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The Limitation of Capitalism (November 22, 2006)

Terry Hung

November 22, 2006 


If the capitalism is credited for the socioeconomic up-cycle, shouldn’t it be blamed for the socioeconomic down-cycle as well?

T
he socioeconomic cycle is different from the “business cycle.” The former gauges the overall growth, wealth distribution and other social aspects, while the latter only gauges the overall growth of economy as measured by the growth domestic product (GDP).

T
he socioeconomic cycle focuses on an important factor – the wealth distribution. The concept is very simple: if the majority of the people – normally means the middle-class – are worse off in an economic period, then for the society as a whole, it should be viewed as a down-cycle.

Capitalism by its free-competition nature speeds up the wealth concentration process. One perfect example occurs in China. Twenty years ago the communist China decided to open its economy to private business. In a shockingly short twenty years, .5 percent of the people now control 95 percent of its wealth. Capitalism in the 21th century is more effective than ever – it can give the bulk of the wealth to a few hands in unprecedented speed.

So it all comes down to what is more important in a society. Is the benefit and happiness of a few more important than the majority? The myth that there is a “trickling-down effect” that the wealth of the superrich always flows to the rest is simply a delusion – it seldom happens.

Capitalism has its flaws, the main one being its tendency to create excessively uneven wealth concentration. Unless we acknowledge its limitation, we will face the inevitable in the future social unrest and revolution. The cycle of wealth concentration and revolution has repeated many times in the human history. We just never learned.

We must a
ct now before it's too late.



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