Are millennials giving up on capitalism? A recent survey found a majority now prefer socialism. On this episode of the Capitalisn’t podcast, Luigi Zingales gets the scoop from his millennial cohost, Kate Waldock, who says most simply want European-style social welfare, student-loan debt relief, and campaign finance reform. Is that really so radical?
Speaker 1: Madam Speaker, the President of the United States.
Kate: During his recent State of the Union speech, Trump made a comment that caused quite a stir on the Democratic side amongst the new, younger cohort.
Donald Trump: Tonight, we renew our resolve that America will never be a socialist country.
Luigi: The concept of socialism has been having a good revival in the last few years, since 2016, when Bernie Sanders was running for president. Being identified as socialist is not an insult, but actually something that young people want to be recognized as.
Speaker 2: But you’re a young person and you say, “I support capitalism. I support the free market.” It’s a dirty word.
Kate: But what is it exactly that’s drawing young people to this concept of socialism? Is it that they like socialism? Is it that they don’t like capitalism, or is it something else?
Speaker 3: Can you be a democratic socialist and a capitalist?
Speaker 4: Well, I think it depends on your interpretation. So, there are some democratic socialists that would say, “absolutely not.” There are other people that are democratic socialists that would say, “I think it’s possible.”
Speaker 3: What are you?
Speaker 4: I think it’s possible.
Luigi: This is Luigi Zingales from the University of Chicago.
Kate: And I’m Kate Waldock from Georgetown University.
Luigi: And this is Capitalisn’t . . .
Kate: . . . a podcast about what’s working in capitalism today—and, most importantly, what isn't.
I think before we get into the economics, it’s probably important to define what we mean when we say millennial, because this word gets thrown around a lot, sometimes in an accusatory fashion.
Luigi: Let’s be clear, I’m not a millennial, but you are.
Kate: I am a millennial. There is no technical definition of what it is. I think the best rule of thumb to go by is that the millennial generation includes people who were born between 1980 and 2000. I was born in 1987, which is on the older side of that, but pretty much in the middle of that range.
Luigi: Actually, I was discussing this with my son, who is a millennial, and he said that the millennials are the generation that was not born with the internet at home.
Kate: Sure. I still remember when I was 10 years old, that dial-up modem that we had to deal with, but that went away pretty quickly between middle school to high school.
Luigi: The other definition I saw that makes some sense is that millennials are the ones who actually remember September 11 with some degree of consciousness.
Kate: In any case, now we’ve totally confused everyone, introducing seven different definitions of millennial. But Luigi’s definitely not one, I definitely am.
Luigi: I don't identify as any generation.
Kate: That’s a cop-out.
Luigi: The reason why we’re interested in the millennial generation is not only because it’s becoming the most populous generation at the moment in America, but also because, in a recent Gallup poll, it was found that 45 percent of the people in the millennial generation have a positive view of capitalism, while 51 percent have a positive view of socialism. So, it seems that millennials prefer socialism to capitalism.
Kate: It’s pretty much common wisdom that younger people are more idealistic and more left-leaning than their older counterparts. And so, maybe this is just a standard trend. Maybe it’s just that it’s cool to call yourself a socialist rather than a liberal now. Or maybe it’s something that reflects fundamental differences between the millennial generation and older generations, and maybe these differences will persist.
Luigi: There’s a famous quote misattributed to Churchill, also to Clemenceau, that says if you’re not a socialist at 25, you have no heart. And if you are not a conservative by age 35, you’re without a brain.
Kate: Wait, it’s socialist or liberal?
Luigi: Depends on the quote. Actually, the original quote was Republican, at the time when Republican was left-leaning. So, things have changed. It’s such an old quote—
Kate: This is very confusing.
Luigi: —adapted to location and place. But the spirit of the quote is saying that young people tend to be more, if you want, left-leaning, more open to new ideas, less conservative than older people. But what I find interesting is that if you look at the polls, this positive view of capitalism has dropped very recently in time. It’s not something that has been around for a long time, but just between 2010 and 2018, the percentage of millennials who had a positive view of capitalism went from 68 percent to 45 percent.
