The Economic Cake
Everywhere we look, signs of discontent is happening in all the parts of the world. From political discontent, to economic ones, it has become clear that societies around the world are faced with a critical challenge that needs to be addressed.
CNN Anchor and Host of Fareed Zakaria GPS, Fareed Zakaria was in Kuala Lumpur recently to speak about the changes currently taking place in the capital markets. During which time he spent some time speaking to AWANI Review about these very changes and challenges that comes with it.
“The greatest challenge of our time is on our rewarding system” exclaimed Fareed Zakaria. “Capitalism has been hyper-productive in the last 20 or 30 years. Think of globalization, think of the information revolution, think of the incredible advances humanity has reached. But that productivity has come with very unequal distribution (of wealth). The fundamental problem here is that everywhere in the world, capitalism is being rewarded, and labour is not” he added.
The fundamental problem here is that everywhere in the world, capitalism is being rewarded, and labour is not
He is speaking from the point of view of how the economic pie is being shared to the contributors of that very pie. The polarity of the economic pie are seen through capital and labour. Both cannot exists without each other. But both are - as perceived by many including Fareed Zakaria - not being rewarded equally.
“If you have capital, you are going to do much better than if you are simply working through labour. And yet, we have political systems that throughout the world tax labour much more than they tax capital” outlines Fareed.
Having seen the sharing of the economic pie as being the root problem of capitalism itself, it seems that the economic system does not have the proper mechanism to resolve this very issue.
“If our fundamental problem is that capital is making too much, and labour is making too little of the economic pie, our solution right now is to tax Capital Gains at 15 percent and income tax at 40 percent,” explained Fareed. “There is something that we haven’t figured out yet, and haven’t realised that this one issue, is the central challenge of our age.”
Solving any economic woes is directly correlated to changing the political system as well. On this front too, one cannot exist without the other. But Fareed thinks that solving a problem of this magnitude can start with something as small as creating a sense of community and belonging. And the need to start solving this must be immediate, or risk creating further instability.
“It is not only an economic phenomenon, there is also an associated issue. When you have that kind of radical inequality, you need to create a sense of community and belonging, because otherwise people would just feel totally alienated, and that is where the anti-elitism comes from. All the attacks on the system, the attacks on the elites, attacks on the institutions and everything else will come from,” explained Fareed.
“This is because people will feel totally alienated. They don’t even feel they are part of the same country. And in some very real sense, they are not part of the same country,” says Fareed.
Watch the full interview, only on AWANI Review.