What Went Wrong with Capitalism

The central thesis of Sharma's book is that the ills of capitalism are linked to excessive government intervention curbing the very nature of capitalism. He asserts that in today's society, every group receives government assistance — the rich through bailouts and the poor through welfare programs, ensuring no one is allowed to fail and no crisis is fully revealed. His examination is centred mainly on the past and the trends of the U.S. economy. However, in closing, he discusses the economies of Switzerland, Vietnam and Taiwan.

He tracks the development of this pattern in the U.S., starting with the emergence of deficit spending in the 1970s. This was followed by a reliance on corporate bailouts and, eventually, the easy access to money facilitated by the Central Bank. He contends that the government's ongoing fear of potential crises has led to providing stimulus even when the economy is stable. As a result, bailouts and easy money have contributed to high inflation, growing national debt, and falling productivity, as even "zombie" companies with no real value are being kept afloat. Moreover, innovation has suffered due to the lack of creative destruction and reduced competition driven by survival of the fittest.

Sharma contends that the neoliberal revolution of the 1980s—which aimed to replace Keynesian economics, shrink government, and deregulate markets— mainly was an illusion. He asserts that "the era of small government never happened." He points out that U.S. government spending has ballooned eightfold since 1930, from less than 4% to 24% of GDP, or 36% when including state and local expenditures. Despite tax cuts, government deficits and public debt soared.

Sharma claims deregulation led to "more complex and costly rules," which the wealthy and powerful were best positioned to navigate. Rather than simplifying regulations, the volume of rules grew. Sharma also argues that, out of fear of another Great Depression, central banks began collaborating with governments to bail out large corporations, banks, and even foreign nations during financial crises. Thus, rather than a neoliberal liberation of capitalism, he sees the opposite: the entrenchment of big government.

Sharma proclaims that social "immobility is stifling the American dream." He laments that in the supposed golden age of "competitive capitalism," hard work and entrepreneurial spirit could lift someone from rags to riches—a path he now claims is closed. He highlights that most billionaires and wealthy individuals in the U.S. and elsewhere inherited their wealth, and those who did become billionaires often relied on substantial family support.

Sharma contends that capitalism, in its original form, no longer exists. What was once a system of competitive markets has evolved into one dominated by monopolies and sustained by an oversized government. "The idea that limited government is essential to individual liberty and opportunity has not held true for decades," he argues. Sharma advocates dismantling monopolies, shrinking government, and restoring true "competitive capitalism" to create widespread prosperity. He envisions a system where smaller and newer businesses can challenge—and disrupt—the entrenched concentrations of wealth and power.

Sharma believes that if capitalists were simply left to exploit labour without the burden of regulations and welfare costs, they would naturally thrive. "In the real sciences, life is explained as a cycle of transformation, ashes to ashes, yet political leaders continue listening to advisers who claim they know how to generate constant growth. Their overconfidence must be restrained before more damage is done." According to Sharma, capitalism will recover if we allow its boom-and-bust cycles to play out without interference. "Capitalism is still the best hope for human progress, but only if it has enough room to work."

However, the book omits specific empirical details that undermine the strength of its central argument. While Sharma rightly concentrates on advanced capitalist economies and offers considerable insight into state intervention in China, the treatment of other emerging economies is insufficient. As a result, the book leans heavily towards a Western perspective, with a particular focus on the United States. Moreover, Sharma's analysis is focused on the advanced capitalist economies of the Global North. He largely ignores the Global South, where most of the world's population resides. Has social mobility ever existed there? Are there countries where expansive welfare programs are working? Are companies in these countries flush with easy credit? Are there domestic monopolies stifling competition? Are bailouts common? Overall, a thought-provoking read, questioning the nature of capitalism as we see it today.