My Baby Explanation of Capitalism and What to Do About It

People seem genuinely surprised that the cost of living keeps rising while wages stagnate. However, I want to point out that this is exactly how our economic system is designed. Unfortunately, we live in a capitalist country—a society that is more capitalist than many others around the world. As a result, the effects are felt more acutely here than, for example, in Western or Northern Europe, to which we often compare ourselves. Is that a fair comparison? I'm not sure. Sometimes I think we’re the best of the developing countries, but who am I to judge? The truth is, in capitalism, the goal is always to seek more profit, with a constant focus on economic growth. To achieve that growth, businesses must cut costs. The fundamental logic of capitalism is that we are paid less than the value of what we produce.

For example, if I am a mechanic and the value of my work—fixing cars—is worth, say, $150,000, but I work for someone else and don’t own my own garage, the owner has to charge less than the value of my labor to make a profit. Let’s say I’m paid $100,000 a year, while the owner pockets the remaining $50,000 as profit. Now, if the cost of parts or operating expenses increases, the owner doesn't just want to maintain their previous profit; they want to increase it. So, even if they only want to maintain the same profit they made two years ago, they may have to reduce my wage to $90,000 to sustain that profit. With the introduction of shareholders who expect a return on their investment, the owner may lower my pay even further—to $75,000 or $70,000 in subsequent years. It’s a sign to shareholders that you are improving the business to give them a bigger return on their investments, making them happy. As my wages decrease, I realize that working as a mechanic is no longer beneficial to me or my family. So, I might open my own business servicing cars, so I can earn more. Guess what? The other mechanic job still needs to be filled, so the business hires someone from a developing country, willing to work for much less. They might have earned only $20 a month back home, but now they can make $60,000 a year, which is $5,000 a month before taxes! That feels like a huge improvement compared to where they came from.

I think many Americans don’t realize how this issue is unfolding on multiple levels. It's not that it's easy for us to blame immigrants simply because we see them coming to our country to work. The real issue is that we don’t like to point fingers at the people who actually own the businesses. We avoid blaming the shareholders who have a vested interest in securing returns on their investments. Instead, we often blame Black, Brown, and Latino people—and even some White people—who come to the United States and work for lower wages. But at the end of the day, the people at the top keep getting richer, while wages for jobs like that of a mechanic continue to decline. This is the logic of the system.

We don’t live in a society where most businesses are cooperatives—organizations in which workers also have ownership stakes. In such a system, shareholders wouldn’t be necessary because the workers themselves would benefit from the profits. For instance, the same mechanic who produces $150,000 worth of labor annually but only gets paid $100,000 would see the remaining $50,000 profit distributed among all the mechanics in a cooperative, since they all own the company. That profit would go back to the workers who own it. For example, if there are two mechanics, each would get a $50,000 check in the mail.

The point is, if we want to stop our systems from continuing to operate as they do, we need to explore new ways to reform them. One major avenue for this is through changes in the law. We need to implement regulations that prevent companies from shipping their wealth overseas to avoid taxes or evade paying for infrastructure—like the potholes their trucks cause every winter. But at the end of the day, don’t hate the player, hate the game, right?

Capitalism is a challenging system. While it may be the best economic model humans have ever developed—far better than a bartering system—it does have its flaws. Unfortunately, it’s also contributing to the destruction of our planet and hindering our ability to live full, happy lives. Most of us are working more hours than our parents or grandparents ever did. Clearly, change is needed.

I remember telling my students when I taught introductory sociology that there’s no such thing as a truly socialist, truly communist, or even truly capitalist society anywhere on this planet. Even those who tout their love for capitalism should realize that we’re already part socialist. We have socialist elements in the capitalism we practice. We have public organizations that serve everyone—regardless of income. You can still receive treatment at a public hospital, like the one where my mother works. It’s a hospital where, whether you’re rich or poor, they’ll take care of you. And it’s funded by tax dollars, through Medicare and Medicaid, as well as traditional insurance.

As a collective, as people living in the United States, we’ve decided, "Hey, we don’t want people dying in the streets. We’re better than that." We want to ensure that people can feed themselves when they're hungry, and we’ve created systems to help others live decent lives. We shouldn’t just blame or give all the credit to FDR and his supporters. As everyday Americans, we want to provide relief to regular people. We want everyone to be able to access healthcare, even if they can't afford it. So, as a society, we’ve created systems to help others live decent lives. Is it getting harder to do that? Yes, it’s becoming more costly.

We have politicians making money hand over fist because they work for capitalists, business owners, and stockholders. We call it lobbying, but other countries call it corruption. There are people getting paid thousands—sometimes millions—of dollars to talk to the congress people who represent us. They make sure bills, like any regulation on guns, are dead on arrival. And I’m not talking about one side or the other here; everyone’s taking that good money. Then we wonder why we can’t have more regulations on guns.

This is why I strongly believe regular people need to run for office right now. We need everyday people in positions of power. Look, I don’t agree with everyone, and I certainly don’t agree with some of the extremes. But I’d much prefer a regular, non-racist or anti-racist Republican running for office than someone like Joe Schmoe, who’s taking money from the gun lobby and blocking progress that could prevent things like school shootings. And that’s a fact, Jack!