Socialism vs. Capitalism: What Does Gen Z Think?
Although the oldest members of Generation Z are just now entering their mid-20s, it was an 80-year-old man who gave a voice to their collective disgust with the system that they were inheriting. Democratic Socialist Bernie Sanders has long painted American capitalism as a cruel and corrupt system rigged by the rich and powerful to make sure they stay that way.
Thanks largely to young millennials and Gen Z, Sanders’ message became a movement, and today, young Americans are far more likely than any generation that came before to challenge capitalism and embrace socialism. But considering the fact that there’s not a single example anywhere on Earth of a successful socialist economy, what does that mean for the future of the United States and the free-market capitalism that built it into a global powerhouse?
Capitalism vs. Socialism: Free Market vs. Government Distribution
The primary difference between socialism and capitalism is the role of government. In socialist economies, a central body — the government — owns and controls the society’s assets, firms and resources, and distributes them to the population as it sees fit. Capitalist economies, on the other hand, are based on private ownership of assets and businesses.
With limited government intervention, winners and losers in capitalist economies are selected by their ability to compete. The profit motive drives innovation and expansion, and free-market forces like supply and demand determine the prices of goods and services.
In socialist economies, on the other hand, the government sets price controls, and instead of individuals earning incomes based on demand for their labor, the central body distributes wealth. With no profit motive or competition, businesses in socialist economies have little incentive to become more efficient or more productive.
“As the well-known hedge fund manager Ray Dalio explains in layman’s terms, capitalists make the pie bigger,” said Alcides Otiniano, founder of Prosperous Frugal. “Then it can be shared among more people, generally benefiting more those who can make the pie — goods and services — grow more to reach more people. Capitalism rewards people by allocating more financial benefits to those who can generate more revenues.”
Socialism Is a Proven Loser, But Its Ideas Can Strengthen Capitalism
The ever-growing pie of capitalism gave birth to the modern industrial global economy since its rise from a local European phenomenon in the 16th century, according to Vanderbilt University. Socialism, on the other hand, has failed everywhere it has been tried — and not just in glaring examples like the Soviet Union. According to the Heritage Foundation, countries like India, Israel and Great Britain all adopted socialism as their economic models after World War II — but not for long. Today, there is not a single successful socialist country on Earth, although, following the loosest interpretation, Bolivia could be considered the lone example.
“Capitalism, free trade and freedom are linked,” said Michael Rossman, the co-founder of the business banking app MachFast, as well as an entrepreneur and banker with an MBA from the University of Chicago. “The greatest good for the greatest number is when our personal preferences are satisfied without infringing on the lives and rights of others.”
The problem is that when it’s not tempered with socialist ideas — like Social Security, Medicare and in the Nordic countries, things like universal healthcare and free college — capitalism can infringe on the rights and lives of others. That’s the part that Gen Z seems so keen on overthrowing.
Socialism Becomes Attractive When Capitalism Is Cruel
The last minimum wage increase happened in 2009 when it was raised to its current rate of $7.25 an hour, the longest period of stagnancy since the minimum wage was established in 1938. That means that there are kids in seventh grade today who have lived their whole lives without ever seeing their parents get a raise, despite the fact that their meager wages can purchase fewer and fewer bare necessities every year.
The result is that tens of millions of people — many of them working full time — spend their days scratching out an existence in abject poverty in the richest country in the world.
The U.S. has a greater percentage of working-age adults living in poverty than any other member of the Organization for Economic Cooperation and Development (OECD). In terms of per-capita poverty, America is doing a little bit better than Costa Rica, but not quite as well as Romania.
“Capitalism has greatly increased the gap between the rich and the poor, with the poor always being at a disadvantage,” Hasting said.
By contrast, there are now an astonishing 2,755 billionaires in the world today, according to Forbes, 660 more than in 2020. Eighty-six percent of them got richer last year as the world’s billionaires added a combined $5 trillion to their stacks in just 365 days. On average, a new billionaire is minted every 17 hours.
It’s that kind of gross and glaring economic inequality that made Bernie Sanders’ politics possible and, many would argue, necessary.
“I myself don’t believe in socialism,” said Sharon Van Donkelaar, chief marketing officer of Expandi. “But as much as I believe in capitalism, I know it has its flaws. I know the young people are questioning those flaws because they are the ones who have to deal with the worst consequences. I personally don’t like the feeling of seeing socialist politics gaining more votes, but how on earth will these young people get hope of a better future?”
