing. I'm not saying
10:30it's bad. I think oftentimes, we should do that, because then we can make capitalists build the
10:34things that we want them to build. To me, the real interesting question is, in the end, is the
10:39state working for the capitalists? Or is capitalists working for the state? King True Story asked,
10:44do you think there are ethical billionaires that it's possible to acquire that level of wealth by
10:49completely honest means? What's the cap on wealth that you think you can acquire ethically? I think this is
10:54more of a question for philosophers than for historians. But I'll try to answer it anyway.
10:59Capitalism is a social structure. And it creates situations where even people who are good people
11:05can be kind of placed into a system where they make a lot a lot of money that they didn't
11:10necessarily
11:11completely earn. There has been a kind of cultural shift amongst billionaires. So in, let's say, the
11:16end of the 19th century, the beginning of the 20th century, it really wasn't legitimate to be a
11:20billionaire. Americans didn't like billionaires. They didn't like corporations so much. So even though
11:23someone like an Andrew Carnegie or Rockefeller probably did some pretty evil things in their
11:27lives, they then did try to correct that by doing good things. Billionaire is a policy decision,
11:32okay? If you don't want billionaires to exist, you can tax them out of existence or you can create
11:37stronger antitrust roles. Because usually, if you hire a billionaire, that probably means you have some
11:42kind of monopoly on the market. Because otherwise, it'd be really hard to make so much money. No single
11:46person is that productive. There have been periods in American history where, you know, the people just
11:50decided we don't want these kind of billionaires anymore and they tax them. A user on Reddit asks,
11:56what good has capitalism brought to humanity? When did its usefulness run out? It's funny because,
12:00you know, when people think of the criticism of capitalism, the first person they think of,
12:04of course, is Karl Marx. But Karl Marx would have been the first person to admit that capitalism did
12:08a lot of great stuff for humanity. It took us out of the idiocy of the village, he called it.
12:12It was like,
12:13you know, we're living as these kind of super feudal peasants and, you know, capitalism creates kind of like big
12:18cities and it can create more opportunities. So even Karl Marx thought that capitalism had done a lot of
12:23good. But then he also thought we shouldn't stop there and we can do even better. I think capitalism
12:28is really good at like reducing the cost of these kind of basic goods. But if you look kind of
12:33at what
12:34capitalism is doing in recent years, you know, with where are the big investments and, you know,
12:38I'm not so sure that Facebook or TikTok or Google or even, you know, oil companies or other insurance
12:45banks, I'm not sure that they're making the world a better place. I'm not sure that the growth we're
12:49getting today is actually improving people's lives. Atlee asks, how can capitalism survive
12:55total automation? Very relevant question in the age of AI. To Marx, profits come from exploitation.
13:02They come from the fact that people are working and creating more than they actually get in their
13:06wages. And therefore, if everything becomes automized, you can't exploit the machines like you can
13:12exploit the people and you won't have profits anymore. In fact, that's how Karl Marx thought
13:16capitalism was going to end. He thought that there was going to be such competition between the
13:20different capitalists that they would all shift more of their investment to machines and less to
13:25people. They would automize everything until they didn't make any profits. Because remember,
13:29he only thought you could make profits from exploiting people. And in the end, capitalism would collapse.
13:35One of the reasons why, you know, capitalists, you know, make sure that we have clean water
13:39and a nice place to eat or basic needs is because they need us to get up every morning and
13:44go to
13:44work. OK, this is something that kind of historians and experts call social reproduction. They need us
13:49to reproduce ourselves because they need our labor in a world where it's just machines. I mean, that's
13:54kind of scary to me. Can't they just be like, oh, maybe we'll just, you know, move to our capitalist
13:58world on Mars and, you know, let everyone else behind. Maybe the worst thing to be in a capitalist
14:03society is not to be exploited because then no one even cares about you at all. You become completely
14:08invisible. And who knows? Maybe they're like, you know what? I don't need you anymore. Goodbye.
14:13I'm just going to be using the robots now. Yeah, things are getting dark.
14:20Squirtstain asks, MFs will use capitalism interchangeably with like 2,937,933 other terms.
