American Capitalism:
expectations vs. reality
Free-market effects on U.S. society
From my perspective, free-market capitalism seems to be a sense of identity and one of the most defining features of the United States. Many Americans even take it so far as directly attributing their personal success, real or potential, to the financial system. Another attitude I have noticed is that of a deep-seated disdain for any other system, with a hyper-focused hatred of socialism and communism. However, the grasp that these people have as to what these systems actually entail often lacks first-hand research and more often than not is based on hearsay critiques.
I’ll admit that growing up I was under the same impression. It would not be until I took an economics class about racial inequality and discrimination that my misguided interpretation of these systems would be challenged. The course taught by seventh-year economics Ph.D. student Kelly Lee vividly laid out the ways in which American free-market capitalism is responsible for both the creation and perpetuation of essentially every single socio-political issue the U.S. currently faces. Whether it be racism, mass incarceration, unprecedented wealth inequality, the failing public education system, gentrification, media bias, or political polarization and corruption, the common denominator is the economic system in which they all take place. My goal now is to make this vital information more accessible.
Let’s begin with defining economics. Lee, who has extensive law enforcement and military background, thinks of it as the study of how people and institutions make decisions and their subsequent real-world impacts. From that, the Oxford English Dictionary defines capitalism as “An economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state” (take note of the fact that the control is driven by individual profit interests). Communist and socialist structures differ in that the economy is controlled by society and the state, to varying degrees.
Now let’s set the stage for the environment that this system operates within. The assertion that America is the most developed and successful nation to ever grace this earth is inescapable. If you base your opinion on word-of-mouth, it’s easy to see why you might believe this. However, if you actually look at how the U.S. ranks in international comparison, it is all too obvious that this assertion does not hold up. Many of the international rankings pertaining to economic development paint the U.S. in a favorable light, but the social rankings suggest the contrary. In terms of education and health, the U.S. ranks 27th internationally. For overall life expectancy, we are 39th. In terms of gender equality, we rank lower than Zimbabwe at 53rd. For healthcare we are 18th. Our infrastructure places us at 13th. For freedom we are 17th. So where does the U.S. rank high? Well, we are fourth in income inequality, first in the number of incarcerated people, sixth in police killings, first in military spending, second in CO2 emissions, third in insulin prices, first in gun ownership, third in healthcare costs, and first in patriotism.
The top 10% of the wealthiest Americans now own more than 70% of the total wealth in the nation while the bottom 50% of people own less than 10%. Simultaneously, the median white household annual income is $188,200 while the annual Black household median income is $24,100. To explain these gross inequalities there are three economic theories; the conservative theory, the liberal theory, and the Marxist theory (I know — “treason!”).
The conservative theory basically blames Black people for their own oppression. It states that current inequalities can be attributed to Black people historically making poor human capital investments in terms of college education, employment opportunities and more. What aspect of the American economy does this ignore? Well, a lot, but most notably the fact that the entirety of American capitalism was quite literally built upon the institution of slavery. Black people were prohibited from accumulating wealth for centuries while the money they would have been making to eventually pass down to future generations was put in the pockets of white men.
On the other hand, the liberal paradigm does acknowledge the historical barriers faced by people of color and calls for government intervention in the form of policy, however, they believe such policy should work to bring up the entire economy, not just select groups of oppressed people. What does this ignore? The critical difference between equity and equality. By the liberal standard, improving the whole economy would increase income for these groups, but at the same time would also increase the incomes for those already at the top. Obviously, this would make no real difference in the racial wealth gap we see now, deeming this theory useless.
Finally, the Marxist theory is based on the distinction between classes in a capitalist society and in the workplace. The more powerful class, the capitalists, control the means of production and the less influential, but still necessary, labor class. Marx also ascribed an ultimate goal to each group; the capitalists want to maximize their surplus and profits, while the laborers want to maximize their wages and benefits. To Marxists, problems come about because of these goals that are in direct conflict with one another. Improving wages, benefits, and conditions for workers requires the capitalists to spend more money that they could instead take home as profit. The solution to this is obviously to create a united and interracial working class in order to overpower the capitalists’ interests, however, the reason this does not happen is that capitalists recognize this reality. This complex dynamic is the ultimate reason why some assert that capitalism breeds racism; in order for the capitalist’s profit to be protected, it is in their interests to create a divisive workplace where workers are at odds with one another, instead of creating a united workforce which would collectively have greater bargaining power for demanding better wages and conditions. If capitalists can pay a Black worker less than a white one, then the workers will focus on the differential wages by race instead of the fact that both are being paid less than they deserve. The trend in American workers unionizing in the 20th century, only to be met with anti-union control from company executives and the modern mirroring of these efforts from companies like Amazon and Kellog demonstrates this harsh reality.
