Opinion: Sorry Bernie, capitalism is America's secret sauce
I have no doubt that U.S. Sen. Bernie Sanders, if elected, will honor the rule of law. Moreover, he has lived, by all accounts, an honest and purposeful life. But there’s a better way. Thankfully, and just in time, Democrats seem to agree. Former Vice PresidentJoe Biden’s vision of an America we can make better over time, and his personal decency, won Super Tuesday.
Ideally, the Democratic Party should present a choice to the American people this fall who understands and appreciates the country’s secret sauce — the dynamism of people risking capital and betting on ideas (which often fail) that allow so many hungry, driven and entrepreneurial individuals to seek a better life for themselves while simultaneously creating societal value.
Sanders wants to stay a multi-millionaire, and who can blame him? It’s nice having three homes and savings to ensure that you, and your children and grandchildren will have a margin of safety against possible future economic anxieties.
“I wrote a best-selling book. If you write a best-selling book, you can be a millionaire, too,” Sanders said in 2019. Sanders evidently agrees with Mike Bloomberg on this point — if you create something that others want to buy, the spoils rightfully go to the creator. Bloomberg simply sold more of what he created.
In reality, Sanders and all of us with comparable wealth have more than we need to comfortably live our lives. Meanwhile, nearly 60% of Americans have savings that total less than $1,000. We can all give more than we do; that’s the sad truth.
Sanders has benefited from capitalism in myriad ways beyond writing a best-seller, likely involving life-saving drugs financed by some company risking capital in pre-clinical research and running costly trials.
In fact, Sanders’ analysis of the pharmaceutical industry, which can rightly be criticized with its less-than-transparent pricing practices, well illustrates the lack of nuance and binary thinking that characterizes so many of his positions.
Sanders blasts pharmaceutical profits absent any recognition of what the industry delivers in return, like longer lives and less suffering while those lives are lived.
Industry profits are among the highest, but have held steady for years at an average of roughly 17% of sales (below Coca-Cola’s 20% plus margins), according to an in-depth industry report by the Government Accountability Office.
As the lack of new antibiotic drugs developed over the past ten years makes clear, when profitability evaporates in the pharmaceutical sector, people die.
Curiously, Sanders never has a good thing to say about the economic system that has so clearly advanced human welfare. While others fail to appreciate the role of government, Sanders is equally dismissive of the mind-boggling creativity unleashed by capitalism.
While tax rates, inheritance taxes and other policies have contributed mightily to today’s wealth inequality, a good portion of it is simply the result of asset appreciation. The world’s investors have been willing to bid up publicly traded shares to record levels.
In Berkshire Hathaway’s most recent annual letter, Warren Buffett warned that the stock market could drop 50%, and with it half of his net worth, anchored as it is in Berkshire’s stock.
Corporate America is getting away with murder regarding its tax burden. Corporate taxes, which were 5% of GDP in the 1950s, have been on a steady decline for decades and are now at an all-time low of just 1%.
In the debate about the proper role of government, Sanders makes a fair point. We should all be mindful that out of the roughly 200 countries in the world, the richest ones, represented by the Organization for Economic Co-operation and Development nations, have an average public sector of roughly 46% of GDP. America’s combined federal, state and local government makes up about 38% of our GDP. Thus, there is likely room to increase the public sector’s role in distributing America’s wealth.
Fair enough, we should properly tax the economy’s winners and make more public investments to ensure a fairer America. But let’s clearly acknowledge we’re all heirs to the game-changing and life-enhancing ways of capitalism.
Jim Roumell is president of Roumell Asset Management and chairman of the Investment Committee of the Wayne State University Endowment. In the mid-1970s, he proudly delivered The Detroit News.