I know this is a broad question some would recommend me reading Marx or other critics of capitalism to find the answer. But my question is, in almost all western world, there are left wing entities in government which try to 'amend' the system but despite all those measures by 'left wing' entities (consider these left entities as spectrum from center left to extreme left), one thing in which systems in western nations have failed miserably i.e. stop the accumulation of wealth. Yes, the quality of life of ordinary man has gone better as compared to one century before, but from Korea to US, Germany to Australia, gap between rich and poor is getting wider and wider. I want to ask, is this polarization of wealth a natural corollary of capitalism? If yes then what is that thing which despite 'measures' by center-left/socialist/left parties - this problem- instead of receding, is getting worse and worse?
Very roughly, a Marxist viewpoint would hold that inequality is intrinsic to capitalism since capitalism is a system in which the means of production are privately owned and are used to make profits for their owners. Profits derive from selling the products of labour, employed to operate the means of production, at a higher price than is paid to that labour : this is the extraction of surplus value. A far more refined and nuanced statement is possible and I leave this to others. What I want to suggest here, basing myself on the work of Geoffrey Hughes, is that there are sources of inequality in capitalism, turning on 'complexity', which apply independently of a Marxist analysis.
Capitalism, complexity, and inequality
Capitalism is a social formation in which markets and commodity production are pervasive, including capital markets and labor markets. ... Its driving logic involves the expansion and diversification of multiple markets. As it expands, corporations seek ever-new opportunities for trade and gain. As competition intensifies within particular markets, profit-seeking corporations innovate and diversify their products in unceasing creation of new market niches (Chamberlin 1933; Rueschemeyer 1986). The competitive pursuit of profit pressures firms to invest in new technology or new skills. In this quest for innovation, the frontiers of science and technology are advanced, leading to new fields of knowledge and enquiry. Services are generally more diverse than manufactured goods; hence, diversity also increases with the increasing relative size of the service sector. New and varied organizational forms are devised to increase productivity and to manage an exponentially expanding number of products and processes.
Accordingly, there is a long-run tendency in capitalist economic systems toward greater complexity, driven by powerful economic forces and leading to the widening of markets and greater product diversification (Warsh 1985). There are several meanings of complexity and the definition of complexity is problematic (Pryor 1996; Rosser 199-9), but we can make an outline attempt. Complexity is not the same as variety (Saviotti 1996). Variety refers to a diversity of types. Complexity exists only when such variety exists within a structured system. In short, complexity in the sense used here is systemically interconnected and interactive variety. By this definition, increasing economic complexity means a growing diversity of interactions between human beings and between people and their technology...
The increasing diversity of products and tasks, along with the growing sophistication of knowledge, is likely to be paralleled with an increasing variety of skills and occupations. As complexity grows within the economic system, it is likely that there will be demands for higher and higher levels of skill in particular specialisms. New specialisms emerge to deal with the multiplying facets of the increasingly complex capitalist system. Workers with advanced and transferable skills, and with enhanced capacities to rapidly learn and adapt, are more and more at a premium. We have a scenario of enhanced skills and growing knowledge intensity. Some skills and professions will become obsolete. At the same time, for each individual worker, it becomes more difficult and costly to transfer readily from one specialism to another. A skills escalator can emerge, where frequent retraining is required to relocate in the more skilled and more highly remunerative jobs. Retraining is easier and less risky for those that already have acquired high skill levels. Without remedial policies and subsidies, some may never get onto the skills escalator. A further widening of inequality can result. (Geoffrey M. Hodgson, 'Capitalism, Complexity, and Inequality', Journal of Economic Issues, Vol. 37, No. 2 (Jun., 2003), pp. 471-478 : 471-2, 474-5.)
Introducing increasing complexity into the picture fits both with Marxist analysis and with an explanation independent of Marxism.
Chamberlin, Edward H. The Theory of Monopolistic Competition. Cambridge, Mass.: Harvard University Press, 1933.
Hodgson, Geoffrey M. 'Capitalism, Complexity, and Inequality', Journal of Economic Issues, Vol. 37, No. 2 (Jun., 2003), pp. 471-478.
Pryor, Frederic L. Economic Evolution and Structure: The Impact of Complexity on the U.S. Economic System. Cambridge and New York: Cambridge University Press, 1996.
Pryor, Frederic L., and David L. Schafer. Who's Not Working and Why. Cambridge: Cambridge UniveTsity Press, 1999.
Rosser, J. Barkley, Jr. "On the Complexities of Complex Economic Dynamics." Journal of Economic Perspectives, 13, no. 4 (fall 1999): 169-192.
Rueschemeyer, Dietrich. Power and the Division of Labor. Stanford, Calif.: Stanford University Press, 1986.
