Global wealth gaps and economic instability are hitting record levels, raising fresh questions about capitalism’s promise of shared prosperity and whether it has failed to deliver on this fundamental pledge.
“Capitalism creates the wealth – alternative economic systems would have led to worse outcomes for all,” said Omar Al Ubaydli, Director of Research at Bahrain-based think tank DERASAT.
“Nevertheless, government policy has failed to ensure that the fruits of capitalism are shared.”
The numbers speak for themselves. Global net wealth experienced a 4.3 per cent recovery in 2023 following a decline in 2022, yet wealth inequality remains extreme – the top 1 per cent controls 45 per cent of global wealth while the bottom 50 per cent holds just 1 per cent, according to reports by Credit Suisse and UBS.
North America and Western Europe led this growth whilst China saw slower expansion, largely driven by a rebound in financial markets, according to a recent BCG report. While wealth managers saw modest profitability improvements, they continue to face headwinds from increasing funding costs and regulatory requirements.
Managing Director at XTB MENA Achraf Drid told Arabian Business that while capitalism’s historical role was to drive economic growth, it is facing mounting challenges in the current context of the world.
“While capitalism has historically driven economic growth and reduced poverty, this economic model now faces tremendous challenges, including stark disparities in wealth distribution and environmental damage,” Drid explained.
The regulation debate and market power concentration
The debate over market regulation remains particularly contentious.
“Self-regulating markets can look great if the alternative is regulation by corrupt or incompetent government officials,” said Al Ubaydli. However, he emphasised the need for “a competent and honest bureaucracy monitoring, ready to step in when necessary.”
One of the most visible symptoms of capitalism’s current challenges is the concentration of market power. While Al Ubaydli noted he hasn’t observed true monopolies, he pointed to concerning oligopolistic trends, particularly in how large companies interact with political systems.
The numbers are striking. In technology, five companies – Apple, Microsoft, Amazon, Alphabet and Meta – dominate approximately 60 per cent of the global market. The telecommunications industry shows even greater consolidation, with AT&T, Verizon, T-Mobile, China Mobile and Vodafone controlling roughly 70 per cent of worldwide telecommunications market share.
Drid observes that monopolies and oligopolies are “most apparent in the US, where a few major companies dominate industries like media, airlines, and technology.” He added that in the MENA region, state-owned firms’ control over key sectors like telecommunications and oil can reduce competition and potentially raise consumer costs.
Michael Brown, Senior Research Strategist at Pepperstone, pointed to emerging technological monopolies.
“Nvidia, and their dominant role in the chipmaking/AI sector, is a prime example of this,” he said, while also highlighting traditional cartels like OPEC+ as examples of market concentration.
The social mobility crisis
Perhaps nowhere is capitalism’s challenge more evident than in the changing nature of work and diminishing social mobility.
Al Ubaydli acknowledged the potential impact of automation and AI but maintains that “regulated capitalism continues to be far superior to socialism or communism.”
Recent data underscores this concern. The millennial generation (born 1981-1996) has accumulated significantly less wealth than their predecessors at comparable ages, with median household net worth at $12,500 in 2016 compared to Baby Boomers’ $20,700 in 1983.
Despite higher education levels and longer expected working lives, they face unprecedented challenges including substantial student debt, delayed homeownership, and economic disruptions from both the 2008 financial crisis and the pandemic.
Innovation and regional adaptation
Despite these challenges, the experts see capitalism as continuing to drive innovation.
“I have never heard of a non-capitalist system deliver sustainably high levels of innovation,” Al Ubaydli said, particularly emphasising the need for massive investment in innovation today.
The Middle East’s economic diversification efforts serve as a real-world laboratory for capitalism’s adaptability. The UAE’s financial free zones like DIFC have created thriving market economies within a state-led framework, while Saudi Arabia’s Vision 2030 reforms are attracting record foreign investment while maintaining strategic oversight.
Brown observes that while many Middle Eastern countries may be late to diversification, these efforts “should reinforce the capitalistic principles of regional economies, with new industry providing opportunity for entrepreneurship, and innovation.”
The path forward
While none of the experts advocated abandoning capitalism, they all highlighted the need for reform and adaptation.
“It is complete folly to say that capitalism has failed,” Brown said.
The consensus among the experts suggests that capitalism’s future lies in finding the right balance between market freedom and effective regulation.
Al Ubaydli highlighted the importance of government competence, while Drid advocated for “effective regulations… to encourage businesses to consider their social and environmental impacts.”
Perhaps, their collective analysis suggests that capitalism isn’t broken so much as it is straining under the weight of modern challenges. The system’s ability to adapt to these pressures – from technological disruption to environmental concerns – while addressing growing inequality may well determine its future viability.
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