Transcription
Joe, I've got some really good news. It's finally happening. Global capitalism is fracturing. That isn't coming from me. It isn't some old quote from Al's Little Red Book. It's coming from Larry Frink, billionaire CEO of one of the world's largest investment companies. Black Rock.
Black Rock. Black Rock. They're pretty much running everything. Is Black Rock evil? This is one of those companies that is a juggernaut. A company that manages trillions of dollars of assets has clients in over a hundred countries and together with its clones Vanguard and State Street owns roughly 20% of any given company in the S&P 500. If anybody should be worried about capitalism being over, it's not you and me, it's this guy. And he's worried.
But before we celebrate, is he even right? Well, for one, he's not alone. A lot of big important capitalists have already been sounding the alarm for a while. In 2023, the CEO of the French investment bank associate general was saying basically the same thing. And every year since, we've lurched from one disaster to another as this whole thing seems to barely stay afloat. Massive inflation, a year of never-ending layoffs, and now a global trade war and bombing in the Middle East that have put World War II back on the table right as we're being told AI is going to replace everybody.
In Larry's 2026 letter to shareholders, he's predicting the end of the same signals. Things are bad. Workers are worse off today than they were 40 years ago. AI is going to get us. It's all crumbling and we're not even building infrastructure like we used to. And if that wasn't enough, we might soon have a new financial crash on our hands.
And I'm worried about something worse than a recession. We are headed for a US dollar crisis. When this thing crashes, okay, it's going to it's going to crash. When this thing crashes, it's going to be like mashing up the dot thing with a financial crisis because this is so much larger.
Wall Street execs have recently warned that the private credit markets not looking so good. A few bankruptcies and plummeting stock values are starting to snowball and could become the seeds for a new depression. It really seems like capitalism's tearing at the seams because this just can't keep going on. Or maybe it can.
Hey everybody, just wanted to take a quick second to plug some merch. As always, I want to make sure I respect your time. So, if you're not interested, here's a time stamp. Now, for those of you that stuck around, thank you so much for your support. You're probably already familiar with the DRO. That's the podcast I do with Hakee and Yukopnik, but you may not know we also make the best merch in the business. Our latest drop just went live, and I genuinely think it's got some of our best designs yet. Our philosophy when we're designing this stuff is aesthetics first. We don't put out designs we wouldn't actually wear ourselves. We all hate the generic podcast merch. So, we've worked really hard to make stuff that's actually cool. I was hoping to get some of the new designs delivered before I had to record this so I could show you in person. But, as usual, I waited too long to order. So, please enjoy instead this amazing shirt I found on the clearance rack. Anyway, you can check out the full lineup at dprogramshop.com. And as an added thank you, all Second Thought patrons can get 10% off using the coupon code available at patreon.com/secthought. Again, that's dprogramshop.com. Thank you for continuing to support the channel. We truly could not do this without you. And now, back to the show.
If history is any guide, there's just centuries like this where nothing changes, it all keeps getting worse, and we all suffer. So to know if any of this will kill the beast, we need to think about capitalism much much more deeply than simply pointing to things going wrong. We can't just do finus sloppilism. Let's start with the basics. What are we even talking about when we say the end of capitalism? Capitalism is a system that guarantees the existence of the rich in a world where the poor outnumber them but need to work for them in order to live. That was about the shortest one-s sentence definition I could come up with. It's It's pretty vague, but it gets to the point. This is what capitalism is about, and that's how it works. For it to end, these things have to no longer be true. Looking around, there's very little risk of that right now.
So, let's get a better, longer definition that gets progressively more complicated and accurate as we go, so we can refine our analysis a little. Capitalism is a political, social, financial, and economic order that began sometime in the 16th, maybe 17th century. What makes capitalism capitalism is the way that this order is organized around a specific set of rules and conventions. The most important of which are the right to private property and the imperative use of that right to make a profit. For example, by hiring those who don't have private property to produce commodities and paying them less than the revenue that their work generates, or by trading debt as money with the confidence that states and central banks will protect the value of those assets in times of liquidity crisis, periodically rolling over the moment that the market ceases to exist so that capitalists can continue to transact. In other words, capitalism is a collection of strategies for the elite to stay the elite indefinitely. a status that is based on unequal access to and power over the resources necessary for human life and commerce.
So this is a pretty theoretical definition. No society is ever completely 100% sticking to these rules at every single level of human interaction. Whether it's the US, China, Brazil, Russia, South Africa, every one of these countries has a blend of capitalist and socialist, even feudal conventions overlapping with one another. But in this era of global capitalism, at the end of the day, the biggest decisions boil down to what generates profit for an elite class of businessmen. And for the last century at least, we've been predicting the end of that. To give you an idea, the term latestage capitalism has been around for over a hundred years. A 100red years later, we're still waiting for that to mean we're getting close. Because every time it runs into a crisis, capitalism hasn't died. It's mostly just been tweaked.
Take the biggest tweak we've ever seen. After capitalism went through its greatest liquidity crisis in 1929, the stock market crashed, and the world went into a 10-year depression. High unemployment, poverty, a nearly 50% cut in production, and price deflation, meaning wages taking a huge hit. Thousands of banks went out of business. Millions of people were suddenly living through much scarier times. And all immediately following the peak of robber baron fortunes. If there was ever a moment where you could say that capitalism should have ended, it was then. But it didn't. It was tweaked. Keynesian economics took over as the new governing model of capitalism. The primary imperative, keeping the elite as the elite, didn't go away. But now their status was conditional on new things like full employment. This is where the New Deal, the welfare state, the fortis production model, all came into being and brought capitalism back from the brink all the way up until the 1970s. Capitalism was saved by disciplining the elite, not challenging their status.