Saviotti, Pier Paolo. Technological Evolution, Variety, and the Economy. Aldershot, U.K.: Edward Elgar, 1996.
If you don't want to read my long-winded response, here's a summary:
Instead of searching for a problem that's intrinsic in capitalism, look for something that is NOT intrinsic in capitalism, namely 1) a moral foundation, and 2) a system of checks and balances.
The key word here is power. The acquisition and use of power is what politics is all about, and money is one of the most potent forms of power.
In this spirit, consider the maxim "Power corrupts, and absolute power corrupts absolutely."
Though it might not be considered a scientific principle, there's a lot of truth in those words.
To further put it in perspective, consider historical patterns. People have been waging war and political intrigue for thousands of years in order to create city states, kingdoms and empires. Forever, those empires have been generally getting bigger, from the Greek empire to the Roman empire, which was exceeded by the European colonial empires, now replaced by the United States' de facto empire.
Of course, control of the global economy is an important keystone of the U.S. empire.
Capitalism can be thought of as a tool that helps the rich become richer, and they generally become richer by exploiting everyone else.
Narrowing the focus to "what is intrinsic in capitalism" is a little more difficult. There are apparently just two major economic systems today - capitalism and socialism.
It could be argued that socialism is by design a moral system. That is, its creators intended for it to impart some fairness to economic systems. But whether or not it actually works depends on the state. It could be judged successful in Cuba and Libya, but it was a different story in the Soviet Union.
In contract, there's nothing inherently moral about capitalism. That doesn't necessarily make it "evil." One could argue that it's simply a tool, similar to a hammer - a neutral system that's no better than the state or regime it serves.
So rather than searching for something intrinsic in capitalism, we might instead search for something that is NOT intrinsic in capitalism. That something could actually be described as two things: a lack of a moral foundation, and a lack of checks and balances.
People with more wealth than others are obviously going to have more power, and a lack of checks and balances (e.g. regulation) will obviously make it easier of them to get still richer.
You refer to the inability of "left wing" entities to fix the problem. Historically, those in power have been very good at maintaining their power. It is simply very hard for dissidents to reform the system.
But it's also important to note that many apparent left wing entities aren't really left wing. Rather, they're examples of "controlled opposition." In plain English, they're actors, pretending to be left wing.
I live in Seattle, one of America's most famously liberal/progressive cities. I've been politically active for two decades, and I don't think I've ever met a genuine socialist or reformer in this city. In fact, the lack of true left wingers is so extreme, it almost defies belief.
Also, your assertion that the lives of ordinary citizens have improved is debatable. Technology has given us the printing press, electricity and hot running water and other cool things, but that technology was hardly dependent on capitalism. There's also a flip side to technology (e.g. global warming).
In fact, there are millions, if not billions, of people who are living in grinding poverty (not to mention human rights abuses) in countries exploited by the U.S. and its allies. Moreover, the quality of life will only continue to decline as the rich get richer, the global population grows, resources dwindle, etc., etc.
Let's also remember that wealth was concentrated among minorities long before the birth of capitalism. Again, this tends to discredit the notion that there's something "intrinsic" in capitalism that makes the richer richer.
Rather, capitalism does nothing to discourage the greed and accumulation of power that appear to be an integral part of humanity.
I pose two postulates:
- The more wealth you have, the easier it is to accumulate wealth
- The total potential to accumulate wealth exceeds the rate at which the available wealth grows
The first point means that, on average, the gap in wealth between people will tend to grow over time.
The second point implies a competition which, I think, tends to shape the distribution of wealth so that there are fewer high-wealth people.
The purpose of Capitalism is to create wealth for the ones in power to do so. Everything else from an objective p.o.v is secondary towards irrelevant compared to that purpose, human life included. Everything else from a general p.o.v. is propaganda (**1 will detail below*).
The tendency of such a system can be interpreted mathematically and it manifested like it was planned, meaning in plain English that more and more wealth will be in the hands of less and less people. It was, is and always will be inevitable. (Rule of Acquisition 010: Greed is eternal, Rule of Acquisition 182: The cost for profit is never too high.)
Currently (actually since about 3 years ago), we got to the point that in the U.S. the top 1% own more wealth than the bottom 95%, and between them stands a buffer of about 4%.
In time, the 1% will become 1:1000, the 95% will become 99% and the rest of under 1% will be the buffer. (**1:detail* - none whatsoever will ever be able to reach top 1% unless selected, trained, formatted and approved by the ones currently in that top 1%).
The only issue relevant here is what actually happens when the wealth distribution becomes so unbalanced that will lead to a collapse of the system.
Mathematically, the numbers 0.1%, 99% and under 1% are the critical point, which is relatively close, but math is not the only factor.
The top wealthy ones also take complete measures on all aspects to make sure that they stay in power, they grow wealthier, they have the means to protect themselves and their wealth and to oppress everyone that tries anything against them.
