Peter Thiel is a great American success story for any number of reasons, not the least of which is that he wasn’t actually born in America, but came to the land of opportunity to make his mark on the world. Thiel is also a fierce intellect and a keen observer of economic and cultural developments.
Recently, Thiel’s view of young people has been in the news. In January 2020, Thiel was giving guidance to senior executives at Facebook about how to engage with millennials. He encouraged the executives to try to understand why that cohort held socialism in such high esteem. “[W]e need to do better than simply dismiss them by saying that they are stupid or entitled or brainwashed.” He went on to identify the source of millennial discontent as “when one has too much student debt or if housing is too unaffordable, then one will have negative capital … if one has no stake in the capitalist system, then one may turn against it.” Theil recently gave an interview to the Free Press, elaborating on this observation. He noted, among other things, that “capitalism is not working for a lot of people in New York City.”
Respectfully, Thiel is wrong. It is not capitalism that is not working for people; it is leftism.
As described by Thiel, the main complaints a lot of young people have about “capitalism” are the cost of housing, including rent, and the burden of student loans. Except that those costs are not imposed by capitalism, but by the imposition of leftist policies in those areas. Spending on both housing and education is dominated by government programs that increase costs. Largest among these are demand-side subsidies, or funds given to the consumer to help them defray the cost of housing or education. But the law of supply and demand is undefeated. By merely giving more money to consumers to purchase the same volume of goods (housing) or services (education), these efforts by the government simply encourage an increase in prices. It’s no coincidence that the cost of housing and education have well outpaced inflation this century, just as big government programs such as HUD and the Department of Education were established. As if to prove the point, another industry that has seen its prices well outstrip inflation is healthcare, which might be the area where the government has provided more demand-side subsidies than anywhere else.
And this doesn’t even begin to consider the costs imposed by excessive government regulation. The National Association of Home Builders estimates that regulation accounts for a little less than a quarter of the cost of building a new home. Imagine how much we could lower home prices if we just eliminated the unnecessary regulations.
Higher education has also seen regulations increase costs. Undergraduate and postgraduate students have taken on mountains of debt not so their universities can hire new professors, but so they can hire new administrators who deal with regulations and other non-teaching functions. According to one study, between 1976 and 2018, the number of full-time faculty at colleges and universities increased by 92%, while the number of full-time administrators and “other professionals” increased by 164% and 452%, respectively. Maybe, just maybe, those costs would be worth it if the students felt like they were getting a quality education that prepared them to enter the working world and fully participate in civic life. But these days, college is doing closer to the opposite.
Despite the costs and failures, students fight for the privilege of overpaying not to be educated, in large part because many jobs require a college degree of some sort. This, too, is an artifact of leftist government intervention. The courts have interpreted civil rights law in a way that makes it less risky for an employer to require a college degree for a job than to administer a test to see if the applicant has the requisite skills and aptitude to perform the job well. Employers lowered their risk by outsourcing applicant screening to colleges and universities, so young people rationally flocked to universities hoping to qualify for those better-paying jobs. Many are wondering why they must pay so dearly to simply enter the white-collar workforce.
ABBOTT PREDICTS DOOM FOR CROCKETT IF SHE ENTERS CROWDED TEXAS SENATE RACE
None of this is capitalism. It’s statism interfering with capitalism. Capitalism is the American grocery store. You don’t tell the grocery store when you are coming, what you are going to buy when you get there, or how much you are willing to spend. But if the store does not have exactly what you want at the prices you are willing to pay, you are going to go somewhere else. If you have to go somewhere else enough, you’ll just stop going to the first store altogether. Yet, somehow your grocer keeps the shelves stocked and freezer cases full. Unless, that is, the government runs your grocery stores. Then it is barren shelves, high prices, and poor customer service as far as the eye can see. Just a few months ago, a government-run grocery store in Kansas City had to close down despite lavish taxpayer subsidies.
So, no, Peter Thiel, capitalism has not failed a lot of people in New York City. Leftist policies have.