14:28Did you mean consumerism, monopolization, rent seeking, wealth disparity? One can only guess.
14:34Capitalism is a term that can get a little sloppy and people can begin throwing that
14:38term around and not really defining what it is. I do think you're right that we need to talk about
14:43different aspects of capitalism. You can have wealth disparity in non-capitalist societies. We
14:48get it all the time. So we need to be careful oftentimes how we use that term. We also shouldn't
14:52blame all the bad things in the world just on capitalism. Madrascat asks, how do we regulate
14:57capitalism when the ones in power have no interest in being regulated? Indeed, they have a vested interest
15:03in deregulation and corruption. You really need to create a very powerful infrastructure, culture,
15:10society. Otherwise, these rich corporations, they're just going to kind of tear it all down.
15:14And that's pretty much what we've been seeing in the United States since the 1980s. If you look at
15:18like the period in the United States after the World War II and until around the 1970s when things were
15:23very regulated, those were the periods in which the growth rates were the highest, that Americans' wages
15:28were going up. Inequality plummeted during those years. And a lot of people made the jump to the
15:35middle class. And this all happened in a highly regulated economy. Regulations aren't just good
15:40about protecting people. They're actually also oftentimes good at making sure the economy is
15:45working for us and not for the billionaires. EA123ABC, who identifies as an older Gen Zer, asks,
15:54was capitalism different back then? There have definitely been moments in American history. People talk
15:58about the first Gilded Age at the end of the 19th century where there really weren't a lot of
16:03regulations. For instance, there was child labor and the conditions in the factories were awful and
16:07people could work 16-hour days and you could have your arm get cut off while you're working at the
16:11railroad and you wouldn't get any compensation for that. So definitely there have been moments in
16:16American history that have been really, really bad and really cruel and really tough. I'm not even
16:20talking about, you know, the history of slavery. That is also a huge part about the history of
16:24capitalism. But on the other hand, definitely if you look at kind of the periods after World War II,
16:30after the Great Depression, the 1940s to the 1970s, you had job security, you had a living wage where
16:36you could kind of, you know, send your kids to college, you could have social mobility, and there were
16:41a lot more regulations or laws. There are a lot more taxes on rich people in place. So people, for
16:46instance,
16:47born in the 1940s, 1950s, that's the boomer generation, 90% of them made more money than their parents.
16:52Today, the Gen Zers, and even some of the millennials, for the first time really in American history,
16:57less than half are making more than their parents. So in that sense, this feeling that something's gone
17:02wrong with the American dream is absolutely true. Avnit Kardami asks, Capitalism promotes competition?
17:09Where? Because all I see are monopolies or duopolies or triopolies. A lot of times when people give like
17:14definitions of capitalism, they say, oh, competition. But remember, capitalists don't want competition.
17:18Competition is hard. It means you constantly have to work at getting better. And I think there
17:23definitely are a lot of moments in the history of capitalism where we see that competition declines,
17:28and what we get are monopolies, duopolies, oligopolies. So at the end of the 19th century,
17:33for instance, there were a lot of small businessmen who said to themselves, why are we killing each other?
17:37Why are we competing against each other? Why don't we just take our money? Instead of building a small
17:41factory, let's create a big corporation. And that way, we don't have to compete anymore.
17:45Another thing that's happened really in recent years is something called mergers and acquisitions.
17:50That's where one corporation buys another corporation and begins to swallow up more and
17:54more corporations until you get these giant corporations. For instance, the amount of
17:58corporations on the American stock market has declined dramatically in the last 40 or 50 years
18:03because we're seeing a massive concentration of the economy. And really, when we get to the problems
18:08with the American economy today, a lot of it is about the fact that there just isn't a lot of
18:13competition. Corporations can kind of walk all over us. There used to be something called
18:17antitrust regulations in this country where if one company, for instance, if Facebook wanted to buy
18:22Instagram, if you had tried to do that in the 1950s or even earlier, they'd be like, no way we're
18:28letting Facebook buy Instagram. You're going to become a crazy monopoly. Today, as we know,
18:32Zuckerberg could do that no problem. And now we have this giant social media monopoly called Meta
18:37that, you know, controls enormous amounts of our attention and our time and, you know,
18:41all the information that we get. I think another argument that you hear sometimes between economists
18:46or between people from the left and people from the right is competition something that just kind
18:50of happens or do you really need to work on it? And I would say that actually it's kind of
18:53funny
18:54because you think, oh, capitalism creates competition. Actually, a lot of times you need
18:57governments to create that competition because if the governments aren't there to intervene
19:01and create that competition, you're just going to get very big monopolies.
