A first edition of Scottish economist and philosopher Adam Smith’s book The Wealth Of Nations is displayed at the Dutch House of Representatives library in the Hague on May 31, 2018. | Bart Maat/AFP via Getty Images
Today, Explained looks at how Americans lost faith in capitalism — and whether we can get it back.
My interest in capitalism began with an observation. I worked as an economics reporter for six years, from 2013 to 2019, for some of the biggest radio shows in the US. In that time, I never once used the word “capitalism” on air.
Then, in the summer of 2017, during a zeitgeisty taping of The Nod podcast, a panel discussion turned to the economic message embedded in Jay-Z’s new record, 4:44. Vinson Cunningham, a writer for the New Yorker, asserted that “capitalism is not the answer for Black people.”
It hit me: Economics reporters like myself weren’t talking about capitalism. Everyone else was. I reported this observation to skeptical econ-colleagues, who chalked it up to youthful nonsense — but I spent years thinking about what had happened and why.
Now, years later, some of those thoughts have crystallized in a new Today, Explained series, “Blame Capitalism.” In the four-part series, which is airing on Fridays in September, we talk to economists, thinkers, and regular Americans about what happened to change our attitudes about our economic system. Why did we lose faith? Can we get it back? And should we try?
The best way to understand capitalism is to live it. We have no choice. The second best way to understand it is to read about it. Below are five new-ish books, and one very old one, that I read while reporting the series.
You can listen to “Blame Capitalism” and Today, Explained on Apple Podcasts, Spotify, or wherever you get podcasts.
What is capitalism?
We’re all talking about capitalism these days, but we’re not all working from the same definition of what it is. It turns out, neither are economists.
“Economics, like many sciences and other forms of academic inquiry, is very specialized,” economist Wendy Carlin tells Today, Explained. “They might work on the economics of migration, or of competition policy. There’s not really a study of the whole system. And so they might feel a little uncomfortable if you ask them to define capitalism.”
A good place to get started, though, is with Adam Smith, often referred to as the father of modern economics.
The Wealth of Nations by Adam Smith (1776): It’s a long book, but a fairly breezy read if you take the 18th century prose in stride. Writing in the decade before the book’s publication in 1776, Smith describes the emerging economic system he sees around him. There is private property, there are firms, those firms want to make a profit. And because everyone is working in their own interest, neither king nor czar is required to make the economy run. An invisible hand is doing all the work. Sounds simple, and it is. But it didn’t stay simple.
Further reading: If Smith is too far removed from your day-to-day, scour the materials at Wendy Carlin’s CORE Econ project, which bills itself as economics for the world we live in now. Created by economists, there are free ebooks, quizzes, and data visualizations.
Who broke capitalism?
Milton Friedman was the world’s leading exporter and communicator of free-market and libertarian ideas. Friedman leveraged his impish accessibility and towering intellect to captivate American presidents and the American people. He was a frequent guest on Phil Donahue’s afternoon talk show, and his 10-part PBS series, Free to Choose, was so popular with viewers that the network aired it a second time. There have been very few excellent books about Friedman, until now.
Milton Friedman: The Last Conservative by Jennifer Burns (available November 2023): Historian Jennifer Burns describes her book as “a history of the 20th century through the lens of one of its foremost intellectuals, thinkers, and economists.” Friedman began life as an American underdog; his parents were Jewish immigrants from eastern Europe. But by the time he died in 2006, we were all living in a world of his making. “If you’ve had taxes withheld from a paycheck, planned or postponed a foreign holiday due to the exchange rate, considered the military as a career, wondered if the Federal Reserve really knows what it’s doing, worked at or enrolled your child in a charter school, or gotten into an argument about the pros and cons of universal basic income, you’ve had a brush with Friedman,” Burns writes.
The Man Who Broke Capitalism: How Jack Welch Gutted the Heartland and Crushed the Soul of Corporate America―and How to Undo His Legacy by David Gelles (2022): In 1970, Milton Friedman wrote an essay for the New York Times arguing that the responsibility of a corporation is to make money. He was responding to activists like Ralph Nader, who, in the spirit of the times, were pushing companies to take social positions: eliminate discrimination and minimize pollution. Somewhere along the line, Jack Welch, the famed General Electric CEO, must have read that essay, argues New York Times reporter David Gelles. Gelles propulsively traces the Boston scrapper’s rise to the top, his evisceration of General Electric as a manufacturing giant, and his influence on dozens of other top CEOs. Along the way, he makes a persuasive case that Jack Welch changed capitalism, possibly forever.
How the financial crisis destroyed our faith in both capitalism and democracy
When the Berlin Wall fell and capitalism “won” the existential war against communism, it seemed the entire world would march toward liberal democracy. Not for nothing did we start talking about “the End of History.” Capitalism and democracy were inextricably linked, we assumed. A political system that lets people vote in their own interest would be married to an economic system that ostensibly allows people to act in their own interest. Both are rooted in human agency, even human striving. But decades later, capitalism has spread, while democracy has not. In 2023, authoritarianism is on the march.
The Crisis of Democratic Capitalism by Martin Wolf (2023): The distinguished Financial Times commentator sets out to answer the question of why democracy and capitalism appeared to break around the same time, while offering a powerful warning about where we may be headed and why it matters. It’s a Wolf book, so assertions are backed up by data. It’s not a hopeless book, however; the final sections offer solutions to our latest existential problem: how to fix capitalism — and democracy — so they work for people.
Should we throw the bum (capitalism) out?
Capitalism is underpinned by a very simple idea: Growth is good. We measure our success using gross domestic product, the sum of all goods and services produced by a nation. It seems self-evident: Growth means more money, longer lives, better education, more infrastructure, and new technologies. Unfortunately, the pursuit of growth has wreaked havoc on the planet. It might be time to start rethinking our fixation with growth, argue members of the “degrowth” movement.
Less is More by Jason Hickel (2020): Jason Hickel writes in the book’s epilogue that he was inspired to investigate growth a decade ago, after his partner asked him why the US, with all its wealth, needed more GDP. In this book, which has been called the bible of the degrowth movement, Hickel begins with the emergence of capitalism and draws on not just economists, but philosophers and historians to investigate our obsession with growth. His proposed solutions, such as legislating an end to planned obsolescence, might strike some as naive and smack of central planning to others. But degrowth is part of the capital-C Conversation, and it’s important (and even enlightening) to understand the arguments being made.