‘It was capitalism that ensured we had a vaccine in less than a year’. The Prime Minister said these words at the recent Conservative party conference in Manchester. Amid other notes about the safety of women, building back better, levelling up, and the NHS, Boris Johnson made it clear that the arrival of the ‘wonder drug’ was thanks to capitalism. Undoubtedly, he was correct. The vast amount of private capital that went into developing the Coronavirus vaccines was one of, if not the, most important factors in defending against the virus so quickly. We are now over three decades on from the end of The Cold War, and capitalism has more than won its battle against communism, but what comes next?
The traditional watered-down version of history would have us believe that it has always been capitalism versus communism and that, frankly, capitalism won. Certainly, from a twenty-first century, first-world perspective, it is not hard to see why. After all, capitalism has given us many great things: laptops, drugs, transport networks, art, literature, gameshows, etc. It is a great way to live and certainly a lot better than the average citizen of the USSR in 1980. Unfortunately, it is not all sunshine and rainbows. While the capitalism of our time has allowed us to develop life-saving drugs in less than a year, it has also allowed the vast accumulation of wealth by selling them at inflated prices. Exhibit A: insulin in America.
A 2018 study revealed that it costs approximately $2.28-$3.42 to produce one vial of human insulin and approximately $3.69-$6.16 to produce one vial of analogue insulin. The sale price of some units of insulin would have patients paying out up to $1,239.90 a month for insulin, a significant increase from the production cost. The reason: profit. An awful tragedy that is compounded by the fact that the discoverers of insulin wished for it to be freely available to all who required it, and thus forewent signing a patent for their discovery. Frederick Banting and Charles Best decided to sell their discovery to the University of Toronto for just $1. They were true philanthropists. Now, American pharmaceutical companies make ridiculously large amounts of profit by producing a compound that was discovered nearly a century ago by someone else. While Banting and Best could not have dreamed what the world would look like in 2021, I would be surprised if they envisioned a private company making profit from their discovery while diabetics skip doses of insulin because they cannot afford their medication.
So yes, capitalism has its benefits, but it also succeeds in perpetuating an ever-increasing division between those with wealth and those without wealth. Is there a better way? Well, recent observers of the Met Gala in New York City will not have failed to notice Alexandria Ocasio-Cortez wearing a white gown inscribed with the words “Tax the rich” in big red letters. The congresswoman for New York’s 14th congressional district felt an immediate backlash from right-wing republicans who claimed that she was hypocritical for displaying such a slogan at the gala. Regrettably, critics of this move, deliberately or unwittingly, missed the point.
“The rich” in this context does not simply refer to those with money, as this includes a significant amount of people. “The rich” does not refer to millionaires or people who are comfortably well-off. “The rich” refers to those individuals and companies who have accumulated such vast quantities of wealth that they dwarf some economies. It talks of those people who have such wealth that it is, quite bluntly, unethical. Unethical wealth. To truly see how unfair this gap is, we must look at the numbers.
The average income of the top 1% in the USA is $1.32 million. If you earn about this figure, then you are considered to be in the top 1%. In comparison to billionaires, this is a small income. Talking about the 1% is missing the problem; it is the 0.01% that we should be focusing on. The reason that this 0.01% should be the only group in the definition of “the rich” is because the share of global wealth attributed to this group has risen at a far greater rate than everyone else. In 1973, the 0.01% held 0.5% of total income, while in 2010, this had risen to 3.3% of total income (nearly 7X as high). Compare this to the growth rate of the 1% (just 2X greater share of total income) and it is clear that this is where wealth is concentrated.
So, the gap is unfair, and capitalism is the model which has allowed that to happen. While the competitive nature of a free market has allowed huge advances in technology and medicine, it has also made sure that a lot of these innovations are not accessible in a way that benefits society.
Taxing the rich is one option, putting a cap on how much wealth can be accrued is another, but this will create a new problem. If limits are imposed on how much money people can make, then the competitive element of the model is done away with. Who wants to invent a great new iPhone if they cannot sell it, right? Besides, who are you to say I am not allowed to make money anymore? Surely that is an abuse of my rights as an individual!
The incentive to innovate is the fuel on the fire of capitalism, and the chances are that keeping the fire going for most is better than dowsing it just so everyone is cold together. Taxing the rich is the best option of the moment if we want to see society prosper. For the time being, we are stuck with capitalism, and we should make the most of it, but there is something else out there and it would be worth betting that it will be better than what we have now. Capitalism is unfair by nature, but it does not have to be quite so unfair as this.
Written by Isaac Knowles
Isaac Knowles is a columnist at DecipherGrey.