For Many Young Americans, There’s Just No Stigma to Socialism
Both Fortune and Axios/Momentive recently conducted studies that showed that Americans, particularly younger Americans, are losing faith in capitalism at a startling pace. Both studies — and many others like them — found that at least one-third of the country now has a negative view of capitalism, with the youngest Americans ages 24 and under either evenly split or underwater on the issue.
That means it’s no longer just a stereotype to say that most Gen Zers probably have anti-capitalist leanings.
Until recently, those kinds of leanings would have been taboo or even dangerous to espouse publicly. Much of it has to do with the legacy of the Cold War, when America versus the USSR became capitalism versus communism.
But Gen Z didn’t live through the Cold War and they’re not carrying those hangups into the 21st century. In an article titled “Why Gen Z is Turning to Socialism,” Vice reported that “capitalism” is now a dirtier word “socialism” in many circles of the younger set.
“This generation believes that without capitalism, people will have a better chance of surviving and succeeding,” said Scott Hasting, who, as an entrepreneur and the co-founder of Betworthy is by definition a capitalist himself. “People belonging to this generation view the world differently, putting emphasis on the impacts of a business more than the brand image itself. Gen Zs are now more willing to spend more to support what they believe has a good social cause, helping all members of society, including the marginalized ones, to be successful.”
Gen Z Experienced the Very Worst That Capitalism Has To Offer
The oldest Gen Zers were born in 1997 during a frenzy of capitalistic activity that gave rise to the tech titans who would become the Fords and Rockefellers of their day. As small children in the early 2000s, many certainly heard their parents griping as one giant, under-regulated corporation after another — Enron, Tyco, WorldCom — fell to scandals that revealed them as little more than criminal enterprises with boards of directors.
They were introduced to a seemingly endless rogue’s gallery of corporate criminals — Kenneth Lay, Jeffrey Skilling, Bernie Madoff, Allen Stanford and Martin Shkreli. Most of them, Gen Z noticed, had cozy connections at the highest levels of power in Washington.
“A large portion of Gen Z views capitalism as an outdated and negative economic philosophy,” said capitalistic entrepreneur Alex Mastin, the founder and CEO of Home Grounds. “These sentiments are due to the trauma that economic inequity has had on Gen Z and their parents.”
In 2008, they watched the government scramble to bail out the Wall Street investment banks whose reckless behavior sank the global economy while millions of Americans whose homes were foreclosed as a result received no such mercy.
When COVID-19 struck, they watched as poor people — especially marginalized people — found themselves in a familiar place on the caboose of the train dealing with the worst of it while America’s 600-plus billionaires got $1.9 trillion richer.
“Poverty and debt are forcing them to ask themselves if the system is for them or against them,” Mastin said. “The answer is that capitalism is largely against them. The privatization of resources has created multibillionaires while those who do not own the resources and means of production languish in perpetual financial struggle.”
But They’ve Also Experienced the Very Best
While Gen Z witnessed capitalists like Jeff Bezos, Mark Zuckerberg and Elon Musk amass incomprehensible wealth, their entire lives have taken place in the incredible world that those capitalist billionaires and others like them built along the way.
It was Bezos who willed into existence a world where just about anyone can buy just about anything online and expect it to arrive at their doorstep in a day or two. The world he brought to fruition helped the country survive COVID-19.
It was Zuckerberg who devised the concept of modern social media, a primary tool of social justice advocates, cop-watchers, environmentalists and many other progressive movements that lined up squarely with Gen Z behind Bernie Sanders.
When Musk unveiled the Tesla Roadster in 2008, it was the beginning of the end for the internal combustion engine and the start of a future with cleaner, greener highways.
The same pharmaceutical industry that produced Martin Shkreli also produced incredible vaccines with astonishing speed under intense pressure during the pandemic.
While Musk, Bezos, Zuckerberg and the rest serve as convenient villains for many young Americans, they’re an inspiration to plenty of others.
“Gen Z is an incredibly entrepreneurial generation,” said Said Trent Staggs, a business executive, elected official and the president of Prosperity Utah, a 501(c)(3) that advocates for inclusive capitalism in the U.S. “Many aspire to be business owners, founders and creators, which is made possible with a true free market, capitalistic system.”
Capitalism, like any system, has its benefits and drawbacks. If you live in the U.S., you likely experience both. And while it’s not a system that’s going anywhere anytime soon, younger generations may see fit to mold it into their vision of what the ideal America should be.
- What Money Topics Do You Want Covered: Ask the Financially Savvy Female
- Can You Afford Education in America at These Prices?
- Nominate Your Favorite Small Business To Be Featured on GOBankingRates
- 10 Reasons You Should Claim Social Security Early