Kate: On this episode, we’re going to explore what’s different about the millennial generation and a few different theories that we have about whether or not the millennials’ positive view of socialism is something that will persist.
Luigi: And to begin with, let’s be very clear that this negative view of capitalism is very highly concentrated among people who lean Democrat or consider themselves Democrats. Of course, Democrats on average tend to be less supportive of capitalism than Republicans. In fact, in 2010, 72 percent of the Republican-leaning people supported capitalism as a positive view of capitalism. And in 2018, the number is 71. So, it’s exactly the same, while Democrats went from 53 percent to 47 percent. So, there is a significant drop in the support of capitalism among Democrats.
Kate: But, actually, we shouldn’t necessarily just associate being young with being pro-Democrat and being pro-socialist necessarily. According to a Reuters/Ipsos poll from 2018, young people’s support for Democrats over Republicans actually slipped by 9 percent in the past two years. And if we look particularly at white males between the age of 18 and 34, their support for the Democratic Party has actually dropped significantly since 2016. It went from around a little bit less than 50 percent now to closer to around 33 percent.
Luigi: Not the majority, but at least a plurality of white males voted for Trump over any other candidate. So, I think that it is not such a homogeneous picture. Millennials are a fragmented generation. In this respect, they are as divided as everybody else. Can we agree on the term socialist, because, maybe because I’m old, but when I think socialist, I think about the Soviet Union. I think long lines for food. I think disaster. Since you are a millennial, what do you think when you think of socialism?
Kate: I'll answer you as a professor, and then I’ll answer you as a millennial, I guess. I think that as a professor, I would say that the definition of pure socialism is a system in which the state owns and controls all means of production. Anything that you think of a regular corporation making, whether it’s computers or construction materials, all of those businesses or all of those means of production are owned by the state in a purely socialist setting. Now, is that what most people think of when they say “you’re a socialist” or “I’m a socialist” these days? Probably not. I associate the socialism of today and the socialism of the millennial generation with the state provision of things like healthcare, child care, elderly care, and education financed through higher taxes, particularly on the wealthy.
Luigi: So, by the millennial definition, the entirety of Europe is socialist.
Kate: Yes. But in particular, I think when millennials think of the ideal society, we think particularly of Nordic countries like Denmark and Finland and Sweden as the ideal.
Luigi: But that’s very interesting, because my experience of Scandinavian countries is that they do have a lot of redistribution. They do have a large welfare state, but also, they are quite capitalist in the sense of having a free enterprise system, having competition. And, in fact, one of the institutions of those countries, which is the flex security, a system of flexibility and security, is designed to protect workers, but also at the same time to make the firing of workers easier so that the companies are more flexible. It is, in a sense, a very capitalistic society looking at the means of production, but with a healthy dose of welfare system.
Kate: Yeah. And I think that most millennials would be on board with that. When we say that we disapprove of capitalism, I don’t think we disapprove of all of capitalism. I think we still want most companies to be able to exist. It’s just that, I guess, the tipping point or the threshold of what sorts of industries the state should have control over is a little bit further to the left than the prevailing regime in the United States right now.
Let’s jump into, I think, the prevailing view of why millennials are disaffected and why they claim to support socialism, which is that they’ve had a pretty rough go of it. They experienced the Great Recession. They have had a harder time across the board in a number of economic characteristics. So, let’s go through each of these and talk about why this hardship wouldn’t necessarily make you lean socialist.
Luigi: I think that, as you said, one cause is that millennials were hit by the worst crisis since the Great Depression. And so, of course, this shaped their view of the economy and the system very deeply. And, in fact, there is some new research in economics that shows that your experience of inflation early in your life shapes your expectation about inflation in the future. So, if you come of age at a time where the economy is not working very well, it was hard to find a job, you’re going to be more negative about the system for the rest of your life.
Kate: Yeah. The general takeaway is that if you’ve experienced a huge crisis at some point in your life, then that tends to stick around in your mind in a lot of choices and expectations that you form going forward.
