Take a good, hard look at the chart. I don’t usually write essays about charts— but this one’s different. It’s American collapse in four lines. It says that American elites mismanaged their economy so badly, so fatally, so totally, the rich world hasn’t seen the like since Weimar Germany. They created a capitalist utopia — but the problem is that that’s everyone else’s dystopia.
To understand the story of this gargantuan, historic failure — not managing a society in any way resembling “well”, or even “sanely” — it’s probably best to understand what Europe did right — and then come back to what America did wrong. Which, in short, is that it embarked on one of history’s greatest fools’ quests since alchemy, a utopian mission to turn the lead of capitalism into the gold of prosperity for everyone. But lead doesn’t turn into gold.
Why didn’t Europe’s “labour share of income” — that is, how much regular people receive— decline, like in the States? The simple answer, of course, is “more social democracy, and less capitalism.” But what does that mean? It means that European structures and institutions are radically different from American ones — so different, that many Americans have little idea such things even exist.
The first way that Europe differed was in how economics institutions “interact” — deal with one another. In Europe, unions weren’t destroyed — they thrived. Deals between unions and companies are brokered formally or informally by governments. But that’s just the beginning. In Germany, for example, worker’s representatives sit on company boards. In France, collective bargaining is a right, negotiated by sectors, for example, among all waiters and restauranteurs — not individual companies and employers. In Scandinavia, companies have to account for their social costs and benefits. There’s much more — but this is just an essay. The point is that Europe developed better mechanisms for economic interaction —fuller ones, if you like, which ensured more stable, opportune, and empowered societies. Average people had genuine power to demand a fairer more of an economy’s gains — as they should, not just for moral reasons, but also socio-political ones, which we’ll come to.
But Europe’s story isn’t just about interactions — it’s also about investment. Europe also invested in great public goods. Public healthcare, education, finance, media, safety nets, and so on. Think of Britain’s NHS and BBC, or the French pension system. American economists came to call these great institutions the “welfare state”, derisively — and so they missed their economic point completely. It wasn’t just that they gave people “handouts”, as American pundits might have said — it was that they did something crucial in a modern economy: they employed vast numbers of people, at stable, rising, and decent incomes, doing meaningful work, not just at useless jobs.
So those great public institutions set a soft floor that the private sector had to compete with in terms of wages. America’s biggest employers, instead, became Walmart and McDonald’s — but one of Britain’s biggest is the NHS. The result is that European incomes stayed higher and more stable than American incomes, because people had alternatives to mega-capitalism preying on them a little more viciously every year.
Hence, social-scale public goods also meant that Europeans could enjoy the basics of life at reasonable prices, precisely because many of them were employed at better incomes, in the production of those very public goods — whereas in America, capitalism had to produce such things as healthcare, education, finance, and media. But it had no incentive to produce these things well, affordably, at high quality, or even completely. So Americans got squeezed savagely — they had to pay skyrocketing prices for the basics of life, which capitalism only offered them partially.
Hence, America became a place full of strange, weird, absurd capitalist paradoxes: fresh food costing three times as much as frozen food, whole cities without working utilities or supermarkets, basic medicines like insulin costing thousands, childbirth priced at half an average person’s yearly income. And some things just weren’t available to many at all. No “health insurance”? Sorry — you die. Bad “credit”? Sorry — no housing. Want that cutting edge cancer drug? It’ll cost you $500K — but for Europeans, it’s free. Americans lived perched right at the edge of ruin, trying desperately to afford the things that Europeans took for granted — but those things were the very ones which life depends on most — food, water, healthcare, education, finance, media, pensions.
What does all that remind you of? Shortages. Rationing. A system unable to provide for people’s fundamental needs. A cratering quality of life. The basics of life simply unavailable or unaffordable to most. It should remind you of the Soviet Union. That’s not just an analogy — it’s a repetition of history. Let me explain. America didn’t not just follow Europe’s lead. It did precisely the opposite. Remember Europe’s two great innovation? Better economic interactions, and better public goods? America did the reverse.
Let’s start with economic interactions — in America there was only one kind allowed, according to capitalist utopia: markets. Hence, America destroyed its unions, quite obviously. But more interesting is the fact that all these novel mechanisms Europe had pioneered — the German idea of workers’ representatives sitting on boards, the French idea of collective bargaining as deals between sectors of workers and employers, brokered formally or informally by governments, or even the idea that anyone but now powerless average people had any “responsibility” at all — were off the table. They were seen as outlandish science fiction, and still are. No one in the elite considered, proposed, or advocated them. Don’t you think that’s strange? Not on the right — and not on the left, either.
