On Thursday, dueling visions of capitalism and finance clashed in a Senate Banking Committee hearing focused on the racial wealth gap.
The event, titled “Wall Street vs. Workers: How the Financial System Hurts Workers and Widens the Racial Wealth Gap,” offered a clear message from the Democratic senators who framed it: capitalism is failing marginalized Americans and our financial system furthers systemic oppression.
This was clear from the testimony of New School economist Darrick Hamilton, called to testify by Democrats on the Committee, who argued exactly this point.
Hamilton called for massive government interventions into the economy, such as guaranteed federal government jobs for all who want them, taxpayer-financed student debt cancelation, sweeping cash payments for low-income and minority citizens, and more. He claimed that unless the government takes this drastic expansion, “millions of Americans will suffer in an unjust and inhumane economy.”
In stark contrast, Senator Pat Toomey, the Committee’s ranking Republican member, stood up for free-market capitalism and the vast rise in economic growth, the standard of living, and expansion of opportunity it has brought to Americans of all backgrounds.
“Capitalism clears a path for the industrious to become wealthy, for the poor to become middle class and for the middle class to build a prosperous, secure life for themselves and their children,” Toomey said.
“There's no question that the standard of living of middle-class and working-class Americans has improved over recent decades,” the senator added. He cited a Cato Institute study which showed that an unskilled worker has to work 72 percent less in 2019 to buy the same basket of everyday goods than they would have had to in 1979.
“Life expectancy has increased and the quality of health is better,” Toomey pointed out. “The average American lives in a larger, more comfortable home. Cars are safer and more comfortable. And unlimited information, entertainment, services, and resources are all in the palm of our hand.”
The senator pointed out that only due to the financial sector can working-class Americans readily access the capital to buy cars, become home-owners, and make other life-changing investments. He also argued that prior to COVID-19, a policy combination of deregulation and tax cuts led to a booming economy for all Americans, especially African Americans and Hispanic Americans.
“We can do more to ensure that everyone has the education and opportunity to thrive and obtain economic mobility,” Toomey concluded. “That’s what we should be focused on—not policies that undermine capitalism and are likely to leave us all poorer and probably no more equal.”
The Republican senator’s case was buttressed by the testimony of Brown University economist Glenn Loury. He argued that the “racial wealth gap” cited by critics of capitalism is based on many different factors; and not in itself proof of a problem with free-market economics and modern finance.
Loury dubbed the notion that “any group disparity must reflect some intrinsic unfairness that is built into the system” a “treacherous presumption” that “haunts society.” He said that the real goal should be reducing the wealth gap regardless of race through “empowering Americans of all races to avail themselves of the great opportunities in this country.”
One way of doing this, he suggested, is expanding school choice to provide more opportunity to low-income and minority students who are being failed by public schools.
Loury stressed the need to “look forward” and promote growth for all, rather than squabble about redistributing existing wealth.
“We can shift wealth around at a point in time,” Loury said. “[But] the creation of wealth deserves to be a part of this conversation.”
It’s worth concluding with one of Loury’s most powerful messages: “Unless we address the capacity of all of our people to create wealth, to develop their productive capacities and to acquire skills, we will not be addressing the root causes of the inequalities we can see all around us.”