Luigi: But if this is the reason, actually this is quite important, because this suggests that this generation might be more in favor of the welfare system and less in favor of a more, if you want, cutthroat competition, than previous generations, and not just temporarily, but maybe for the rest of their lives.
Kate: All right, so we experienced the Great Recession. Unemployment jumped 10 percent. Not only did we experience it, but the people in the middle of the millennial generation graduated close to that time. I remember, and I’ve mentioned this on the podcast before, but I had to take time off from college because all of the expectations that I had about getting a job after college and having everything be great went out the window. And I was very concerned about my ability to get a job at all. I thought the only recourse at the time was to take time off from school so I would be able to stay in college a little bit longer, hopefully ride out the recession.
Luigi: In your case, things turned out pretty good. I would say that the recovery was slow, but eventually it gave a job to most people. Today, the unemployment rate is a particularly low by historical standards. So, it’s hard to tell a story where these people did not get a job.
Kate: Yeah, I think that that’s totally fair, and that’s central to this question of whether or not it was a transitory shock or something that will stick around in people’s minds. But I think that the potential of not being able to get a job is something that lasts, even once economic conditions get better.
Luigi: There are a lot of people who have a job, but a job that doesn’t pay particularly well, and they still live at home with their parents. In fact, one of the characteristics of this generation is that they stay at home much longer than the previous generations, and they get married much later than the previous generations.
Kate: Right. So, to put some statistics on that. For the first time ever, living with your parents is the most common form of household arrangement for people in the age 18-to-34 group. That was according to a 2016 Pew Research study. And, in terms of dating and marriage, if we were living in 1970, the median guy would be getting married around the age of 23, whereas today, that number is more like 30. We’re staying sad and lonely for longer, Luigi.
Luigi: Yes. But as somebody who remembers 1970, I will tell you that Tinder was not around back then. And so, people were getting married earlier, because it was more difficult to find a mate online.
Kate: Fair, but I think that the millennial response would be that Tinder is hardly what people think of when we imagined fulfilling, satisfying life partners and relationships. Even though that is how I met my boyfriend. So, I’m a fan.
Luigi: One of the problems is not so much in my view the economy overall, but the distributional impact that the economic recovery had. While a lot of people found a job, not all jobs paid very well, and—this is the important difference—many of the members of the millennial generation came to their first jobs with an enormous amount of student debt that was not there before.
Kate: To put statistics on that, if we’re comparing Generation X to millennials, in 2004, 20 percent of Generation X had student loans, whereas in 2017, that was 33 percent. It went from about one-fifth to about one-third of people with loans. And then, in terms of the average balances, in 2017, student loan balances were more than double the average balance in 2004. The total amount of debt really ballooned in this time.
Luigi: And the problem is, when you start with a very different distribution of outcomes, owning debt or financing education with debt becomes a very inefficient way of financing. This is where our corporate-finance background comes in handy, because if you are in a company with a very volatile cash flow, you don’t want to finance your investments with that, because you’re very likely to go bankrupt. The same is true for a student. In the old days, where all the education was paid handsomely, financing your education with debt made a lot of sense. But in the world in which there are huge winners and a lot of less-lucky ones, financing with debt means that a lot of people would go bankrupt, and the number of people that are defaulting on their student debt is skyrocketing.
Kate: I think something that doesn’t get enough attention is how the cost of education affects inequality within cohorts. I remember that in terms of the job options that were available to people whose parents paid for college versus the people who were paying for it themselves. It just seemed like there was this huge unfairness, that you didn’t have this big burden to carry around if your parents footed the college bill, and you could choose whatever career you wanted. And I remember being deeply jealous of my friends who had that sort of freedom.
