The first day of April is the day when practical jokesters tell you things like, “I know the number you play and guess what? You won the lottery last night,” or ‘I saw your car being towed.’ These harmless prevarications are followed by “April Fools’—I got you!”
But—no joke—this past April, Ray Dalio, the founder and CEO of Bridgewater Associates and Dalio Philanthropies, announced a $100 million gift to the State of Connecticut—if the state and other philanthropic organizations match his pledge, to total $300 million. It was the largest private gift in state history. It was a gift made based on rigorous economic and political analysis and Dalio’s firm belief that without significant changes to American capitalism that address growing income and wealth inequality, the country is in deep trouble.
The trouble Dalio refers to is both existential and theoretical. Dalio’s theoretical analysis is consistent with the work of the famous 20th-century economist John Maynard Keynes, who wrote about the contribution income inequality made to the onset of the Great Depression. It is also consistent with the work of 19th-century economist and political theorist Karl Marx, who argued that capitalist economies are inexorably driven to crisis due to ever-increasing concentrations of monopolistic power and wealth.
One of the nation’s richest men, Dalio believes that if we do not address growing wealth and income inequality, support for democratic institutions is at risk. A casual reading of the daily news bears witness to the erosion of these institutions, giving rise to the question of whether or not capitalism is the best way for society to organize its resources. If the vast majority of Americans lose faith in the American dream—of their children leading better lives than their parents—there will be angst, hopelessness, and despair. When people have nothing to lose, Dalio says, desperation can turn into civil unrest on a scale never before witnessed.
We should all applaud the growing numbers of wealthy Americans who have taken the “Giving Pledge” suggested by billionaires Warren Buffet and Bill Gates. The pledge asks wealthy Americans to commit to donating at least half of their fortunes to philanthropic causes during their lifetimes. To date, over 200 people have accepted the challenge, donating more than $1 trillion.
This vast amount of private wealth is going to important initiatives such as improvements in healthcare (Facebook’s Mark Zuckerberg), public education (Gates), the promotion of democracy (investor George Soros), and gun control (businessman and politician Michael Bloomberg) Now, Dalio has joined the pledge, targeting wealth inequality.
In my humble opinion, there is a cause that deserves more attention than any of these if we are interested in helping capitalism survive in the 21st century. And that is business formation and entrepreneurship in low-income communities.
Imagine if the nation’s most troubled cities had business and innovation cash awards specifically targeted to certified minority business enterprises (MBEs). Imagine if each regional National Minority Supplier Development Council (NMSDC) could hold contests giving $1 million prizes to the most innovative and creative MBE. Imagine NMSDC corporations coming up with challenges for MBEs to solve, and giving MBEs hundreds of thousands of dollars to develop concepts and contracts.
MBEs and other diverse businesses are starving for capital to innovate. These billionaires became billionaires because of innovation. Instead of throwing money at the problems of capitalism, why don’t they support capitalism by investing in innovative, entrepreneurial MBEs? The related costs would be a rounding error in their philanthropic contributions.
Mr. Dalio, thank you. Perhaps some of your funds can be allocated to support entrepreneurship, innovation, and capitalism where it is needed most. Tell your friends!