Ray Dalio says that everybody is missing the key metric for saving America's economy from inequality a?? productivity

Ray Dalio says that everybody is missing the key metric for saving America's economy from inequality a?? productivity
Hollis Johnson/Business Insider

Ray Dalio is the billionaire founder of the world's largest hedge fund, Bridgewater Associates. Last year he proclaimed that American capitalism had to be reformed.

Now he tells Business Insider that people are misinterpreting that as a call for wealth redistribution, rather than for increasing the nation's productivity.

Productivity, or how efficiently a country is using capital and labor to create value, has been on a decline in America since 2004, and has been especially low since the financial crisis.

He told Business Insider that the US is headed in five years to an economic and social disaster on the scale of the era that saw the Great Depression and WWII unless it is able to take a bipartisan approach to reducing dangerously high inequality. He estimated there was a 30% chance of it happening.

To him, reforming capitalism means refocusing policymaking and financial regulation toward increasing productivity rather than short-term benefits.

This article is part of BI's project "The 2010s: Toward a Better Capitalism."

The Better Capitalism series tracks the ways companies and individuals are rethinking the economy and role of business in society.

Visit BI Prime for more stories.

Ray Dalio sounded frustrated. He didn't want to debate policies, he didn't want to discuss presidential candidates. He wanted to focus on the priority no one was talking about.
I had called Dalio — the billionaire founder of Bridgewater Associates, the world's largest hedge fund — to get an update on his call to "reform capitalism" in America from last year, and his desire that the country's leadership declare inequality in the country a "national emergency." In the nine months since, the idea of rethinking capitalism had broken into the business mainstream, with advocates like the Business Roundtable, under JPMorgan Chase's Jamie Dimon, and CEOs like Salesforce's Marc Benioff saying that we needed to move away from shareholder primacy.
I went in wanting to see what he thought of these developments, as well as issues that Democratic frontrunners like Senators Bernie Sanders and Elizabeth Warren have been championing. When I asked what he thought about increasing wage inequality over the last four decades, Dalio jumped in. "You keep focusing on measures of inequality, as though those themselves…," he said, trailing off. "To me, the question is merely how from an engineering point of view, how to increase the size of the pie and divide it well." To be clear, he's written extensively about measures of inequality, and he's gone on the record about tax and healthcare reform. He emphasized that he wasn't going to make policy proposals on subjects he wasn't an expert in, but that, "If it increases the size of the pie and divides it well, I'm all for it."
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