Capitalism Has Stopped Working

"Fear stricken teams give you their hands, some of their heads and none of their hearts" Timothy R. Clark

Thirty years ago I started working in a supermarket. After my induction I was given a list of my new working hours. They were odd. I immediately noticed two things. Firstly all of my shifts were no more than 3 3/4 hours. Secondly my total hours amounted to 11 3/4 hours. I thought both were strange numbers, so I went to see the boss. I had previously made clear that I was an impoverished student, desperate to work as many hours as possible, so why the odd hours? "Don't worry" he said, "you'll be working full time."

When you have more time on your hands, you have time to stop, think and read more than in normal times. I read a brilliant Linkedin article by Ray Dalio last week that underlined something that I have felt for a while (link at the end of this article). The capitalist system has stopped working well for the vast majority of people. Capitalism is still the prevailing preferred global system (personally I think because of the lack of confidence in socialism to improve peoples lives) but I think it is increasingly on shaky ground.

I was lucky enough to grow up in a family that had enough money. Although I lost them when I was young, I was raised by parents who cared for me. I also received a decent education and was lucky enough to work for big brands that helped me get on in my career. As a young person I believed that if I worked hard and continued to educate myself that I would do OK. I have been very fortunate and done well. Dalio's research frighteningly showed me that I am the exception, and likely to become an even rarer exception.

The killer point in Dalio's research is that there has been little or no real income growth for most people for decades.?60% of workers have had no real income growth since 1980.?During that period incomes for the top 10% have doubled and those of the top 1% have tripled. In addition to this, the income gap is about as high as ever and the wealth gap is the highest since the late 1930's.?Today, the wealth of the top 1% of the population is more than that of the bottom 90% of the population combined. Those in the top 40% now have, on average, more than 10 times as much wealth as those in the bottom 60%.

The most successful people have increasingly done better, but the average person is not seeing their life improve. That's a significant worry because the problem is cumulative. If young people today stop believing they will do better than their parents did, that's a huge issue and one that will very likely lead to dissatisfaction and political change.

The bottom 60% of people are poor. Even in developed markets like the United States where Dalio based his research. For example, only about a third of the bottom 60% save any of their income in cash or financial assets.?According to a recent Federal Reserve study, 40% of all Americans would struggle to raise $400 in the event of an emergency. That's a worrying number is any economy but I would never have guessed it would be as bad as this in the U.S.

And the poor are increasingly stuck being poor.?The odds of people in the poorest income group moving up to the middle or wealthiest group declined from about 23% in 1990 to only 14% as of 2011.

It may be a stretch, but I think it is likely that this situation has already led to the rise of political populists, however I see little sign of wealth gaps starting to shrink under their watch. So, I think further political change will be sought.

Over time, capitalism must improve the lives of the many. If that doesn't happen it will eventually run out of steam and be replaced. People must have hope.

As I continue my gardening leave and consider what I want to do next, I have a goal. I want to find an organisation that has realised the scale of this challenge. An organisation that has realised:

• It must work (and be seen to work) for the majority of the people, not just the minority.
• That reducing benefits for the majority every year is a bad thing. Potentially a terrible thing if the benefits of senior people are improving over the same period.
• It must have a culture where it is safe to challenge. Increasing the likelihood leadership will understand whether they have a problem.

Thirty years ago I eventually figured out why I had been given the hours I had. 3 3/4 hour shifts meant that I wasn't entitled to a paid break. You had to work 4 hours to get this. Giving me 11 3/4 fixed hours but then asking me to work full time meant that when I took holidays I would only be paid for 11 3/4 hours. I don't want to look back with rose tinted glasses though. All those years ago, one of the biggest employers in the country was already letting new people find out by accident how the system worked. That said, my sense is that if I was starting a similar job today my starting position would likely be significantly worse.

Maybe I am the exception. Maybe those kind enough to comment on this article will inundate me with corrections to my assumptions. I'm hoping so. It would be great to hear from people at organisations that are bucking these trends.

Capitalism is built on a foundation of hope and aspiration. That foundation feels increasingly shaky to me.

Ray Dalio Article:(1) Why and How Capitalism Needs to Be Reformed (Parts 1 & 2) | LinkedIn