19:07Spiritual Big 9927 asked, how would life in the U.S. look if it weren't a capitalist society?
19:14What would change? What would stay the same? I would argue that America wasn't always capitalist.
19:18If you go back to kind of the 18th century, obviously things were very different. Much of
19:22America was family farms. There were markets for sure, but there weren't, you know, a lot of people
19:27who were selling their energy in the labor market. Also, there are certain moments in American history
19:32where things are less capitalist. World War II is an interesting case where, you know, it was so
19:36important for us to beat the Nazis and save the world that we had a lot of things going on
19:42that
19:42really wasn't a capitalist society anymore. You had crazy price controls. The government was intervening
19:46with everything. They were building factories. They were deciding where we invest and where we don't
19:51invest. I would say that those years, America was actually in many ways more socialist than it was
19:55capitalist. And you can see that things actually really did change. You saw inequality drop
19:59tremendously. And so if capitalism were to end in the United States, we'd see certain things change.
20:05I do think it's important though, and this gets back to an earlier issue, not everything can be
20:09blamed on capitalism. Not all the problems are capitalism. And, you know, there are a lot of good
20:12things we might also miss if a capitalist society goes away. So, you know, would you have your 17 kinds
20:18of vitamin water? Would you have these giant TVs? Maybe not. So, you know, beware of what you wish for.
20:23The poll pot asks, can capitalism stop climate change, stop the worst of its effects? Well,
20:29this is an important question because it's only the future of society in our hands. I'll give you
20:34the optimist version and then the pessimist version. The optimist version is that capitalism is good at
20:40innovating. And at some point they're going to realize that we have a huge problem on our hand
20:44and that we're burning the world. And they're going to be very kind of rich, greedy billionaires who
20:48are going to want to make a lot of money. And they're going to create some technology that,
20:51I don't know, somehow sucks all the heat out of the air and global warming is solved.
20:56So that would be the positive optimistic version. I don't think capitalism is going to save us. And
21:02the reason I don't think capitalism is going to save us gets back to the profit motive and how the
21:06profit motive works. So even now, just so you know, when a bank wants to give a loan to like
21:11a green
21:11energy company, if that wasn't subsidized by the government, chances are they wouldn't get that loan
21:17because it's just not profitable enough. Okay. The most profitable thing to do right now is still
21:22to dig up oil from the ground and burn it. That's the problem with profits. It only sees what you're
21:27going to get out of it. It doesn't see the other damages that can't be priced into forms of money.
21:33These costs that we all have to pay, but that you don't see them come up when you're looking at
21:38your
21:38ledger or at your balance sheet and trying to think how much money you're going to make. And so because
21:43of
21:43that, I really do feel that if we want to save the planet, we are going to have to seriously,
21:49seriously intervene and force companies and corporations to stop doing certain things and
21:54start doing other things because the profit motive isn't enough. It's not a coincidence,
21:57I think, that in China now we are seeing by far the industry that has become the most green. It's
22:03investing the most in solar energy, in electric cars. And this doesn't mean it's all just about,
22:07you know, oh, I want the world to be a better place. A lot of it also has to do
22:11with national
22:11security issues, okay? China just saw what happens when, you know, there's a war in the Middle East
22:16and all their oil that they got from Iran is suddenly stuck. So they have other reasons to
22:19do this as well. But I definitely think that capitalism is not going to save the planet.
22:24This kind of reminds me of the New Yorker cartoon where there's this dystopian future and all these
22:28kids around a bonfire with this guy. And he says, sure, we destroyed the planet, but before that,
22:33we made a lot of money for our shareholders. Well, that's everything for today. I hope you learned
22:38something. And thank you for watching Tech Support Capitalism.