Keeping up with the Smiths: In Defense of Capitalism

Meet the Smiths, an average American family. The calendar on their wall says the year is 1970. Neither Mr. nor Mrs. Smith went to college. Mr. Jones works as a manual laborer making household and industrial goods. None of the Smiths is obese, but they are well fed, unlike many below the poverty line. The Smiths live a modest life and are lucky to have a car, television, indoor heating, and some toys.

Now meet the Johnsons. The calendars on their smartphones say the year is 2010. Both Mr. and Mrs. Johnson went to college and work, likely in the health care, retail or manufacturing industries. Caloric intake has skyrocketed, with obesity at historical highs among not only the average family, but those below the poverty line as well. The proliferation of new medical procedures such as cancer and HIV treatments, organ transplants, CAT scans, and knee replacements make life that much better have decreased infant mortality and increased life expectancy. The Johnsons’ house is overflowing with state-of-the-art consumer goods such as a microwave, a high-definition television, and a personal computer. Stores have a huge variety of clothing, food, and other goods from around the world at cheaper prices. Gadgets that would cost thousands of dollars fit neatly in the smartphone in Mr. Smith’s pocket. Life is good.

Statistics illustrate some of the improvements in quality of life mentioned above. Women’s participation in the labor force has risen from 43.3 percent in 1970 to 62.2 percent in 2010. Average daily caloric intake has increased from 2,168 to 2,673 in the same timeframe. Life expectancy has risen from 70.8 to 77.9 years. Infant mortality rates have fallen from 20 deaths per 1000 live births in 1970 to 5.9 in 2010.

The Smiths and the Johnsons represent the average, middle-class American family, whose economic well-being is at the center of political discussions. Their lives are separated by four highly disputed decades of American history. These four decades have parted the Red Sea of American politics into the conservative and liberal camps we see today.

On one side of the boxing ring stand the liberals, spewing economic data to argue that the gap between the rich and poor has widened to unprecedented levels — leading them to adopt the buzz phrase “income equality.” This phrase has infiltrated Brown’s campus everywhere from introductory economics classes to my friends’ dorm room conversations. On the other side of the ring stand the conservatives, ready to label naysayers as Marxists and commies and arguing that the income of the middle class has grown.

This fight over the relative income of the middle class is fruitless. As the two earlier scenarios demonstrate, even if we assume that the income in real numbers of the middle class have not gone up, and even if we assume that the relative income of the middle class has stagnated (or even gone down), the middle class is still much better off in the 21st century than they were 40 years ago.

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Even as real dollar incomes plateau, those dollars can buy today what recently would have been considered luxuries. The workings of capitalism still offer the middle class a higher standard of living each year.

I am not arguing that the gap between the upper and middle class is good. I am pointing out that the absolute opposite is true as well — it is not necessarily bad that this gap has widened, as long as everyone has benefited. We might want, in an ideal world, for the benefits to be more equitable.

The goal of business is to make profit. Business is inherently selfish, yet, in pursuing profit, businesses inadvertently help all of society, including the middle and lower classes. This is not simply a coincidence; it is a natural result of businesses’ desire to sell more products.

There are three ways that the rich benefit the middle class. The entrepreneurs and investment bankers who orchestrated these changes may be filthy rich, but that does not detract from the improvements in quality of life that it has afforded the rest of society. These benefits have come in the form of new products, better products and cheaper products.

The middle class has been hurt by the financial crisis, but the political conversation should be focused on how to help the middle class, rather than on focusing blaming the rich. The best way to help the middle class is not by taxing the rich, demonizing the rich, regulating the rich, setting up economic barriers. The focus of our policies should be the broad economy, aiming to rejuvenate our economy so that the interconnected economic forces that tie together rich, middleclass, and poor can do its job. A rising tide does truly lift all boats.


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