The dirty secret of capitalism -- and a new way forward
-
0:01 - 0:04I am a capitalist,
-
0:05 - 0:08and after a 30-year career in capitalism
-
0:08 - 0:11spanning three dozen companies,
-
0:11 - 0:14generating tens of billions
of dollars in market value, -
0:14 - 0:20I'm not just in the top one percent,
I'm in the top .01 percent of all earners. -
0:22 - 0:25Today, I have come
to share the secrets of our success, -
0:25 - 0:29because rich capitalists like me
have never been richer. -
0:29 - 0:31So the question is, how do we do it?
-
0:32 - 0:34How do we manage to grab
-
0:34 - 0:38an ever-increasing share
of the economic pie every year? -
0:39 - 0:43Is it that rich people are smarter
than we were 30 years ago? -
0:44 - 0:46Is it that we're working harder
than we once did? -
0:48 - 0:50Are we taller, better looking?
-
0:51 - 0:53Sadly, no.
-
0:54 - 0:56It all comes down to just one thing:
-
0:56 - 0:57economics.
-
0:58 - 1:00Because, here's the dirty secret.
-
1:01 - 1:03There was a time
in which the economics profession -
1:03 - 1:05worked in the public interest,
-
1:05 - 1:06but in the neoliberal era,
-
1:06 - 1:08today,
-
1:08 - 1:11they work only for big corporations
-
1:11 - 1:12and billionaires,
-
1:12 - 1:15and that is creating
a little bit of a problem. -
1:16 - 1:20We could choose to enact economic policies
-
1:20 - 1:22that raise taxes on the rich,
-
1:22 - 1:26regulate powerful corporations
or raise wages for workers. -
1:26 - 1:28We have done it before.
-
1:28 - 1:30But neoliberal economists would warn
-
1:30 - 1:34that all of these policies
would be a terrible mistake, -
1:34 - 1:37because raising taxes
always kills economic growth, -
1:38 - 1:40and any form of government regulation
-
1:40 - 1:42is inefficient,
-
1:42 - 1:44and raising wages always kills jobs.
-
1:45 - 1:47Well, as a consequence of that thinking,
-
1:49 - 1:53over the last 30 years, in the USA alone,
-
1:53 - 1:57the top one percent has grown
21 trillion dollars richer -
1:57 - 2:03while the bottom 50 percent
have grown 900 billion dollars poorer, -
2:03 - 2:06a pattern of widening inequality
that has largely repeated itself -
2:06 - 2:08across the world.
-
2:08 - 2:13And yet, as middle class families
struggle to get by -
2:13 - 2:17on wages that have not budged
in about 40 years, -
2:17 - 2:21neoliberal economists continue to warn
that the only reasonable response -
2:21 - 2:25to the painful dislocations
of austerity and globalization -
2:25 - 2:28is even more austerity and globalization.
-
2:29 - 2:32So, what is a society to do?
-
2:33 - 2:36Well, it's super clear to me
what we need to do. -
2:36 - 2:38We need a new economics.
-
2:39 - 2:43So, economics has been described
as the dismal science, -
2:43 - 2:46and for good reason,
because as much as it is taught today, -
2:46 - 2:48it isn't a science at all,
-
2:48 - 2:51in spite of all
of the dazzling mathematics. -
2:51 - 2:55In fact, a growing number
of academics and practitioners -
2:55 - 3:01have concluded that neoliberal
economic theory is dangerously wrong -
3:01 - 3:04and that today's growing crises
of rising inequality -
3:04 - 3:06and growing political instability
-
3:06 - 3:11are the direct result
of decades of bad economic theory. -
3:11 - 3:17What we now know is that the economics
that made me so rich isn't just wrong, -
3:17 - 3:19it's backwards,
-
3:19 - 3:21because it turns out
-
3:21 - 3:25it isn't capital
that creates economic growth, -
3:25 - 3:26it's people;
-
3:27 - 3:32and it isn't self-interest
that promotes the public good, -
3:32 - 3:33it's reciprocity;
-
3:35 - 3:39and it isn't competition
that produces our prosperity, -
3:39 - 3:40it's cooperation.
