Chapter 2
Our Backward Economy

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One Ring to rule them all, One Ring to find them,
One Ring to bring them all and in the darkness bind them.

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—J.R.R. Tolkien's epigraph to The Lord of the Rings

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Conventional wisdom says the world’s problems are complex — poverty, inequality, environmental decay, political division — each demanding its own solution.  

But what if they’re not separate at all?  

What if they’re symptoms of a single underlying defect — a ring that binds them together in the darkness?

This book argues that such a defect exists — one we’ve been staring at without ever seeing.  It’s not greed, or human nature, or globalization.  It’s something simpler and more structural: the rules we use to organize capitalism itself.

We live inside what might be called a backward economy — a system built to “pay back” investors first and only afterward (if ever) reward the people who do the actual work.
It’s so familiar that we barely ever question it. Yet its consequences are everywhere.

Indeed, we’ve handed the most important moral and strategic decisions in our economy — how much wealth to share with workers, how much to reinvest in the future, how much to heal what we harm — to those with the greatest conflict of interest: owners and shareholders.

The result isn’t free enterprise gone wrong; it’s free enterprise working exactly as designed.

Take one of our most visible crises: income inequality.  

Why does it seem to get worse decade after decade, despite record worker productivity?

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Because the system rewards business owners for paying employees less.  The less they pay, the more they keep.  

That’s not malfunction — it’s design.

And while most business leaders might say they want everyone in the economy to earn more — because that would mean more customers — they don’t want their own labor costs to rise. Case in point: the U.S. Chamber of Commerce has lobbied against minimum wage increases since the 1930s and has largely succeeded.  The federal minimum wage has been stuck at $7.25 an hour since 2009, even as productivity and corporate profits have soared.  This isn’t because executives are immoral; it’s because the system rewards them for the behavior.  It’s a tragedy of the commons written into the very DNA of capitalism as it’s practiced today.

This produces an economy that runs on contradiction.  A thriving market depends on well-paid consumers — yet our system often suppresses their wages. A stable society depends on shared opportunity — yet wealth in today’s backward system tends to concentrate ever upward.  An efficient government depends on broad prosperity — yet ours must grow ever larger to clean up after the private sector’s financial crises and excesses.

That’s why we’re stuck. 

As this book will soon make clear, most of our major problems — debt, income stagnation, polarization, government expansion, and more — arises naturally from this backward system.  Worse, they reinforce one another.

 
The good news is that we can break free from this ring and address the root of what’s holding us back.  

To do this, let’s stop for a moment and get really clear on what, in fact, we really want our economy to do.  

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