So the math-based collapse will not work because the wealthy top controls everything: the actual wealth, the oppressive armed forces (which become more and more armed), the means of trade, the rules (they call laws, which are no longer based on morality), the resources, the top technology, the top knowledge and every other practical aspect of a society. In order for the system to re-balance itself, the % difference will have to be larger than the mathematically-anticipated one.
Therefore, the capitalism is quite a bigger failure compared to socialism and will lead inevitably to a more destructive collapse.
To convince yourselves how capitalism actually works, please study the complete Ferengi rules of acqusition and replace the word Latinum with Gold or $ or what currency you prefer and Ferengi with 'a top 1% wealthy person' or anything similar you may find convenient. The rules, as the movies series they appear in, have been created at the supervision of those time's top wealthiest people, which even used extrapolations of technologies which actually were later developed.
So to conclude: the discrepancy will become higher and higher until the system will self-balance by total collapse.
Probably the system that will replace it will be meritocracy, which is another topic.
I have another psychological approach which is that capitalism encourages non-empathetic behaviour.
When morality and ethics are a problem to most people those individuals with no remorse nor ethics who are good at emulating to have them are rewarded because in capitalism morality is expensive.
Take for instance drugs companies who won't research cure to diseases because they are making large profits out them. Or any other human experience or sensation you can think of such as the business of sex, entertainment, justice, education, health, prisons, military contractors, mainstream media, politicians, war, pitty and sadness etc. All those don't always have morality nor common interest in mind and if some changes are made in society they could go out of business.
The amount of sociopaths, psychopaths and greedy narcissists is small compared to ordinary people. Selling your ethics for wealth is not new:
Matthew 4:8 ...the devil took him to a very high mountain and showed him all the kingdoms of the world and their glory. “All this I will give You,” he said, “if You will fall down and worship me.”…
Simple: freedom. It is the same as asking why the best soccer players in the world are so few and there is a huge difference between them and the rest of the soccer players? Well, because in a system that has freedom the best players emerge.
This question makes unclear, unstated and false assumptions about moral philosophy, political economy and the conduct of politicians. So to reply to this question it is necessary to address those assumptions.
So let's start with the assumptions about moral philosophy:
Yes, the quality of life of ordinary man has gone better as compared to one century before, but from Korea to US, Germany to Australia, gap between rich and poor is getting wider and wider.
This statement assumes that you should care about what other people have and feel a burning envy and resentment if they have more. It isn't enough to say that some people do feel such resentment, because if that's all there was to it you could advise the envious person to change his ideas so he will stop envying people. Basing your life around what other people do is a mistake because it makes you dependent on them. But other people don't control you and most of them don't know much about you. So their ability to help you is extremely limited. Should they give you more money if you have less money? Not necessarily, maybe you have less money because you suck at dealing with money.
There is another much uglier side to this envy. The idea that rich people owe poor people assumes that rich people owe stuff to poor people by virtue of having more money. In other words, a rich person are just an end to be used by a poor person. If he doesn't do what the poor person wants, he is bad and should be expropriated or punished in some other way.
There is a common idea that rich people get rich unfairly. There are two ways to get lots of money in our current political system. One is to sell stuff that makes a profit. When this happens, the material used to make the goods cost less than the goods themselves. The goods used to makes the sales goods (capital goods) could be demanded for other uses, but the person who actually uses them outbids the person who doesn't. He is willing to pay more because he judges them more suitable than the alternatives and he makes enough money to bid for them. So the other potential users have less demand for those capital goods. If there was a better use for those goods from the point of view of consumers it would be possible for somebody to work that out and outbid the current highest bidder. So problems with how things are made can be corrected by the system of profit and loss. All of the transactions involved are voluntary - a person who doesn't want to undertake them won't be forced to undertake them.
The other way people can make money is getting favours from government officials, including politicians. Government officials get their income by having the ability to use force against people who haven't initiated the use of force against them. For example, if I judge that my tax money is being wasted for purpose X and I write to the government and say "I don't agree with X and won't pay for it", then the government will not take no for an answer. I will be forced to pay or I will be imprisoned and if I resist then I may be injured or killed.
Selling stuff to make a profit is a rational way to get resources since it facilitates the correction of errors. In politics, correcting errors is a lot harder. In Western countries, where correcting political errors is easiest, at best you get the ability to cast a single vote every few years and if the government you voted for loses you a load of policies you disagree with are foisted on you. And since politicians have such poor feedback about what they're doing, they make many mistakes.
To understand these issues better you could read "The Virtue of Selfishness" or "Atlas Shrugged" by Ayn Rand, Capitalism by George Reisman or Interventionism: An Economic Analysis by Ludwig von Mises.