-
3:41 - 3:46What we can now see is that an economics
that is neither just nor inclusive -
3:46 - 3:51can never sustain the high levels
of social cooperation -
3:51 - 3:53necessary to enable
a modern society to thrive. -
3:53 - 3:56So where did we go wrong?
-
3:57 - 4:01Well, it turns out
that it's become painfully obvious -
4:01 - 4:07that the fundamental assumptions
that undergird neoliberal economic theory -
4:08 - 4:11are just objectively false,
-
4:11 - 4:14and so today first I want to take you
through some of those mistaken assumptions -
4:14 - 4:20and then after describe where the science
suggests prosperity actually comes from. -
4:21 - 4:26So, neoliberal economic
assumption number one is -
4:26 - 4:30that the market is
an efficient equilibrium system, -
4:30 - 4:36which basically means that if one thing
in the economy, like wages, goes up, -
4:36 - 4:40another thing in the economy,
like jobs, must go down. -
4:41 - 4:44So for example, in Seattle, where I live,
-
4:45 - 4:50when in 2014 we passed
our nation's first 15 dollar minimum wage, -
4:50 - 4:54the neoliberals freaked out
over their precious equilibrium. -
4:55 - 4:58"If you raise the price
of labor," they warned, -
4:58 - 5:00"businesses will purchase less of it.
-
5:00 - 5:03Thousands of low-wage workers
will lose their jobs. -
5:03 - 5:05The restaurants will close."
-
5:05 - 5:06Except ...
-
5:07 - 5:08they didn't.
-
5:09 - 5:12The unemployment rate fell dramatically.
-
5:13 - 5:16The restaurant business in Seattle boomed.
-
5:16 - 5:17Why?
-
5:18 - 5:20Because there is no equilibrium.
-
5:22 - 5:25Because raising wages
doesn't kill jobs, it creates them; -
5:25 - 5:26because, for instance,
-
5:26 - 5:31when restaurant owners are suddenly
required to pay restaurant workers enough -
5:31 - 5:35so that now even they
can afford to eat in restaurants, -
5:35 - 5:37it doesn't shrink the restaurant business,
-
5:37 - 5:39it grows it, obviously.
-
5:41 - 5:43(Applause)
-
5:43 - 5:44Thank you.
-
5:46 - 5:48The second assumption is
-
5:50 - 5:55that the price of something
is always equal to its value, -
5:55 - 5:58which basically means
that if you earn 50,000 dollars a year -
5:58 - 6:01and I earn 50 million dollars a year,
-
6:01 - 6:06that's because I produce
a thousand times as much value as you. -
6:07 - 6:08Now,
-
6:08 - 6:12it will not surprise you to learn
-
6:12 - 6:14that this is a very comforting assumption
-
6:14 - 6:17if you're a CEO paying yourself
50 million dollars a year -
6:17 - 6:20but paying your workers poverty wages.
-
6:20 - 6:24But please, take it from somebody
who has run dozens of businesses: -
6:24 - 6:26this is nonsense.
-
6:26 - 6:29People are not paid what they are worth.
-
6:29 - 6:32They are paid what they have
the power to negotiate, -
6:32 - 6:35and wages' falling share of GDP
-
6:35 - 6:38is not because workers
have become less productive -
6:38 - 6:41but because employers
have become more powerful. -
6:42 - 6:44And --
-
6:44 - 6:45(Applause)
-
6:47 - 6:53And by pretending that the giant imbalance
in power between capital and labor -
6:53 - 6:54doesn't exist,
-
6:54 - 6:58neoliberal economic theory
became essentially -
6:58 - 7:00a protection racket for the rich.