Both sides of American economics had devolved into something like alchemy. They were on a quest to turn lead into gold — that is, to turn capitalism into prosperity. The right advocated something like totalitarian capitalism, capitalism as the only force in society — and the left, something like slightly less totalitarian capitalism. Hence, not a single American economist of renown, left or right, said something like: “Hey everyone! We should have an NHS! A French-style sectoral bargaining for everyone! And also a BBC! They’d employ people, raise incomes, and reverse the big problem in the economy.” Don’t you think that’s strange?
Look at the chart above again. What date does it begin? 1980. The trend was there, in other words, for decades, to see. Yet no one chose to see it. No one of renown rang an alarm bell — except maybe Joe Stiglitz. Mostly, American elites thought everything was going swimmingly well. Isn’t that a little stunning?
Alchemists were looking to turn lead into gold. American elites were looking to turn capitalism — and only capitalism — into prosperity. Alchemists never looked elsewhere, questioning their question. American elites never looked at Europe, questioning their question. If they had — even once — they would have seen the trend above, wouldn’t they? American economics, in other words, became the study of capitalism, and capitalism alone. But that way, it became a kind of self-fulfilling, and self-defeating, prophecy. There were many times alchemists thought they’d turned lead into gold. But it turned out to be fools’ gold, or a patina, or a veneer. In the same way, American elites, only ever looking at America, only ever studying, researching, thinking about America, never looked at Europe — and so what could they learn? They couldn’t.
All that American elites could do was to keep trying more and more extreme forms of capitalism — because they’d already assumed that the answer to the question of prosperity was capitalist utopia. Hence, capitalism went extreme, and became dystopian. Having assumed they knew the answer to the wrong question, they set about imagining, theorising, endorsing, and proposing was capitalism, taken to new heights of gruesome absurdity, every year, in a weird and fatal escalation of folly.
Let me give you one of my favourite examples. In the 1980s, it became legal to raid pensions funds. Why? Well, the idea was that collective investment were bad. Everyone should have their own “retirement account.” Let them eat stocks. But the problem was pretty obvious. If you’re working 10 hours a day, what time do you have to manage a pension? What if you’re not interested? And doesn’t it set long-term incentives for a company to hold such balances, too — to manage more wisely, instead of running something like a chop shop? Europe would have reeled in horror, laughing at such an obviously foolish idea. And yet American economists, obsessed with the idea of capitalist utopia, quickly launched “reform” after “reform”, of just the same manner. Privatisation, deregulation, stripping away bargaining rights, rolling back basic protections, from minimum wages, to vacation time, to overtime, to unionisation, to benefits.
All these eroded whatever norms, values, shared social contract employers might have once felt they had. Now anything was fair game. Companies had nothing invested in their workers beyond their daily wages, really — so why treat them as anything more than disposable commodities? And so soon enough, Americans were working “jobs” that weren’t really “jobs” in the old sense — they carried few benefits, offered little stability, security, mobility, and therefore, held out a shrinking chance at a decent life. America had handed total control of the economy over to capitalists. But the problem was that capitalists were a tiny number of people — 10% of people owned 80% of stocks, and even less owned companies, in any real sense. The effect was that industry after industry came to be dominated by mega-monopolies — Walmart, Amazon, Google, because there was simply nothing to restrain capital’s natural tendency to accumulate wealth, power, and fortune.
America had gone Soviet. It had become a land where gigantic institutions used artificial scarcity, controlled shortages, and rigid price controls (only upwards, not downwards) as a mechanism to exploit and prey on people — the system was unable to provide for people anymore, even in basic ways. And funnier and more tragically, it was precisely America’s elites who thought all this was exactly the right thing to do — not just economically, but morally, too. If you’re poor — you’re weak, and therefore, you deserve to be punished. Capitalist utopia is for the strong! The only kind of justice that was allowed in the promised land was the ideological whip. Because underlying this strange and foolish quest American thought had become, lay the same old myths which had always haunted, and maybe even cursed America: self-reliance, cruelty, greed, domination, might makes right.
Yet America’s elites never questioned themselves once. They never looked at the world. They were too busy mesmerised by the alchemists who were telling them fantastic tales of turning lead into gold. Of capitalism becoming a promised land of prosperity. It did — for a tiny handful of people, whom, today, are richer and more powerful than kings of old. But for everyone else, America became a gruesome, bizarre dystopia. A land where children are sold bulletproof backpacks because no one can rein in the gun lobby. Where people choose between chemotherapy and bankruptcy. Where billionaires plan to flee to Mars — but a single rocket could pay for a thousand teachers, or the drinkable water, healthcare, and income that millions don’t have.
Like all utopian dreams, America’s failed catastrophically. Not because it didn’t try hard enough at turning lead into gold. But because it did. Lead doesn’t turn into gold. Capitalism, alone, doesn’t turn into prosperity. It was a fools’ quest from the beginning. But there they still are, the wise men, wearing their suits, nodding their heads, stroking their chins, wagging their fingers— have they learned anything yet?