“With the Marx theory, you can agree with his critique of capitalism, it’s his solution to that that was communism that you don’t have to agree with,” Lee said. “There’s more than one solution to a problem…and that’s where the power of propaganda comes in. If I can equate any socialist policy with communism and if I can just equate everything, even the critique of capitalism itself, with communism, then it closes the door to even having the discussion.”
CEO compensation since 1978 has grown 940% while worker compensation has increased only 12%. To explain this disturbing trend is perhaps the most hailed icon in American capitalist culture — former Republican President Ronald Reagan. From about 1950 into the 80s, across Democratic and Republican presidents alike, the corporate income tax rate was maintained at around 50%. In 1986, though, Reagan came in and decreased it to about 35% in the name of the hyper-capitalistic trickle-down economics scheme. The rate floated around that margin until 2016 when Donald Trump cut it again to just above 20%. Ironically, in the aftermath of each of these tax breaks is when we see the wealth gap exacerbated the most, begging the question of the practicality of trickle-down economics.
Even though America’s current climate and attitudes towards differing economic systems seem unchangeable, there are some possible solutions that need to be more widely recognized. The first of these possibilities is something called a universal basic income which Lee defines as the “social philosophy that everyone should have a basic income that provides for a minimal standard of living.” Of the many different forms a policy like this could take, it would provide workers with the bargaining power they need to refrain from accepting exploitive wages and conditions by providing them with just enough financial security to wait for an appropriate job opportunity. If workers collectively gain this power, companies would eventually be forced to adhere to their demands. Although the estimated costs of such a program are in the trillions of dollars, the money saved on funding other welfare programs like unemployment benefits or food stamps could justify such a hefty price tag. This type of policy has also been tested on a smaller scale in places like New Jersey, Seattle, Denver, Alaska, and California and the successful outcomes seem to fall in line with predictions.
A second possible solution is that of a federal jobs guarantee. This policy approach would entail a government agency whose sole purpose is to provide job coverage for all eligible adults and would include non-monetary benefits like health insurance. Basically, if somebody finds themselves out of work, the government would either provide them one or provide them with adequate training in order to enhance their job options. Similar to the idea of a universal basic income, this would also eliminate involuntary employment and give workers more bargaining power. The spending that would incur from obtaining higher levels of employment would also help to restore local and state tax bases, mitigating the total expense of such a program.
Finally, the most widely known solution would take the form of reparations, which again, have historically proved to be successful. In 1971 the federal government made a land grant of $1 billion and 44 million acres of land to Alaskan Natives. Then in 1986, they granted $32 million to the Ottawa tribe of Michigan. And again in 1990, an apology was formally extended as well as payments of $20,000 to individual Japanese Americans subjected to internment during World War II.
This final proposal seems the most practical as various Democratic leaders have explicitly expressed their support for such a program. For example, a couple of years ago Sen. Cory Booker (D-NJ) introduced a reparations bill in the Senate and some of the party’s most influential people, such as Sen. Bernie Sanders (I-VT), then-Sen. Kamala Harris (D-CA), Sen. Elizabeth Warren (D-MA), and Sen. Amy Klobuchar (D-MN) co-sponsored the legislation. President Joe Biden has also expressed potential consideration of such provisions.
American Capitalism: Expectations vs. Reality
Join Colorado State University third-year student Lucy Morantz for a sit-down discussion analyzing the unintended consequences of American free-market capitalism with CSU Department of Economics Ph.D. students Brendan Brundage and Kelly Lee.
How the federal government created urban slum areas
Since the inception of federally-funded public housing projects beginning after the first World War and with the onset of the Great Depression, racial inequalities and prejudices have plagued the public good while maintaining a facade of smart and safe capitalist tactics.
