Capitalism, Justice, and Inequality

In the United States, the concept of the American Dream is accepted as the natural state of order, in which citizens are not tied down by caste, class, or family background, but can go as far as their ambition, initiative, hard work, and discipline will take them.  The growth of the American economy throughout the 19th and 20th Centuries provided opportunities that inspired immigrants the world over to travel to Ellis Island, and nurtured the development and dominance of capitalist economies around the world.  John Rawls, philosopher and author of A Theory of Justice, wrote in 1971 that:

“No one knows his place in society, his class position or social status, nor does anyone know his fortune in the distribution of natural assets and abilities, his intelligence, strength, and the like. I shall even assume that the parties do not know their conceptions of the good or their special psychological propensities. The principles of justice are chosen behind a veil of ignorance. They are the principles that rational and free persons concerned to further their own interests would accept in an initial position of equality as defining the fundamentals of the terms of their association.” (Rawls)

Rawls echoes the idea of the American Dream, that in a free, capitalist society, justice is opportunity, through the effort put forth by individuals, to improve their station in life.  Rawls believed that each individual should have a right to the maximum amount of liberty, but that any economic inequality should be arranged so that they are the greatest benefit to the least advantaged members of society.  In short, Rawls was egalitarian, consistent with the concept of the American Dream.

After the fall of the Berlin Wall and the dissolution of the Soviet Union, economists like Francis Fukuyama, who wrote The End of History and the Last Man, argued that an unending era of prosperity and peace under capitalism was upon us.  However, despite the rapid growth of capitalism during the last 50 years, and despite the end of the Cold War, inequality continues to grow globally.  In the United States, the percentage of total income that went to the top 1% of Americans increased from 8.9% in 1976 to 23.5% in 2007.  In 2007, the combined net worth of the Forbes 400 Wealthiest Americans was $1.5 Trillion, while the combined net worth of the poorest 50% of American households was $1.6 Trillion (IPS). Globally, the Gini Index, which measures the degree of income inequality in countries, shows that the level of global inequality is very high, and has risen during the last four decades (Anand).    This global inequality brings into question the concept of justice espoused by Rawls, and embodied in the idea of the American Dream.  What is it about capitalism that precludes equality?

Successful countries have advantages over developing countries that include superior educational institutions, superior and patented technology, and greater capital that allows for economies of scale and efficiency of production.  These same advantages hold true when you look at income groups instead of countries; even in the United States, the ‘land of opportunity,’ the son of a Harvard educated investment banker has significant advantages over the daughter of a working class family.  A recent examination by the New York Times of the epidemic of law school graduates, unable to find work and saddled with debt, featured a telling quote:

“Many Thomas Jefferson [School of Law] students are either immigrants or, like [Michael] Wallerstein, the first person in their family to get a law degree; statistically those are both groups with generally little or modest means. When [Beth] Kransberger [Associate Dean of Students at Thomas Jefferson] meets applicants engaged in what she call ‘magical thinking’ about their finances, she advises them to defer for a year or two until they are on stronger footing. ‘But I don’t think you can act as a moral educator,’ she says. ‘Should we really be saying to students who don’t have family help, No, you shouldn’t have access to law school? That’s a tough argument to make.’” (Segal)

The problem experienced by Mr. Wallerstein and many other law school graduates is a lack of capital; he overleveraged himself, with the American dream that he would get a job in a high-powered law firm.  Unfortunately, he made a bad bet.  John Perkins, author of Confessions of an Economic Hit Man, has written about the systematic overleveraging of developing nations through massive loans from the International Monetary Fund and the World Bank; like Mr. Wallerstein, those developing nations, such as Panama and Indonesia, were not positioned to undergo the kind of economic development that took place in the United States.  They are inherently at a disadvantage, and stunted by the game that is capitalism.  Unfortunately, the equality that Rawls proposed is not fundamental in our global economic system.  The American Dream, and by extension our globalized economy, is inherently rigged towards those that are already successful.

Works Cited

Anand, Sudhir and Paul Segal.  “What Do We Know About Global Income Inequlity?”  University of Oxford, 2006.  PDF. January 12, 2011, Web.

The Institute for Policy Studies (IPS).  “Inequality By the Numbers”, November 2009, PDF.  January 12, 2011, Web.

Rawls, John.  A Theory of Justice. Cambridge: Belknap, 1999.

Segal, David.  “Is Law School a Losing Game?” New York Times, Jan. 8 2011., Jan. 12 2011, Web.


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