But that very thing ultimately became the source of a new crisis. 40 years of wage growth became just too much for capitalists who were making profits, just not faster than workers were getting better off. From the late7s on, then capitalists revolted. Capitalism was going to need to get much leaner for workers. And this new era was kicked off with the Vulkar shock. A 20% hike in interest rates by the Fed that skyrocketed unemployment and simultaneously set up the US to elect Reagan, the UK to elect Thatcher, and Germany to elect Helmet Cole. Even countries where socialists were in power, like France, suddenly found themselves forced to change their economic policy drastically. Vulkar reminded the world that as long as it's capitalism, the imperative of keeping the rich wealthy doesn't go away. And this time it would survive on the condition of cheap consumer goods. Neoliberalism was the new name of the game. The welfare state was shuttered. The average job started to pay less. Unions got crushed. Everyone started needing crazy debt to get by. And to offset everything else getting worse, the new social contract was held together by cheap TVs and shirts for a dollar.
But this predictably led to another crisis. You can't have wages decline so much that people's basic necessities depend on taking on huge amounts of debt forever.
The housing market collapse created one financial crisis after another. The signs were everywhere, but now it's official we are in a recession. Major financial institutions have teetered on the edge of collapse, and some have failed. 2008 was another one of those moments where it really felt like this whole thing was cooked. Neoliberalism had pushed global finance to chase extreme levels of debt at the same time as wages took a nose dive. Once banks realized this system didn't have the liquidity they thought it did, the crisis started bouncing from one part of the economy to another until the central banks stepped in. They brought the bank securities onto their own balance sheets, bailing out the banks and leaving the rest of us to absorb the costs. Houses got foreclosed on, jobs disappeared that never came back, and entire generations have now come into the labor market completely unable to match the wealth of their parents and their parents before them.
And now that we've been in this situation for a couple decades, what do the elite suggest as a solution? A new tweak on the global stage. The US is starting to pull out of the global exchange and production system and switching to a growth strategy that depends on inflation and price shocks. Wars are exploding all over the world with the chief objective of making oil costs skyrocket, increasing the sale of American weapons, and bringing up prices for everything else without any hope of them going down after the oil shocks pass. That's on the policy side.
Let's go back to letter for a second. In the face of all the problems he lists, Larry gives us his own solution. Just invest. He says it himself. In the last 30 years, wages aren't growing as fast as returns on the stock market. A dollar in the S&P 500 grew 15 times faster than that same dollar as a median wage. So Larry's advice is why not just hitch a ride on the one thing that's going up? Well, you can probably think of why without me having to tell you. In a country where 1 in four people live paycheck to paycheck and millions are dealing with huge student loan debt, having money to put aside in savings, let alone financial investments, is just not something that's within reach for a lot of people. Those who are most directly targeted by the violence of capitalism are the ones with the least flexibility to do things Larry's way, which I don't have to tell you either. He's only suggesting because it just so happens to be the solution that lines his pockets. The head of an investment company currently trying to get younger generations stoked about investing on TikTok obviously doesn't want that for altruistic reasons.
But beyond the practical reasons why this is BS, advice like this reads more like a confession to me. Did you know that 62% of Americans have money in the stock market? And honestly, that's not a bad thing. You should have some kind of retirement fund or or something. But anyway, stats like these make it seem like a majority of us have something to gain from economic growth. Except about 90% of all stocks are held by just the top 10% of investors. Worse even, the top 1% own about half. Meaning that when the stock market grows, when the economy is doing well, it's really only benefiting the top 10%. And it's specifically doing that at the expense of the 90% that are left. The little money we can get from our investments is a cover for the fact that that money is coming out of our wages.
Between 2018 and 2022, after Trump's tax cuts, corporate profits exploded. And instead of putting that money into raising wages or doing R&D, billions went to stock buybacks and dividends. And when Time magazine looked at some of these numbers, they found that the biggest offenders not only gave more money to their shareholders, they siphoned off more money from consumers by raising prices. Pepsi laid off hundreds and raised prices by doubledigit percentages eight quarters straight. Comcast rates went up and they fired 3,000 people. United Healthcare increased claim denials 800% and gave their investors $15 billion in buybacks. The whole just invest strategy isn't a solution. It isn't going to make capitalism work for more people. It's a cover for capitalism to continue doing what it's built to do. Exploit the poor, enrich the elite, and keep that cycle going forever.
When Frinkin says capitalism is fracturing, what he really means is that he and his buddies are giving away the game. And he would really like it if capitalist countries would realize they're getting cocky. He would much rather they get people to invest a little more and make a little bit of money so that the bigger problems of no jobs, no health care, no roads don't seem as bad even as he and his private equity friends keep making them worse with the added bonus that he would manage some of these investments. At the end of the day, you can't reform your way out of this. There is no capitalism without the enrichment of the elite at our expense by its very definition. So, either you negotiate for more crumbs on their terms, or we finally get smart and say, "No, I think we're done now." And we break the wheel that keeps this system crushing 99% of humanity.