Luigi: But let me play for a second the devil’s advocate and say that all that you’re saying is true, but there are other elements that lead to the dissatisfaction of millennials. One is that they seem to have different goals in life. One anecdote that I just learned today, a former student of mine is running a bank in Topeka, Kansas. It is not the type of bank you imagine. This is the most advanced fintech bank in America, very state of the art, using technology, really revolutionizing payment systems, out of Topeka, Kansas. And the problem she has is that she cannot find workers who want to work there. And she just lost one of the best employees, who decided to be a waitress in Chicago rather than a software programmer in Topeka, Kansas, because of lifestyle considerations.
Kate: I mean, that seems like a little bit of an extreme example, but it is true that millennials are more urban. Eighty-eight percent of millennials live in metro areas, whereas that number was only 68 percent for baby boomers. Having said that, though, A, I think Topeka, Kansas, counts as a metro area, and, B, to not take a software job when you have the ability to do so and give that up is pretty wild to me.
Luigi: But it is important to see that this generation that was born in a very affluent world, at least, values other things besides money in a much greater way. I can see in my kids that one of the first questions they want to know from a job is, how much vacation do you have? And I find it actually refreshing that this generation wants something different than just money.
Kate: Yeah. It’s hard for me to necessarily tell whether this is my own bias, having always lived in cities or relatively close to them, or if this is truly a reflection of being a millennial. But I think one of the ideas for why living in a metro area is so much more appealing is that the whole idea of what pulled together a suburban or a rural community in the 20th century is this idea of church and family. Those ideas have maybe not fallen apart, but they don’t really have as much of a grip on the millennial generation. I mean, we’re much less religious than our former counterparts. And also, it’s harder for us to start families, partially because we’re getting married later and we’re not owning houses as quickly. And so, this idea of community that I think attracts people to living outside cities is not something that even necessarily seems attainable to us.
Can I talk about another reason that I think doesn’t get enough attention in the common discourse about how the millennial generation has been shafted in some sense?
Kate: At least for millennials growing up in the US, we didn’t get a very strong education in STEM. And STEM is the one area where, like the 2000s or today, the job market looks a little bit like what I imagined the US job market looked like in the 1960s, where as long as you go to a decent college and you do decently well, you’re pretty much going to get a job afterwards, right? You'll find gainful employment and you’ll be making a decent salary and you’ll be able to afford a house within 15 years of working there, 10 years of working there. Whereas, outside of the hard sciences, that really doesn’t exist anymore. And yet I also feel, as an American having been educated in the US system, I just didn’t get those sorts of skills.
Luigi: It's funny because, actually, coming from Europe, coming from Italy, I thought that the only thing my kids learned in high school was math, and they did not learn history. In fact, they don’t know what socialism is about because they did not learn history. They did not learn literature so well. They did not learn very useful ancient languages that I learned, like Latin and ancient Greek. They only did math. So, I’m a bit surprised to hear that.
Kate: Yeah. I mean, maybe it’s all relative. I would say that the last thing I want to mention is that we’ve experienced a lot more inequality than older generations. The top 1 percent’s share of income in 1975 was less than 9 percent, whereas in 2015, it was 22 percent. And this is according to data collected by Emmanuel Saez. We’re just experiencing much more extremes in inequality. And I think that it’s much more obvious that this is an unfair system.
Luigi: You’re raising is an excellent point, and I think this is probably combined with social media. In 1970, there were a lot of rich people, maybe not as many as today, but you only saw them sometimes in some magazines with some pictures. You didn’t know how they were living, where they were vacationing. Unless you were very close to them geographically or because of some blood relation, you didn’t know about them. Today, you have many of these super rich, especially kids, posting their lives on Instagram, and Facebook is for old people like me, but whatever.
Kate: No. Instagram and Snapchat.
Luigi: OK. If I am an average kid, I get exposed to what the billionaires do in life. This inequality is also perceived in a much stronger way.
Kate: Yeah. And I would add to that one thing, which is that on Instagram and on Snapchat, if you’re a famous celebrity or if you’re some sort of socialite billionaire, like 20-year-old, there’s this culture of being accessible while at the same time being inaccessible. So, even though you might post pictures of yourself like your birthday party with Taylor Swift and Heidi Klum and stuff, you’re also messaging your fans and you’re responding to them. And in some cases, you’re even in private messages with them being like, “Oh, thank you for all of your support and for your love.” And so, there is the sense that these are my friends. These are my people, even though you really don’t know them.
