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Friday, May 27, 2016

Millennials Can’t Just “Reject” Capitalism

Socialist Countries Show What Happens When You Try

The Washington Post recently blared the headline: “Majority of Millennials Now Reject Capitalism, Poll Shows.”

I suspect, perhaps unfairly, that this is a matter of some pleasure for the Post’s editorial board.

But if you actually read the article, a different picture emerges. In fact, 42 percent of the millennials polled say they support capitalism. In comparison, only 33 percent say they support socialism. So an equally accurate, and less tendentious, headline would have been: “Millennials Favor Capitalism over Socialism by Wide Margin.” At a minimum, by the logic of “rejecting capitalism,” we should say that “Two-thirds of Millennials Reject Socialism!”

You Can’t Just “Reject” Capitalism Any More Than You Can Reject Gravity

Of course, there are some problems interpreting these answers. For one thing, it’s not clear that the millennials in the sample (or folks of any age the Post’s editorial board) can actually define capitalism, or for that matter, socialism.

But more importantly, it’s not clear that you can “reject” capitalism, any more than you can reject gravity. Numerous accounts of the (now-failed) socialist nations document the emergence of market exchange and production even in the most difficult circumstances. Markets happen, often with the tacit consent of states that officially decry exchange, because otherwise society cannot function. The “transition” from communism in fin de siècle Eastern Europe was largely accomplished before it became official.

Oddly, support for “capitalism” may be stronger in countries that pretend to be socialist. In China, more than three-quarters of respondents agree that “people are mostly better off in free market systems.”

Based on this, it would appear that millennials are out of step not just with the U.S., but with the world, and especially with China. What gives?

I think part of the answer is the fact that I have alluded to above: the set of policies required to suppress private exchange and production are so draconian that they are inconceivable. But it is also important to recognize the importance of another explanation millennials have rarely heard: capitalism fosters cooperation, giving desperate people a chance to find creative ways to serve one another. What’s not to like?

Capitalism Brought Slushies to a Refugee Camp

A recent example is striking, even poignant, because it is both quotidian and yet easily appreciated by anyone with a sweet tooth: slushies.

I don’t mean slushies at your local gas station, or some county fair. I mean slushies in a Syrian refugee camp in Jordan. Zaatari has 110,000 “residents.” In terms of population, that’s about the same size as Topeka, Kansas, almost as big as Charleston, South Carolina.

A respectable size for a city.

Where one might expect squalid conditions and the kind of cheating and bad dealings that scarcity can create, what one finds instead is…slushies. Australian reporter Steve Pennell tells the story of how slushies, and a lot of other services, provided in an orderly fashion and motivated by profit. It’s a simple yet sophisticated system.

Capitalism, in other words.

What Makes Capitalism Happen?

The notion of profit and loss, explained beautifully by Ludwig von Mises, is what drives capitalism. The usual definition of “private ownership of the means of production,” is a diversion. The point is that producers get paid if—but only if—they produce more value for consumers than the production uses up in resources. Everyone gets a benefit:

  • Labor, owners of machines, and sellers of other inputs all get paid.
  • Consumers only buy if the price is less than what they as individuals value the product (Subjective value, anyone?).

Only if there is something left over does the producer get paid.  It’s a pretty terrific system, and it happens without anyone telling anyone else what to do. In fact, it always happens, even in countries where the government tries to prohibit it.

It’s worth watching the whole video, but the part about slushies and other groceries (“We…have….everything!” at 7:30) is particularly fascinating. It covers the story of a budding capitalist who manages to liberate a slushie machine, finds a way to get electric power and supplies, and now sells slushies to…well, to pretty much anyone who wants one.

Refugee camps start out, of necessity, as command economies to a degree that would make any Commissar envious: everybody gets a debit card with $40 a month for the grocery, and a tent for housing, and some bedclothes. But given a chance, people will turn, as they always do, to capitalism.

Maybe millennials will, too.

Author’s Note: the premise for this post, and the slushie example, were suggested by Tori Hall.

This post first appeared at Learn Liberty.

  • Michael Munger is the director of the philosophy, politics, and economics program at Duke University. He is a past president of the Public Choice Society.