Tell the next generation: Capitalism is better

Capitalism is often painted as a relic of a bygone era in universities and social media platforms. For recent generations, the rising cost of education, unaffordable housing, and a perceived lack of upward mobility have fueled a growing demand for change. But while these frustrations are accurate, the solution often proposed—a shift toward socialism—is not as kind or fair as it seems.

The debate in universities today has primarily devolved into a one-sided conversation where capitalism is portrayed as a flawed straw man. Rather than discussing whether society benefits from capitalism, the focus is on how to mix in a "healthy dose" of socialism to fix it. The narrative suggests that the government can provide a kind and fair solution to these problems, and this belief has gained traction. Influenced by educators and social media, students are exposed to socialism and its seductive call for community ownership. In this skewed debate, capitalism is losing because socialism is a system where, purportedly, everyone wins. Equality in outcomes is the ultimate goal, much like the participation trophies everyone receives in middle school sports. However, this perspective ignores a fundamental truth: capitalism is not just about economics—it’s about freedom.

The practical benefits of capitalism

Capitalism has been a cornerstone of our society and the foundation of our freedom. It has created the framework for taking risks, creating jobs, improving services, and lifting the overall standard of living in the United States. Ayn Rand, the philosopher and novelist who advocated for the moral and practical superiority of laissez-faire capitalism, argued that capitalism's essence lies in protecting individual rights, particularly property rights. According to Rand, owning and controlling property is the linchpin of all other rights. Without it, individuals are at the mercy of the collective, unable to secure the fruits of their labor or pursue their happiness.

This principle is more than just philosophical—it’s practical. The U.S. dollar’s status as the world’s reserve currency is not just because we are a democracy but because the U.S. economy is open to trade and capital flows, with strong property rights protections and the rule of law. Randian capitalism is not just an economic system but a social system rooted in recognizing individual rights. It posits that the government's role is to protect these rights, ensuring that no one can initiate force against another. Ironically, the government has turned from the protector of this freedom to the force behind diminishing it.

As the upcoming election looms, the conversation has been dominated by claims that the survival of democracy is at stake—a claim made by both sides. While this framing is emotionally powerful, it obscures the real issue. Democracy, in its purest form, is simply a mechanism for collective decision-making. It can take many forms, from direct votes to representative governance, and it does not inherently protect individual rights or the sanctity of private property. We don’t have to look far to find democracies where excessive government involvement in the economy and capital markets—even ownership of industry—has led to societal failures.

Today’s discourse calls for wealth redistribution, increased regulation, and expanded government control over various sectors, including price controls. These proposals are often justified with the language of fairness and democracy, suggesting such measures are necessary to correct imbalances or punish unfair practices. However, what is frequently overlooked is that these policies, though well-intentioned, fundamentally undermine capitalism by infringing on property rights. 

For instance, Jay Clayton, former chairman of the Securities and Exchange Commission (SEC), warned of the transfer of rights from the owners of shares in a corporation to unelected regulators. This shift undermines the rights of shareholders—the actual owners—by forcing companies to engage in initiatives dictated by the government rather than those that align with their business objectives.

Capitalism is about freedom

There is a demonstrable need for government regulation to maintain fairness and punish bad actors, but that is far from the government attempting to determine outcomes through policies that distort open and free markets. When the government decides to redistribute wealth, it essentially determines that some people have more right to the fruits of others’ labor than those who earned it.  When politicians create tax breaks for some and not others, they trample on property rights. When tariffs are implemented on some goods and not others, we skew the balance of fair and accessible capital markets. When regulators selectively enforce rules against specific industries or companies, they interfere with business owners' right to compete. When governments determine the prices of goods, we take another step away from a capitalistic society. This path will likely lead to a perilous outcome.

Ayn Rand’s philosophy reminds us that the true measure of freedom is not how decisions are made but whose rights are protected in the process. Without this foundation, democracy has and will morph into a tool of micro-oppressions, where the majority imposes its will on the minority, stripping away the freedoms, incentives, progress, innovation, and growth in the standard of living that most people have enjoyed until now. While capitalism doesn’t ensure equitable outcomes, the systems that have historically pursued this strategy have demonstrated a near-perfect track record of failure, stagnant growth, and lower living standards for almost everyone.

Passing the torch

The gap between generations' beliefs is best addressed by listening and dialogue. Dust off your copies of Atlas Shrugged or Capitalism: The Unknown Ideal and pass them on to your children. They’ll hear a perspective that is hard to find elsewhere. And for those with less time, consider sharing the words of Ronald Reagan, a president whom millennials and Gen X missed. He was the last president to win an election in an electoral landslide (489 to 49), not because he belonged to one political party or another, but in part as a reflection of wisdom when he crafted the ten most terrifying words in the English language: “I’m from the government, and I’m here to help.”

Mark Goldberg is a recognized leader in the financial services industry with broad experience in Investment Management, Financial Intermediary distribution, and Broker Dealer operations. He currently serves as an Independent Board Director and Advisor to several companies. He has received numerous awards and recognition for his professional and philanthropic efforts, including the IPA Lifetime Achievement Award in recognition for having significantly advanced the goals and reputation of the Investment Management Industry. He is a sought-after public speaker and contributes to several investment-focused publications.