Luigi: If you add to the real increase in inequality, this increase in perception of inequality, I think that you create a lot of disappointment for people, because many people graduate with a large debt but expect the world to turn into a successful startup that will make me a billionaire by the age of 29. You know what? This is extremely rare.
Kate: All right, so I feel like we’ve gone through several explanations or several reasons why the millennials got the short end of the stick. But what really bothers me, and, you know, maybe it’s fair, maybe it’s unfair, is that I feel like older generations have a different response to why millennials lean socialist, or at least they claim to, which is that we just don’t remember what it was like during the Cold War or the post-World War II era, when socialism and communism were actually very real and very scary threats. And we just sort of take for granted that if we were to become more of a socialist country in the United States, for example, that we would look like Finland and like Denmark, rather than like some of the countries that have had less-pleasant experiences with socialism.
Luigi: But I think that this explanation is a bit misleading. As we discussed earlier, I don’t think millennials want the Soviet Union. Millennials are more intrigued by an alternative way of living, like in Europe. You don’t need to be socialist to appreciate the lifestyle in Sweden. So, their like for socialism is more like a dislike of capitalism to begin with. And, second, a dream that, as all dreams, seems very nice from afar, but you don’t really manage all the details.
Kate: I mean I think we’re sort of on the same page here, which is to say that socialism goes hand in hand with repressive authoritarianism is kind of a false dichotomy. I mean, the socialism of today has actually been much more successful, I guess as long as we’re not counting Venezuela. And I think that when millennials think about socialism, what they really mean is social democracy. But even so, I think that it’s an important question as to whether, let’s say, in addition to what we’ve got going on in the United States right now, we had universal healthcare for everyone. Would that necessarily lead to authoritarianism?
Luigi: No. But I will distinguish very much between the redistribution of the welfare component from the production component. You can have healthcare for everybody, but not necessarily healthcare provided by the government. In Switzerland, you have a private system that insures everybody and is actually much more effective and much cheaper than the one in the United States. The same is true for schooling. The fact that you want to give schooling to K-12 or even university, free tuition, is independent of who provides those services. So, I think that very often there is a confusion in the debate between the degree of redistribution that you want and the degree of what I would call social insurance you want to provide. And the mechanism of allocation of control in the economy and how the economy really works. Very often, you can have the two merge, and the Soviet Union was trying to control one and provide insurance on the other.
But you can have a mix-and-match system. You have a system like Sweden, where you have a lot of social insurance, but you have a very effective system of competition and really a capitalist economy in all senses. And on the other hand, you can have very socialist economies that don’t necessarily provide a lot of social insurance. China, for example, does not have a good system of healthcare for elderly people. It is a system that calls itself socialist but does not provide some social insurance. So, I think that it is important that we distinguish between these two components. And my view of the millennials—but you are one, so you can reply on that—my view is what they want is, number one, more social insurance. And, number two, they want a capitalist system that works. And they see so many distortions in the existing system that they will vote against the distortions, and then they embrace the opposite just out of desperation, not out of conviction.
Kate: OK. Well, so then I think that’s a good segue into a third theory for why millennials are disillusioned with capitalism or prosocialism, which is just that it’s more of a reaction to the way that politics are today. And I guess you could say that there is some overlap between this and our first theory, which is that millennials are just disaffected.
But I think that there is some legitimacy to this idea that under the Obama administration, we tried to be fair and work both sides of the aisle and to trust the establishment, and to try to come to some sort of agreement in terms of how we would reform our healthcare system. And it just didn’t work. We are supremely disappointed with the way that reaching across the aisle and the status quo have worked out. And so, because of that utter failure, we’ve been forced all the way over to the left in order to be heard at all. And, in some sense, that’s also a response to what the Republicans did, to what Mitch McConnell did, just digging in his heels and being completely obstructionist. And so, even though the dissatisfaction with politics might be there across all generations, I think it’s easier for millennials to just say, “Hey, we’re giving up on capitalism. We’re going to move even further to the left.”
