The analyst who once predicted the ‘end of capitalism’ sees Zohran Mamdani’s election as a ‘day of reckoning coming in’—and corporates only have themselves to blame

Edwards said that inflation was generally blamed at the time on raw material prices due to the Ukraine war, as well as the labor market, and very few people were saying there was profit-driven inflation, but he took a different view: “This is unprecedented,” noting that “when unit costs go up, always, unit margins go down, always, in history.” He said that should not have happened, and the reason for this was the large stimulus provided by the government that “businesses could get away with doing this, using… [inflation as] cover.”

The result of money printing and fiscal spending has been a “bonanza for the corporate sector”, causing corporate profit margins to rise “indefinitely” after the pandemic. Edwards noted that certain sectors have benefited significantly, recalling a study by the Federal Reserve Bank of St. Louis that showed corporate profits as a share of national income have risen since inflation rose, an overall anomaly compared to the rest of the world.

Edwards argues that this period of corporate excess set the stage for extreme political instability and public anger. “Just look at the election in New York, which was about the cost of living,” he said. The election of Zahran Mamdani is “an indication that this issue is still big.” Edwards agrees that “affordability” is a major topic right now, along with the US housing market: “It’s coming up like, ‘What’s going on?’”

This latest turn in the populist shift isn’t necessarily something to celebrate, Edwards said. As an economist, he said he considered Mamdani’s policies, drawn from his democratic socialist background, such as rent control and price controls, “crazy”, because he had experienced them himself in the 1970s. However, the dysfunction of capitalism means that society will “come full circle back to this.” Growing generational conflict, driven by the exclusion of young people from the housing market and the concentration of wealth, has created a primal sense of betrayal, especially among Americans who no longer feel they are better off than their parents.

Edwards was speaking at a time when the average age of a first-time homebuyer had reached 40, a stark symbol of how the largely youthful voter base that elected Mamdani was being excluded from the market. Sean Dobson, CEO of the Amherst Group, one of America’s largest landlords, recently assessed the same post-Covid-19 economic landscape that so enraged Edwards: “We may have made housing unaffordable for an entire generation of Americans.”

“You reap what you sow”

Returning to his criticism of capitalism, Edwards said Mamdani’s election is “part of the result…corporations, through excessive greed, and hence ‘rapacious inflation’, laid the seeds of their own destruction – and backlash.” “More and more people are learning about corporate surplus,” Edwards added.

Speaking about what he called “generational conflict,” Edwards said he believes this is “the first generation in which people do not see themselves as better off than their parents were.” Everywhere you look in modern capitalism, “young people can’t get on the housing ladder, they see wealth too concentrated…and that takes the stimulus out of the economy if young people don’t feel like they’re participating.”

Edwards’ argument here has some strange arguments, since none other than Peter Thiel has warned about this motivation problem for years. Mamdani’s election appears to have sent shivers through Silicon Valley’s right-wing ranks, with Chamath Palihapitiya sharing Peter Thiel’s 2020 email to Mark Zuckerberg and Marc Andreessen, warning of a “broken generational pact” and the logic that, “if one has no stake in the capitalist system, it is possible to turn against it.” In a follow-up interview days later, Thiel told the Free Press: “If you turn young people into the working class, you shouldn’t be surprised if they end up becoming communists.”

Tim Wu, a professor at Columbia law School, recently said he is on the left wing of legal thought luck He wrote his new book, The era of extractionabout a similar feeling. “My understanding of America is that it’s a place where things are supposed to get better,” Wu said, but instead we’re living in a time where we’re seeing an “economy-wide problem” where “everything is kind of creeping up. It’s that weird feeling that something you love is getting worse.” He added that American politics at the moment is “very angry” and characterized by “economic dissatisfaction” but also a general feeling that “we have let things go too far” and that we are “just kind of losing touch with the tradition of broad-based wealth that was the American way.”

On the subject of greedy inflation, Edwards was philosophical but insisted that what happened in 2023 was a mistake. “Well, I can understand that this is capitalism, and this is the way it works, but if the government doesn’t step in,” he said of the pursuit of the profit motive, “there’s bound to be a backlash.” Edwards declined to say whether this was a specifically Democratic or Republican issue, but noted that “there is a reluctance” in American culture to dictate matters to the corporate sector. In any case, the upshot is that “there is a day of reckoning coming,” he said.

Edwards, who is also convinced that AI is in a bubble, said he views his role in this often overly optimistic market as being similar to “Caesar’s slave,” referring to a story from ancient times about a Roman emperor who ordered someone to follow him everywhere and always whisper in one ear: “You are mortal.” (This is also commonly referred to by the Latin phrase “memento mori.”) Edwards warns that while macro-level abuses may not be visible in their entirety, digging deeper reveals that “things are very bad beneath the surface.” The political backlash embodied by Mamdani’s focus on affordability is a clear signal that the economic consequences of corporate greed are now driving mainstream political change.

Edwards concluded that there was an apt phrase for the dysfunction of capitalism in the 2020s: “You reap what you sow.”