Capitalism 101

Growth and trust are fundamental to a free society.

Centrally planned growth and decentralized market-driven growth offer different perspectives on trust and its placement in others to create a better world. When central planners are trusted with predicting the future, they must agree on what that looks like and efficiently organize people and resources to reach a desired outcome. History shows that pro-growth economic systems built on this principle don’t work. Eventually, growth stagnates and everyone fails. 

Capitalism, in contrast, trusts markets. Open markets and free enterprise encourage individuals to boldly predict the future and profit from developing new and better ways to do things. Some individuals succeed and some do not, but overall everyone wins as free enterprise grows the economy and raises living standards. In a democratic society, there are limits to markets. True laissez-faire capitalism, the kind with no government intervention or oversight, does not exist. 

Almost 80% of Millennials and Gen Zs tell us that free enterprise positively impacts society. Many see themselves as future entrepreneurs. Yet, when we ask Millennials and Gen Zs about capitalism, some give it a thumbs down. Why? 

Asking about capitalism is like asking about the economy.

What Millennials and Gen Zs say about capitalism and how they behave may be different. In our ongoing project through The Center for the Study of Capitalism at Wake Forest University and YouGov, we find most young Americans support private property, private ownership of the means of production, a belief they should be able to invest for profit, the idea that competition stimulates people to work hard and develop new ideas, a conviction people should be compensated based on ability, and similar capitalist ideas.

When we ask Millennials and Gen Zs for an opinion of capitalism, what they say (and what most people say) is influenced by heuristics; mental shortcuts that help us answer complicated questions. Rather than slog through the effort of synthesizing data and generating a reasoned answer, we get one based on feelings about growth, trust, and morality. This may be particularly true for detractors of capitalism who are less confident than promoters in explaining its drawbacks. Here are three thought experiments to explain what we mean:

Growth

When we ask for an opinion on capitalism, some people answer based on a quick evaluation of their economic situation and how they think everyone else is doing. Americans have enjoyed long periods of economic stability and overall, everybody’s gotten richer and achieved a higher standard of living. Most older people make a quick calculation and decide worldwide economic growth has brought more good than bad to the world. 

Many younger people are not so sure. Some are being told growth is killing humanity. We find 62% say they want to do better than their parents and about 58% are confident they will. Markets for healthcare, housing, and education are not working well. About two in five Millennials and Gen Zs say they already pay too much for housing and healthcare.  

Trust

When we ask for an opinion of capitalism, some people answer based on whether they trust what big banks, big tech companies, Elon Musk, or whoever is in the latest news cycle is up to. In the past, older Americans largely trusted businesses and also said the government needed to keep an eye on them. Most older people make a quick calculation and decide the benefits of free enterprise and open markets outweigh the drawbacks. They channel disapproval of firms that don't operate in the interests of their stakeholders through their own behavior and government action.

Young people lack trust in others and institutions, especially big institutions. In our work, about 40% think most people are trustworthy. About a third think big businesses are a force for good in society. 90% say small businesses and entrepreneurs are a force for good.

Morality

When we ask for an opinion of capitalism some people calculate whether people are fundamentally good or bad and decide if capitalism encourages good or bad behavior. Older Americans witnessed governments structured on communism, fascism, and totalitarianism. They saw how their leaders behaved and they knew what that meant for individual freedom. Most believe a system that pairs capitalism with democracy is morally superior or at least constrains the worst human behavior.

Some young Americans are not sure about the relationship between political and economic freedom. About 60% agree with the statement “Political freedom and economic freedom depend on one another.” Millennials were born after 1980. The Belin Wall fell in 1989. Until quite recently, a quick calculation might suggest it’s possible to keep democracy and not capitalism. 

Is growth good or bad? Low-growth thinking and Go-growth thinking.

We asked Millennials and Gen Zs about growth and found two ways of thinking: Low-growth thinking (Chart 1) and Go-growth thinking (Chart 2). A quarter to a third, represented by our neutral group, don't have strong feelings about growth or don’t think much about it at all. The Low-growth and the Go-growth groups are not exclusive. We defined each group based on correlations among their responses to a range of items we abbreviate here and list at the end of the post. Table 1 shows positive, moderate correlations among Low-growth (yellow) and Go-growth (green) items and no correlation among items between Go-Growth and Low-Growth items (gray).

Table 1. Low-growth and Go-growth correlations.

Who decides the future? The government’s role in free markets.

We asked Millennials and Gen Zs for their ideas about the government’s role in free markets. There are two ways to look at these data. Sorted into agree (slightly to strongly) or disagree (slightly to strongly), many more agree that industrial policy makes it hard for entrepreneurs, that markets do a better job than the federal government in deciding what companies should succeed, and that companies that take government money don’t live up to their promises. However, if we re-sort the slightly agree and slightly disagree in a “neutral” category, we have an unusually high number of more ambivalent responses suggesting many are unsure what they think. Most Go-growthers think free markets do a better job than the federal government.

Market-driven growth is good for humanity.

Your view about the future dictates who you trust to create a better world. In our survey, 37% of Millennials and Gen Zs say they are discouraged about the future. Most, including some of these discouraged young people, want to succeed. About three in five believe most people can get ahead in life if they are willing to work hard and the same number think wealth can grow so there is enough for everyone. 

Overall, this isn’t a Malthusian view of the future. That view will never die but will ebb and flow in reaction to the perceived benefits and drawbacks of technology and access to resources. Many of today’s Low-growth advocates focus on the climate crisis or AI as reasons to stop growth. Ultimately, degrowth and centralization come from a lack of trust in individuals to solve these problems. A minority of younger Americans think the best way to mitigate risk is to jettison personal responsibility in favor of a perceived collective safety. Many are not sure what to think. 

Free societies mitigate risk by trusting individuals to be creative and entrepreneurial. If a person can envision something that works within the laws of physics and puts their entrepreneurial nature to work, it likely will be made (one day). No individual, business, or nation can capture all the benefits of innovation and discovery. Most young Americans favor free enterprise and lack trust in institutions to deliver an environment supportive of their efforts. The lower trust goes, the less likely future generations will be able to hold on to democracy and free markets. And the less chance they'll have to enjoy a better world. 

Low-growth thinking (Chart 1)

1. There is no point in growth: Beyond meeting everyone’s basic needs, there is no point in trying to grow the economy.

2. Redistribution is happiness: People who live in countries with high levels of economic redistribution are happier.

3. Markets diminish community: Free markets diminish community and collaboration.

Go-Growth thinking (Chart 2)

1. Growth prepares us for the future: The faster our economy grows, the better prepared we will be for the challenges of the future.

2. Taxes reduce growth: The more we tax labor, entrepreneurship, and investment, the more we will reduce growth.

3. The profit system motivates: The profit system teaches the value of hard work and success.

4. Markets foster independence: Free markets make it possible for people to leave exploitative relationships.

Market or Government? (Chart 3)

1. Free markets work better. Free markets do a better job than the federal government in deciding what companies should succeed. 

2. Government subsidies don’t work. Companies in industries that receive money from the federal government generally don’t live up to the promises they make.

3. Industrial policy makes it hard for entrepreneurs. A national industrial policy makes it harder for entrepreneurs with new ideas and new businesses to succeed.