Goldman Sachs Questions ‘The Efficacy Of Capitalism’
In the wake of the Wall Street-induced 2008 financial crisis, many Americans have fallen out of the middle class and into a grinding struggle to survive. Wall Street, on the other hand, is booming.
The financial markets have completely recovered their losses under “socialist” President Barack Obama, even as fewer and fewer Americans share in the prosperity and lose faith in the American Dream.
A key driver of the boom of the previous years is corporate profits, which make up roughly 12% of the country’s GDP.
Corporate profits shot upward during the “recovery,” though some question whether all those reported gains were actually a result of improvements in the businesses rather than gimmicks to juice the stock price.
Either way, if capitalism is working as theorized, corporate profits are supposed to “revert to the mean” as high profits are presumed to attract competition, and therefore, profits will go down as businesses compete with each other by lowering prices for goods and services (which decreases the profit margin).
But what if there is no mean reversion? That possibility has led analysts at Goldman Sachs to wonder about capitalism itself.
Bloomberg News reports today that, in a new note, Goldman Sachs analysts say if corporate profits do not decline despite the economic environment the capitalist system may be broken, writing:
We are always wary of guiding for mean reversion. But, if we are wrong and high margins manage to endure for the next few years (particularly when global demand growth is below trend), there are broader questions to be asked about the efficacy of capitalism.
Many will find it hard to believe that the people working at Goldman Sachs, a habitually criminal enterprise, are (or were at one point) under the impression that capitalism has any purpose outside of enriching the very few, which it seems to be doing rather effectively. I imagine Goldman Sachs’ wealth management division has no objection to this dynamic.
Of course, it should be remembered that this Goldman analysis is not decrying the rich getting richer but raising an issue of a technical failure of effectiveness in the mechanics of our capitalist system.
Nonetheless, it would be interesting to see Goldman Sachs offer a more detailed description of what the banksters believe the intended results of capitalism are and how they square those views with capitalism’s real outcomes.