***This column originally appeared in an January 2015 issue of Investor CAFE. I still am a presidential fellow at Chapman University and may well do the same exercise with my current students this year to teach them about capitalism.***
“The rich have only gotten rich at the expense of the poor.” — Marxist criticism
“Capitalism is about turning luxuries into necessities.” — Andrew Carnegie
In my class at Chapman University, I do a little experiment with my students. I ask them to identify good quality products or services that are offered in the marketplace for:
— The rich
— The middle class
— The poor
I ask the students to come up with examples of automobiles, housing, restaurants, hotels and entertainment.
They come up with great answers:
For the rich, there’s a Lexus automobile… They may live in Newport Beach, California… Eat out at Ruth Chris’s Steakhouse… stay at a Ritz Carlton Hotel… and physically go to the Super Bowl .
For the middle class, they may drive a Toyota… live in Santa Fe Springs, California… Eat out at Olive Garden… stay at a local Hilton hotel… and go to a sports bar to watch the Super Bowl.
The poor? They drive a Chevy… rent an apartment or small house… Eat out at McDonald’s… stay at Motel 6… and gather a bunch of friends around the apartment or house for a beer party to watch the Super Bowl on their wide HD television.
Who’s having more fun?
When people ask me about the alleged growing inequality of capitalism, I hold up a smartphone and ask if the wealthy are so different from the poor. Practically everyone these days has a smartphone, whether you are from Beverly Hills or Yonkers, New York. It is the great equalizer.
Andrew Carnegie was right: “Capitalism is about turning luxuries into necessities,” and the poor benefit even more than the rich.