Bulletin
Investor Alert

New York Markets Close in:

Key Words Archives | Email alerts

April 15, 2019, 7:47 a.m. EDT

Hedge-fund billionaire Ray Dalio says capitalism needs urgent reform

Bridgewater Associates founder argues that a widening wealth gap harms America and could spark conflict that hurts everyone

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

or Cancel Already have a watchlist? Log In

By Ciara Linnane and Jonathan Burton, MarketWatch


Bloomberg
Ray Dalio, the billionaire founder of Bridgewater Associates LP.

Capitalism is no longer working for most Americans, according to one hedge-fund billionaire, who says the expanding wealth gap dividing the haves and have-nots is creating a volatile environment with disturbing parallels to the economic and social upheaval of the 1930s.

Ray Dalio, founder of Bridgewater Associates LP, the world’s biggest hedge fund, says 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, the noted investor argues that capitalism is now in need of reform — and offered ways to accomplish it:

‘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 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.’

Ray Dalio, Bridgewater Associates

Dalio says he was fortunate to grow up in a middle-class family, to be educated at a good public school and to be able to enter a job market that offered him equal opportunity — at the time when most people believed equal education and equal opportunity were fair and productive.

The investor says he became a capitalist at 12 when he earned his first wages by delivering newspapers, mowing lawns and caddying, and invested them in the stock market while it was hot in the 1960s.

That experience led Dalio, 69, to become a global macro investor, a career he has pursued for nearly a half-century and one that has shaped his understanding of economics and markets. Dalio believes capitalism is the most effective allocator of resources that raise living standards, arguing that communist systems fail because they do not recognize the need for people to be rewarded properly in order to motivate them to work.

Read: Here’s why hedge-fund billionaire Dalio says the next downturn is what ‘scares me most’

Also: The investor known as the ‘Warren Buffett of Boston’ rattles Davos crowd with this warning

Today, however, the system has produced little or no real income growth for most people for decades, according to the Dalio essay on LinkedIn. Prime-age workers in the bottom 60% have had no real (inflation-adjusted) income growth since 1980, and the percentage of children who grow up to earn more than their parents has fallen to 50% from 90% in 1970.

From the MarketWatch archives: Ray Dalio was mocked for his ‘blowoff rally’ call last year, but nobody’s laughing at Bridgewater’s performance in 2018

The wealth gap is at its widest point since the late 1930s, with the top 1% owning more than the bottom 90% combined, “which,” Dalio notes, “is the same sort of wealth gap that existed during the 1935-40 period (a period that brought in an era of great internal and external conflicts for most countries).”

Most people in the bottom 60% “are poor,” he writes. About 40% of all Americans would struggle to raise $400 in the event of an emergency, he says, citing a recent Federal Reserve study. The childhood poverty rate stands at 17.5% and has not shown meaningful improvement in decades. That, in turn, leads to poor academic achievement, low productivity and low incomes.

Read on: Dow Jones Industrial Average’s 6-month drought nears an end — but key hurdles remain

Also: 5 things JPMorgan CEO Jamie Dimon is worried about for America and his bank

1 2
This Story has 0 Comments
Be the first to comment
More News In
Economy & Politics

Story Conversation

Commenting FAQs »
Link to MarketWatch's Slice.