-
7:02 - 7:04The third assumption,
and by far the most pernicious, -
7:04 - 7:05is a behavioral model
-
7:05 - 7:09that describes human beings
as something called "homo economicus," -
7:09 - 7:14which basically means
that we are all perfectly selfish, -
7:14 - 7:18perfectly rational
and relentlessly self-maximizing. -
7:20 - 7:22But just ask yourselves,
-
7:22 - 7:25is it plausible that every single time
for your entire life, -
7:25 - 7:28when you did something
nice for somebody else, -
7:28 - 7:31all you were doing
was maximizing your own utility? -
7:31 - 7:35Is it plausible that when a soldier jumps
on a grenade to defend fellow soldiers, -
7:35 - 7:38they're just promoting
their narrow self-interest? -
7:38 - 7:39If you think that's nuts,
-
7:39 - 7:42contrary to any reasonable
moral intuition, -
7:42 - 7:44that's because it is
-
7:44 - 7:46and, according to the latest science,
-
7:46 - 7:48not true.
-
7:48 - 7:50But it is this behavioral model
-
7:50 - 7:54which is at the cold, cruel heart
of neoliberal economics, -
7:54 - 7:57and it is as morally corrosive
-
7:57 - 8:00as it is scientifically wrong
-
8:00 - 8:05because, if we accept at face value
-
8:05 - 8:08that humans are fundamentally selfish,
-
8:08 - 8:10and then we look around the world
-
8:10 - 8:13at all of the unambiguous
prosperity in it, -
8:14 - 8:17then it follows logically,
-
8:17 - 8:19then it must be true by definition,
-
8:19 - 8:23that billions of individual
acts of selfishness -
8:23 - 8:27magically transubstantiate
into prosperity and the common good. -
8:27 - 8:30If we humans are merely
selfish maximizers, -
8:30 - 8:33then selfishness
is the cause of our prosperity. -
8:34 - 8:37Under this economic logic,
-
8:37 - 8:39greed is good,
-
8:40 - 8:42widening inequality is efficient,
-
8:42 - 8:44and the only purpose of the corporation
-
8:44 - 8:47can be to enrich shareholders,
-
8:47 - 8:50because to do otherwise
would be to slow economic growth -
8:50 - 8:52and harm the economy overall.
-
8:53 - 8:57And it is this gospel of selfishness
-
8:57 - 9:01which forms the ideological cornerstone
of neoliberal economics, -
9:01 - 9:05a way of thinking
which has produced economic policies -
9:05 - 9:08which have enabled me and my rich buddies
in the top one percent -
9:08 - 9:12to grab virtually all of the benefits
of growth over the last 40 years. -
9:13 - 9:15But,
-
9:15 - 9:17if instead
-
9:17 - 9:21we accept the latest empirical research,
-
9:21 - 9:24real science, which correctly
describes human beings -
9:24 - 9:27as highly cooperative,
-
9:27 - 9:29reciprocal
-
9:29 - 9:32and intuitively moral creatures,
-
9:32 - 9:34then it follows logically
-
9:34 - 9:37that it must be cooperation
-
9:37 - 9:38and not selfishness
-
9:38 - 9:40that is the cause of our prosperity,
-
9:40 - 9:43and it isn't our self-interest
-
9:43 - 9:45but rather our inherent reciprocity
-
9:46 - 9:49that is humanity's economic superpower.
-
9:50 - 9:54So at the heart of this new economics
-
9:54 - 9:59is a story about ourselves that grants us
permission to be our best selves, -
9:59 - 10:02and, unlike the old economics,
-
10:02 - 10:05this is a story that is virtuous
-
10:05 - 10:08and also has the virtue of being true.