Luigi: Yeah. But, actually, this is one concern I have. When they say they move to the left, I understand they are pissed and they want to move somewhere else. But what does it mean to move to the left? It is not clear that there is a coherent platform that you can say today, this is a socialist platform of America or the social democratic platform of America. When you’re saying “I embrace socialism,” in practice, what do you mean? Because you don’t say that you want to nationalize Google and American Airlines.
Kate: No, I think that the two unifying elements of what millennials mean by the socialist agenda are universal healthcare and higher taxes on the wealthy.
Luigi: I will say that has nothing to do with the distinction between socialism and capitalism. It has to do with how much welfare you want in the system.
Kate: Yeah, I totally agree, and I think that most millennials, whether or not they’re also finance professors, would also agree. I think that millennials are woke enough to know that when we say that we’re socialists, this is a rhetorical device to make people wake up and realize that the stuff that we’re talking about really is not that farfetched. It’s really not that different than the model of capitalism that we already have. It’s just one that makes more sense from an equitable perspective. And if you have to call it socialism in order for people to pay attention, then so be it.
Luigi: It’s interesting, because that explains why so many millennials actually ended up voting for Donald Trump, because Donald Trump, at least in words, did advocate a higher level of social insurance. He was very much unlike the traditional conservative Republican in favoring some form of social insurance.
Kate: Yeah, absolutely. I mean, I still personally believe, and I think that maybe this is just my own view, but it’s not necessarily that millennials have had a tough time. It’s that baby boomers had an abnormally great time and that we’re never going to go back to that sort of growth. And that maybe capitalism in its American form worked for that period and happened to allow for the type of innovation and the type of growth that we saw, but that it’s not suited to the low-growth environment that I believe we’re going to have to live with going forward.
Luigi: I think this is a very important point, because one of the fundamental myths of America is this idea that everybody can make gigantic progress. To go from rags to riches is the American dream. For a long time, this American dream was guaranteed by an expanding country. This was the idea of the frontier. Then, when the expansion of the country ended, there was at some point a major crisis with the Great Depression. But after that it was guaranteed for many years by a very booming economy. When the level of boom sort of subsided and became a more normal growth, it was more difficult to provide and fulfill everybody with a dream. I think that Europeans converted earlier to a system of welfare because the opportunity for growth was seen as more limited. We did not have the ability to expand. The only way of expansion was fighting with a neighbor, and that did not work out very well.
Kate: Yeah. I think, unfortunately, today’s version of the American dream means graduating from your master’s degree program when you’re 28 years old with $250,000 of debt and getting a job that pays $50,000 a year. So, you have to get a second job driving an Uber car in order to even be able to begin paying off some of those student loans. And no one wants to date you because you’re not going to be able to pay off your debt until you’re 65. And so, you’re not going to have a family, and you’re not going to have a house. I mean, I think that that today is what the American dream is. And if we just sit around and don’t change anything, I think that that’s going to be devastating for the country.
Luigi: Let me try to make the optimistic case. We are in an era of enormous transformation, and I think that the millennials are exactly the generation on the cusp of this transformation. And, as a result of this, they suffer most of the costs of this transformation. But it’s not obvious that once we get over this cusp, the situation is not much better. So, I think history always provides a guide in this respect.
The end of the 19th, beginning of the 20th century in the United States was a similar era of gigantic transformation. Many people felt disenfranchised because of this transformation. The farmers lost their livelihood because international competition brought down the prices of most crops and, as a result, they had a hard time making a living. What happened is a lot of farmers became workers in factories and that allowed the Industrial Revolution, the second Industrial Revolution, to take off and to produce enormous benefits for the United States overall. So, I think that there might be another sort of bonanza past this cusp. But, of course, this generation faces most of the cost, and that’s a reason why they’re so resentful.
Kate: I sort of don’t want to respond because I’m just going to be depressing, so maybe we should just end on that positive note.