The original intent of public housing was to provide shelter not for those who could not afford it, but for lower-middle-class working families who could not find housing elsewhere because of the severe nationwide housing shortage faced at the time. However, over the course of the decades since, public housing has increasingly been associated with urban Black, Latinx and lower-class families living in overcrowded and unkempt conditions. This reality developed as the families the good was intended for, working-class whites, fled from the city centers to the new racially and socially homogeneous suburbs. All of these trends were exacerbated as the floodgate of opportunities for homeownership was granted to whites at the will of the federal government while being denied to Blacks and other marginalized groups. As real estate industry lobbyists claimed that socialized public housing threatened private enterprise, the United States federal government sided with the market over people while disguising their subsequent and overtly racist actions as decisions based on market competition and investment stability.
This is how American free-market capitalism unintentionally created urban slum areas.
Click here to view the interactive timeline in a separate tab.
What does gentrification look like? See how gentrification is disguised as ‘revitalization’ in Denver
Over the summer a report from the National Community Reinvestment Coalition named Denver as the second most intensely gentrified city in the United States between 2013 and 2017. According to the report, over 27% of neighborhoods in the Denver-Aurora area either have been or are in the process of gentrification.
‘Gentrification’ is a term used to describe the increasingly common practice of cities investing in neighborhoods and communities that they feel need to revitalize in order to attract businesses and other investments to the area. While in theory, this appears harmless, what has happened frequently enough that it is now considered an inherent by-product of these investment schemes is that the people who lived in the area prior to revitalization are displaced. By building new apartment complexes, grocery stores, restaurants, and other businesses, the property values of the once-affordable housing options skyrocket to prices that are not practical for long-time residents, forcing them elsewhere and oftentimes into homelessness. Ultimately, this practice changes the racial, ethnic, and socioeconomic makeup of an area in favor of wealthier, younger, and more affluent populations.
The NCRC report placed Denver second behind San Francisco. It named areas in northern and eastern Denver as some of the most affected areas as seen by Northside’s Latinx population which fell from 70% to 35%. Further, Denver’s homeless population has increased 15% in five years and no new estimates have been made to account for the effects of the pandemic.
What is made clear by observing gentrification on both a micro and macro level is that developments in the name of profits and free-market capitalism are held in higher regard to city governments across the nation than the well-being and housing security of their own residents.
The following photos demonstrate a few of the many obvious examples of gentrification in the Denver area, but in no way are representative of the severity nor the reach that this dangerous process has on the city.
WELTON CORRIDOR
Sticking out like a sore thumb is the Radiant apartment complex surrounded by empty parking lots and garages in the south Five Points Welton Corridor. The complex, which markets itself as “luxury downtown Denver apartments” since 2019, features an 18-story rooftop pool and spa, beer garden, barbeque patio, and other amenities. The cheapest rent payment here is $1,516 per month for a one-bedroom studio apartment.
Located just one block away from the Radiant apartments, another high-rise housing tower stands within a neighborhood of empty parking lots.
FIVE POINTS HISTORIC DISTRICT
One of Denver’s oldest neighborhoods since 1860 has coincidentally also been the fastest growing neighborhood in the 21st century. Located on the northeast side of the Central Business District, the prime location was an attractive feature for investments in new housing and business projects. Simultaneously and consequently, the number of people in the area facing homelessness has increased drastically.
CITY PARK
On the other side of the street from City Park stands the York on City Park Apartments complex. Marketed as “luxurious, amenitized, urban living,” York on City Park offers a studio floor plan starting at $1,719 per month as the cheapest option. The five-story, 212-unit complex was built in 2017 and often overlooks packs of tents occupied by homeless Denver residents and surrounding neighborhoods that are obviously much older and not as wealthy.
CIVIC CENTER
Located just two blocks southwest of Civic Center Park towers Civic Center Lofts, another “luxurious” and “ultra-modern” 14-story apartment complex has towered over surrounding businesses and parking lots since 2019. A one-bed, one-bath unit here starts at $1,560 per month.
MISCELLANEOUS
Though gentrification is an abstract concept, its consequences are all too real and can be seen all across the Denver metropolitan area. Whether it’s through luxurious, high-rise apartment buildings or the destruction of a single home to open space for a business, the human consequences of gentrification must eventually outweigh the profits that it brings.
Lucy Morantz Media 