Cooking the Books 1 – Who does capitalism work for?
‘AI risks widening inequality, warns Fink’ was the headline in the Times (24 March) reporting on the annual letter from billionaire Larry Fink to the shareholders of his asset management company BlackRock. The caption under a photo of Fink read:
‘Larry Fink said that most people who work for an income would be left behind by those enjoying returns on investment.’
These weren’t Fink’s exact words but they expressed his meaning. They also point to the two classes of capitalist society — the working class (those who work for an income) and the capitalist class (those who enjoy returns on investment).
More accurately, the working class is composed of all those who have to work for an income to survive, and the capitalist class of those who have sufficient returns on investment to survive without having to work.
What Fink wrote was that over recent decades:
‘… the vast majority of wealth has flowed to people who owned assets, not to people who earned most of their money by working. Since 1989, a dollar in the U.S. stock market has grown more than 15 times the value of a dollar tied to median wages. Now AI threatens to repeat that pattern at an even larger scale—concentrating wealth among the companies and investors positioned to capture it. This is where much of today’s economic anxiety comes from: a deeper feeling that capitalism is working—just not for enough people.’
He may be exaggerating — he himself later pointed out that when there is some technological innovation the companies producing and adopting it benefit and that this is ‘not unusual’ nor ‘inherently problematic’ — but he has an axe to grind. He argues that widening inequality could be avoided if more people owned stocks and shares; if they owned shares in these companies they would benefit from the rise in their stock market capitalisation. And of course BlackRock will be there to manage their share portfolio, for a fee.
It’s the old fraud of a ‘people’s capitalism’ that the Tories and the Liberals over here used to propose — making capitalism work for more people by giving them a share in profits.
Quite a few workers do own shares, though not enough to bring them an income to allow them to live without having to work, like capitalists. Fink quoted figures showing that in the US more than half of households own shares and that this is ‘a distinctive feature of American capitalism’ compared with Europe where only a third of households do.
This doesn’t mean that workers in the US are better off than those in Europe. It simply means that more workers there hold their savings as shares compared to Europe where more hold theirs as savings in a bank. The source of both the dividends on shares and the interest on savings accounts is profits made in capitalist industry, only in the case of interest on bank savings in a roundabout way.
Banks and assets management companies are in competition for the savings that workers might have. In Britain the asset management companies are currently running an aggressive advertising campaign to persuade workers to entrust their savings to them. Workers can make up their own minds on this. Savings in a bank are secure but, as they say, shares can go down as well as up.
One thing, however, is clear: workers will never have enough savings, whether in shares or in a bank, to allow them to live without having to work for wages. After all, if they did, who would produce the profits? Or the wealth society needs to continue to exist?