Ray Dalio’s Thoughts on the Future of Capitalism

Ray Dalio, the founder of Bridgewater Associates LP, the world’s biggest hedge fund, believes capitalism has developed into a system that is promoting an ever-wider wealth gap that puts the very existence of the United States at risk. In a two-part series published on LinkedIn, as well as seen last night on 60 Minutes, the noted investor argues that capitalism is now in need of reform. I have always respected Dalio’s opinions, as he presents well thought out points derived from his research. In this recent report, he seeks to provide readers a broader look at how life is unfolding before us from an economic angle, whether we see it or not, and what the eventual outcomes could be if we stay on this trajectory. I wanted to share a couple of the thoughts derived from a lifetime of his observations that sparked his research. Be sure to take the time to digest all Dalio has to say by clicking HERE. Definitely food for thought.

“My exposure to most economic systems in most countries over many years taught me that the ability to make money, save it, and put it into capital (i.e., capitalism) is the most effective motivator of people and allocator of resources to raise people’s living standards. Over these many years, I have also seen capitalism evolve in a way that it is not working well for the majority of Americans because it’s producing self-reinforcing spirals up for the haves and spirals down for the have-nots. This is creating widening income/wealth/opportunity gaps that pose existential threats to the United States because these gaps are bringing about damaging domestic and international conflicts and weakening America’s condition.”

“I think that most capitalists don’t know how to divide the economic pie well and most socialists don’t know how to grow it well, yet we are now at a juncture in which either a) people of different ideological inclinations will work together to skillfully re-engineer the system so that the pie is both divided and grown well or b) we will have great conflict and some form of revolution that will hurt most everyone and will shrink the pie.”

“While most Americans think of the US as being a country of great economic mobility and opportunity, its economic mobility rate is now one of the worst in the developed world for the bottom. In the U.S., people in the bottom income quartile have a 40% chance of having a father in the bottom quartile (in the father’s prime earning years) and people in the top quartile have only about an 8% chance of having a father in the bottom quartile, suggesting half of the average probability of moving up and one of the worst probabilities of the countries analyzed. In a country of equal opportunity, that would not exist.”

“There has been little or no real income growth for most people for decades. As shown in the chart below on the left, prime-age workers in the bottom 60% have had no real (i.e., inflation-adjusted) income growth since 1980. That was at a time when incomes for the top 10% have doubled and those of the top 1% have tripled.[i] As shown in the other chart, the percentage of children who grow up to earn more than their parents has fallen from 90% in 1970 to 50% today. That’s for the population as a whole. For most of those in the lower 60%, the prospects are worse.”


Leave a Reply

Your email address will not be published. Required fields are marked *