Rockefeller International chair Ruchir Sharma: capitalism is in crisis

Ruchir Sharma, chair of Rockefeller International, recently wrote on Financial Times that the crisis of capitalism is clear and present in the insidious ways overactive government is widening the key flaws of modern capitalism – slower growth, less fairly distributed.

Capitalism's premise, that limited government is a necessary condition for individual liberty and opportunity, has not been put into practice for decades, he said.

To work, capitalism needs a playing field on which the small and new have a chance to challenge old concentrations of wealth and power, he said, adding that as industries increasingly concentrate and decay, more and more U.S. towns and counties rely on one big employer. 

Before 1980, Americans were two times more likely to move between states and 25 percent more likely to switch jobs in the same industry than they are today, he noted.

"Throughout, income inequality has been widening, but since 2000 this trend is no longer explained mainly by the rise of chief executives, making multiples more than their own employees. It flows from the rise of superstar companies such as Google, where all employees are making more than all their peers at weaker companies," Sharma said.

The investor added that capitalism has arguably gone more wrong in Europe, where the state has been quicker to rescue and regulate and growth in productivity and average incomes has slowed more than in the U.S.

"Now, however, the two sides of the Atlantic may be swapping places." Under President Joe Biden, the U.S. has become an extreme outlier, with deficits and debt on track to set records and grow much faster than those of its peers, he pointed out.

"Today's policymakers are status quoists, indulging the same old impulse to rescue, regulate and spend, and hoping for better results. Instead, they are likely to get the same results: gravy days for markets and billionaires, not society as a whole," he said.