The Dirty Secret of Capitalism – And a New Way Forward: Nick Hanauer (Transcript)

Nick Hanauer – TED Talk TRANSCRIPT

I am a capitalist. And after a 30-year career in capitalism spanning three dozen companies, generating tens of billions of dollars in market value, I’m not just in the top one percent, I’m in the top .01 percent of all earners.

Today, I have come to share the secrets of our success, because rich capitalists like me have never been richer.

So the question is, how do we do it? How do we manage to grab an ever-increasing share of the economic pie every year?

Is it that rich people are smarter than we were 30 years ago? Is it that we’re working harder than we once did? Are we taller, better looking?

Sadly, no. It all comes down to just one thing: economics.

Because, here’s the dirty secret. There was a time in which the economics profession worked in the public interest. But in the neoliberal era, today, they work only for big corporations and billionaires, and that is creating a little bit of a problem.

We could choose to enact economic policies that raise taxes on the rich, regulate powerful corporations or raise wages for workers. We have done it before.

But neoliberal economists would warn that all of these policies would be a terrible mistake, because raising taxes always kills economic growth, and any form of government regulation is inefficient, and raising wages always kills jobs.

Well, as a consequence of that thinking, over the last 30 years, in the USA alone, the top one percent has grown $21 trillion richer while the bottom 50% have grown $900 billion poorer, a pattern of widening inequality that has largely repeated itself across the world.

And yet, as middle-class families struggle to get by on wages that have not budged in about 40 years, neoliberal economists continue to warn that the only reasonable response to the painful dislocations of austerity and globalization is even more austerity and globalization.

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SO, WHAT IS A SOCIETY TO DO?

Well, it’s super clear to me what we need to do. We need a new economics.

So, economics has been described as the dismal science, and for good reason, because as much as it is taught today, it isn’t a science at all, in spite of all of the dazzling mathematics.

In fact, a growing number of academics and practitioners have concluded that neoliberal economic theory is dangerously wrong and that today’s growing crises of rising inequality and growing political instability are the direct result of decades of bad economic theory.

What we now know is that the economics that made me so rich isn’t just wrong, it’s backwards, because it turns out it isn’t capital that creates economic growth, it’s people. And it isn’t self-interest that promotes the public good, it’s reciprocity. And it isn’t competition that produces our prosperity, it’s cooperation.

What we can now see is that an economics that is neither just nor inclusive can never sustain the high levels of social cooperation necessary to enable a modern society to thrive.

SO WHERE DID WE GO WRONG?

Well, it turns out that it’s become painfully obvious that the fundamental assumptions that undergird neoliberal economic theory are just objectively false.

And so today first I want to take you through some of those mistaken assumptions and then after describe where the science suggests prosperity actually comes from.

So, neoliberal economic assumption number one is that the market is an efficient equilibrium system, which basically means that if one thing in the economy, like wages, goes up, another thing in the economy, like jobs, must go down.

So for example, in Seattle, where I live, when in 2014 we passed our nation’s first 15 dollar minimum wage, the neoliberals freaked out over their precious equilibrium. “If you raise the price of labor,” they warned, “businesses will purchase less of it. Thousands of low-wage workers will lose their jobs. The restaurants will close.”

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Except… they didn’t.

The unemployment rate fell dramatically. The restaurant business in Seattle boomed. Why? Because there is no equilibrium. Because raising wages doesn’t kill jobs, it creates them; because, for instance, when restaurant owners are suddenly required to pay restaurant workers enough so that now even they can afford to eat in restaurants, it doesn’t shrink the restaurant business, it grows it, obviously.

Thank you.

The second assumption is that the price of something is always equal to its value, which basically means that if you earn $50,000 a year and I earn $50 million a year, that’s because I produce a thousand times as much value as you.

Now, it will not surprise you to learn that this is a very comforting assumption if you’re a CEO paying yourself $50 million a year but paying your workers poverty wages.

But please, take it from somebody who has run dozens of businesses: this is nonsense. People are not paid what they are worth. They are paid what they have the power to negotiate, and wages’ falling share of GDP is not because workers have become less productive but because employers have become more powerful.

And by pretending that the giant imbalance in power between capital and labor doesn’t exist, neoliberal economic theory became essentially a protection racket for the rich.

The third assumption, and by far the most pernicious, is a behavioral model that describes human beings as something called “homo economicus,” which basically means that we are all perfectly selfish, perfectly rational and relentlessly self-maximizing.

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