-
10:09 - 10:11Now,
-
10:11 - 10:13I want to emphasize
that this new economics -
10:13 - 10:16is not something I have personally
imagined or invented. -
10:16 - 10:19Its theories and models
are being developed and refined -
10:19 - 10:21in universities around the world
-
10:21 - 10:24building on some of the best
new research in economics, -
10:24 - 10:26complexity theory, evolutionary theory,
-
10:26 - 10:29psychology, anthropology
and other disciplines. -
10:29 - 10:34And although this new economics
does not yet have its own textbook -
10:34 - 10:36or even a commonly agreed upon name,
-
10:36 - 10:38in broad strokes
-
10:38 - 10:42its explanation of where prosperity
comes from goes something like this. -
10:43 - 10:48So, market capitalism
is an evolutionary system -
10:48 - 10:50in which prosperity emerges
-
10:50 - 10:52through a positive feedback loop
-
10:52 - 10:57between increasing amounts of innovation
and increasing amounts of consumer demand. -
10:57 - 11:02Innovation is the process
by which we solve human problems, -
11:03 - 11:06consumer demand is the mechanism
through which the market selects -
11:06 - 11:08for useful innovations,
-
11:08 - 11:12and as we solve more problems,
we become more prosperous. -
11:12 - 11:16But as we become more prosperous,
-
11:16 - 11:17our problems and solutions
-
11:17 - 11:20become more complex,
-
11:20 - 11:23and this increasing technical complexity
-
11:23 - 11:28requires ever higher levels
of social and economic cooperation -
11:28 - 11:31in order to produce
the more highly specialized products -
11:31 - 11:35that define a modern economy.
-
11:36 - 11:41Now, the old economics
is correct, of course, -
11:41 - 11:44that competition plays a crucial role
in how markets work, -
11:44 - 11:46but what it fails to see
-
11:46 - 11:51is that it is largely a competition
between highly cooperative groups -- -
11:51 - 11:56competition between firms,
competition between networks of firms, -
11:56 - 11:59competition between nations --
-
11:59 - 12:03and anyone who has ever run
a successful business knows -
12:03 - 12:06that building a cooperative team
by including the talents of everyone -
12:08 - 12:12is almost always a better strategy
than just a bunch of selfish jerks. -
12:13 - 12:18So how do we leave neoliberalism behind
-
12:20 - 12:24and build a more sustainable,
more prosperous -
12:25 - 12:28and more equitable society?
-
12:28 - 12:32The new economics suggests
just five rules of thumb. -
12:32 - 12:39First is that successful economies
are not jungles, they're gardens, -
12:40 - 12:43which is to say that markets,
-
12:43 - 12:46like gardens, must be tended,
-
12:47 - 12:52that the market is the greatest
social technology ever invented -
12:52 - 12:53for solving human problems,
-
12:53 - 12:59but unconstrained by social norms
or democratic regulation, -
12:59 - 13:02markets inevitably create
more problems than they solve. -
13:02 - 13:03Climate change,
-
13:03 - 13:05the great financial crisis of 2008
-
13:05 - 13:07are two easy examples.
-
13:08 - 13:11The second rule is
-
13:11 - 13:15that inclusion creates economic growth.
-
13:16 - 13:19So the neoliberal idea
-
13:19 - 13:21that inclusion is this fancy luxury
-
13:21 - 13:26to be afforded if and when we have growth
is both wrong and backwards. -
13:27 - 13:30The economy is people.
-
13:31 - 13:33Including more people in more ways
-
13:33 - 13:37is what causes economic growth
in market economies. -
13:38 - 13:40The third principle
-
13:40 - 13:46is the purpose of the corporation
is not merely to enrich shareholders. -
13:46 - 13:50The greatest grift
in contemporary economic life -
13:50 - 13:53is the neoliberal idea that
the only purpose of the corporation -
13:53 - 13:56and the only responsibility of executives
-
13:56 - 13:59is to enrich themselves and shareholders.
-
14:00 - 14:05The new economics must and can insist
-
14:05 - 14:07that the purpose of the corporation
-
14:07 - 14:10is to improve the welfare
of all stakeholders: -
14:10 - 14:12customers, workers,
-
14:12 - 14:14community and shareholders alike.
-
14:16 - 14:18Rule four:
-
14:18 - 14:20greed is not good.
-
14:23 - 14:26Being rapacious
doesn't make you a capitalist, -
14:26 - 14:28it makes you a sociopath.
