Who Wrote the NYT Op-Ed Betting Odds?

On June 6, 2020, New York Times columnist and Nobel Prize winner Niall Ferguson penned an astonishing opinion piece predicting the “inevitable” return of capitalism. “One after another,” he wrote, “the great engines of modern prosperity sputtered into action, then stalled, then died.” But it wasn’t long before something unexpected happened: people began flocking to place bets on whether capitalism would rise or fall.

Why? Perhaps it’s because, in the grand scheme of things, very little actually happens in economic history. Sure, there are boom times and there are downturns, but those are just cycles. By and large, the world of economics, finance, and business operates in a vacuum, unchanging and impervious to the vicissitudes of time. That’s incredibly unlikely to the point of being impossible, which means anyone who believes it runs the risk of being a hopeless economic prognosticator.

In reality, it takes an incredible combination of factors to make capitalism collapse. And while some people may still see capitalism as the root of all our problems, it’s important to remember that, ultimately, government is the problem.

How Did We Get Here?

Capitalism, as we know it, was not always there. In its present form, it arguably began with the Industrial Revolution in the 19th century, which was, in turn, fueled by the invention of the factory and the use of machinery to mass-produce consumer goods. This system was enormously beneficial to humankind. It not only enabled us to make our living standards drastically higher, but it gave us the chance to explore new avenues of productivity and creativity.

However, this newfound power of capitalism was not destined to last. As the 20th century dawned, ominous signs began to appear, foreshadowing the eventual collapse of this system we know today.

First off, in the decade before the start of the Great Depression, there was a massive, unprecedented wealth gap between rich and poor. By 1930, approximately half of the U.S. population was living in poverty—a number that has not been surpassed in the country’s history. At the same time, as the middle class shrank, many people found themselves increasingly dependent on the state for economic security, creating the foundation for a more interventionist government. It was a time when the capitalist dream seemed more like a nightmare.

Then, in the early 1930s, the global economy was hit with the massive Great Depression. As the name suggests, this was a time of great turmoil and crisis. It was the worst financial crisis in history, and it fundamentally changed the course of economic thought. In the aftermath of the Depression, governments began to fear financial collapse and saw the need to regulate capitalism to ensure stability.

As it turned out, the worst wasn’t over, as the following year saw the start of another market crash, followed by another, then another. The most disastrous economic decline began in earnest in 1937, and, by the outbreak of World War II in 1939, virtually every country in the world had thrown its hat into the economic ring, with Germany, Italy, and Japan standing out as particularly egregious offenders.

These days, many people look at the horrors of the Great Depression and shudder. But the question is: why did capitalism collapse in the first place? Was it because the system wasn’t fair? Was it because of a fundamental flaw in the design? Or was it just a freak coincidence, an unfortunate cluster of events beyond anyone’s control?

Why Did Capitalism Collapse?

When the dust settled from World War II, many of the world’s biggest economies had been decimated, creating an economic lull that gave rise to the term ‘economic miracle’. The war had cost America over a trillion dollars, and it took decades for its economy to begin climbing back to the levels it had before 1939. The global economy had shifted, and it would never be the same. The ‘50s and ‘60s were boom times, with high employment, rising incomes, and a general improvement in the living standards of the majority of the world’s population.

However, it was all just a mirage. Under the surface, the economic turmoil of the post-war era had started to take its toll. It started with the loss of purchasing power. Between 1945 and 1960, the average American family’s income fell by 27 percent, and it took the country nearly 30 years to begin recovering. However, it was the loss of faith in capitalism that would prove to be its fatal flaw. In the wake of the devastation left by the two world wars, it became clear that capitalism could not be trusted. Governments, worried that their own economic survival might be at stake, began to intervene in favor of the common good.

What started as a small-scale relaxation of financial controls under the Goldwater administration in the ‘60s turned into a full-blown regulatory revolution under the Carter administration in the ‘70s. In the United States, it was known as the ‘regulatory revolution’, and it fundamentally changed the way capitalism functioned. In many cases, it resulted in massive overhauls to the financial system, such as the creation of the Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in 2010. Among other things, the law established a new Federal Financial Crimes Enforcement Unit and created the Consumer Financial Protection Bureau (CFPB).

It wasn’t just America that turned against capitalism. Around the same time, there was a generalized ‘trust fall’ in which citizens of industrialized countries began to lose faith in the financial system, causing a run on banks that lacked the resources to meet the demands. In response, governments would begin to take a more active role in keeping markets open and stable, even if the system itself was unjust. After all, if the people lose trust in the financial system, how can they have confidence in the political and economic stability of the countries they live in?

Over the past few decades, the world has repeatedly looked to China for economic growth, turning a blind eye to the country’s human rights abuses. However, the tables have now turned. Due to increased protectionism and the outbreak of the COVID-19 pandemic, China’s economy has contracted by 20 percent. Around the world, we’re now living in an age of economic uncertainty, as people seek stability in all the wrong places—starting with their local communities and then moving towards bigger, more powerful countries.

What’s In Store?

The world’s leading economies are, at least on paper, more equal than they have ever been. Overall, the gender pay gap has decreased, and the economies of the world’s richest countries are robust. The biggest challenge to this picture comes from the COVID-19 pandemic, as the world’s rich countries closed off their borders and stopped exporting goods, fearing a global economic catastrophe. In turn, the rest of the world has struggled to get the essentials—from food to medical supplies—and suffered as a result. In many developing countries, it’s simply not been possible for the working class to benefit from economic growth, due to rising inequality and a lack of collective bargaining arrangements. In 2021, it is likely that the world’s major economies will look starkly different from what they do today, with inequality and poverty levels rising and the middle class contracting. For the average American family, the impact of the pandemic was devastating, with the economy shrinking by 13.3 percent and over 300,000 jobs being lost. It was a crisis that rocked the world and revealed the flaws in capitalism. And it’s not over yet.

Since the start of this year, the world’s major economies have staged a tentative recovery, with job losses easing and economic activity returning to pre-pandemic levels. However, even in the best-case scenario, the world will face a long period of economic growth, with many people and countries struggling to rebuild their livelihoods. Amidst the ashes of the pandemic, it’s important that we don’t get trapped in a false sense of optimism, believing that this is the new normal and that the clock has now been turned back to normalcy. We cannot forget about the thousands of families who have been directly affected by the pandemic and the many others who have been made vulnerable to future health issues as a result of the economic and social instability it caused. In these times of uncertainty, it is even more critical that we build a just and sustainable world—and not only for the sake of the many people who have been devastated by the pandemic, but for future generations as well.