I watched Robert Reich's Inequality for All on Netflix. He talks about how capitalism has created extreme inequality in the US, even though other economic measures are improving. (One stat that stood out to me is that the richest 400 people have more wealth than the bottom half -150 million people!)
I tried to understand his explanation better with this simplistic example of an economy with 4 stick people - Mr. Blue, Mr. Yellow, Mr. Green and Mr. Red. They all produce the same product - the Back Box-- and earn something for what they produce. But Mr.Blue is more entrepreneurial (and luckier) than the rest.
See how that unfolds over 3 decades:
GDP increases significantly (win!), productivity increases and prices reduce (great!), the best is rewarded - capitalism worked!
But Mr. Blue (Jeff Bluezos?) is now 15 times richer than the others. The others have nearly the same standard of living as they did in the first decade (can purchase ~ 1 black box). Replace Mr.Blue by the top 10% of the world and it can explain the state of inequality.
Capitalism worked. But did society win? Would Mr.Blue have been way less entrepreneurial if he had to give back half his wealth to others as taxes? If Mr.Green and Mr.Yellow got more chances to play, would the GDP have grown even more?
* This illustration is deliberately simplistic. I definitely believe Capitalism's incentives/rewards structure is necessary to be free and to spur innovation. But crony capitalism, unequal opportunities, monopolies, lack of safety nets for basic needs and second chances are undesirable.