-
14:28 - 14:31(Laughter)
-
14:31 - 14:35(Applause)
-
14:35 - 14:40And in an economy as dependent
upon cooperation at scale as ours, -
14:40 - 14:44sociopathy is as bad for business
as it is for society. -
14:45 - 14:47And fifth and finally,
-
14:48 - 14:51unlike the laws of physics,
-
14:52 - 14:55the laws of economics are a choice.
-
14:57 - 14:58Now, neoliberal economic theory
-
14:58 - 15:03has sold itself to you
as unchangeable natural law, -
15:03 - 15:07when in fact it's social norms
and constructed narratives -
15:07 - 15:09based on pseudoscience.
-
15:10 - 15:13If we truly want a more equitable,
-
15:13 - 15:17more prosperous
and more sustainable economy, -
15:17 - 15:20if we want high-functioning democracies
-
15:20 - 15:22and civil society,
-
15:22 - 15:24we must have a new economics.
-
15:25 - 15:27And here's the good news:
-
15:27 - 15:29if we want a new economics,
-
15:29 - 15:33all we have to do is choose to have it.
-
15:33 - 15:34Thank you.
-
15:34 - 15:39(Applause)
-
15:52 - 15:55Moderator: So Nick,
I'm sure you get this question a lot. -
15:56 - 15:59If you're so unhappy
with the economic system, -
15:59 - 16:04why not just give all your money away
and join the 99 percent? -
16:04 - 16:07Nick Hanauer: Yeah, no, yes, right.
-
16:07 - 16:09You get that a lot. You get that a lot.
-
16:09 - 16:12"If you care so much about taxes,
why don't you pay more, -
16:12 - 16:15and if you care so much about wages,
why don't you pay more?" -
16:15 - 16:16And I could do that.
-
16:17 - 16:19The problem is,
-
16:19 - 16:20it doesn't make that much difference,
-
16:20 - 16:22and I have discovered a strategy
-
16:22 - 16:25that works literally
a hundred thousand times better -- -
16:25 - 16:26Moderator: OK.
-
16:26 - 16:30NH: which is to use my money
to build narratives and to pass laws -
16:30 - 16:32that will require
all the other rich people -
16:32 - 16:34to pay taxes and pay their workers better.
-
16:34 - 16:36(Applause)
-
16:36 - 16:37And so, for example,
-
16:37 - 16:41the 15-dollar minimum wage
that we cooked up -
16:41 - 16:43has now affected 30 million workers.
-
16:43 - 16:44So that works better.
-
16:44 - 16:45Moderator: That's great.
-
16:45 - 16:48If you change your mind,
we'll find some takers for you. -
16:48 - 16:50NH: OK. Thank you.
Moderator: Thank you very much.
- Title:
- The dirty secret of capitalism -- and a new way forward
- Speaker:
- Nick Hanauer
- Description:
-
Rising inequality and growing political instability are the direct result of decades of bad economic theory, says entrepreneur Nick Hanauer. In a visionary talk, he dismantles the mantra that "greed is good" -- an idea he describes as not only morally corrosive, but also scientifically wrong -- and lays out a new theory of economics powered by reciprocity and cooperation.
- Video Language:
- English
- Team:
- closed TED
- Project:
- TEDTalks
- Duration:
- 17:03
Oliver Friedman edited English subtitles for The dirty secret of capitalism -- and a new way forward | ||
Oliver Friedman approved English subtitles for The dirty secret of capitalism -- and a new way forward | ||
Oliver Friedman edited English subtitles for The dirty secret of capitalism -- and a new way forward | ||
Joanna Pietrulewicz accepted English subtitles for The dirty secret of capitalism -- and a new way forward | ||
Joanna Pietrulewicz edited English subtitles for The dirty secret of capitalism -- and a new way forward | ||
Joanna Pietrulewicz edited English subtitles for The dirty secret of capitalism -- and a new way forward | ||
Joseph Geni edited English subtitles for The dirty secret of capitalism -- and a new way forward | ||
Joseph Geni edited English subtitles for The dirty secret of capitalism -- and a new way forward |