According to a Gallup poll conducted last year, nearly 50% of young adults have a positive view of Socialism. This contrasts with 34% of Generation Xers and less than 30% of baby boomers. Maybe older Americans know something that younger Americans simply do not know. The poll also found that while 50% of young adults view Capitalism favorably, that figure is down from 66% in 2010.
What happened in the last decade to sway the youth? It appears that the combination of a stagnant economy and ignorance of basic principles are what led the youth to view Socialism more favorably and capitalism less favorably. Older and wiser Americans know more about the workings of Capitalism and its overall positive outcomes in the real world.
What are the differences in the systems? At the most basic level is the assumption about the primary motivation of individuals. Socialism and Communism both assume that people are motivated primarily by what is good for society. Capitalism assumes individuals are motivated primarily, though not necessarily entirely, by self-interest. That difference in primary motivation allows for the differences in the systems.
These differences are reflected in the ownership of property and government control of markets. In Communism, all property is owned by the state. Individuals may use the property while alive, but upon death, the property reverts back to the state who will then determine which individuals will use the property next.
A Central Planning Agency (CPA) determines who has the greatest need. The property is then given to those whose need is great and who would bring the greatest benefit to society from using the property. In theory, the CPA tries to create an equal distribution of output, so everyone gets the same amount regardless of their contribution. In Communism, the CPA also decides which companies produce what output.
The CPA has complete control of markets. Communism then, has public ownership of property, complete government control of production and an equal distribution of output. Capitalism is markedly different. In Capitalism virtually all property is privately owned. Upon death, the property can be passed on to anyone the owner chose. The production, price and distribution of output are determined by market forces. Basically any product that consumers want and are willing to pay a price high enough for the firms to profitably produce will be made.
Individuals receive the output not based on need but rather based on the value of the contribution an individual has made. The more one valuably contributes the more one is paid. This results in an unequal, although arguably fair, distribution of output. How about Socialism? Socialism is a mix of the two systems. Most, but not all, property is privately owned, but the government controls some markets where they set prices and output decisions. An example is the health care market where the government often has complete control of the market and uses taxpayer dollars to finance the system.
The health care market results in a more equal distribution of services since all citizens receive mostly the same care. Socialism benefits the lowest income earners. Those are people who can not afford certain services like healthcare. The remainder of the population settles for less service and counting taxes and prices, usually end up paying more yet receiving less than they would under a free enterprise, capitalistic system. The US economy experienced a period of stagnation from 2008 to 2016. .
That stagnant period led to a lack of opportunity, mostly for the lowest income earners. Today’s youth lived through that period. Most feel it simply isn’t fair that some people have so much while others have so little. Individuals make different contributions and receive different amounts of income to purchase the output. Some have very much, while some have very little. That difference would be much, much less with Socialism. As the youth matures, enters the workforce and becomes productive, they may have a less favorable view of Socialism
They will find what the Generation Xers and the baby boomers found. That is that there is a reduced incentive to produce if it is known that much of what is earned could be taken from them and given to people who, for whatever reason, have not earned it. With Socialism, the government makes the distribution of output more equal. This is done by over-taxing the most productive and giving free goods and services to those who have contributed little or nothing. That’s why Socialistic economies tend to stagnate. There is a lack of incentive for high achievers to produce more and for low achievers to produce anything. America went from the birth of a nation to the largest, most prosperous economy in the world in about 150 years.
This was because the principles of Capitalism were practiced. We encouraged individual freedom, individual responsibility, low rates of taxation and a limited role for government. Socialism runs counter to each of those principles. Let’s hope the youth figures it out soon.
WRITTEN BY Michael Busler
Dr. Busler is an economist and a public policy analyst. He is a Professor of Finance at Stockton University. His op-ed columns appear in Townhall, Newsmax. Technology, politics, money, government, business,
Photo Credit: Joxemai – Own work – CC BY-SA 3.0