The Fourth Turning: how Millennials will save capitalism

In my last post (Let’s understand just whatsocialism means to us (redux)), I decried the misguided belief that socialism should displace the capitalist system in the industrialized West.  Old, white guys like me won’t be around to turn the tide against this trend.  It will be the Millennial generation that saves capitalism.

In Neil Howe’s book “The Fourth Turning: AnAmerican Prophecy – What the Cycles of History Tell Us About America’s Next Rendezvous with Destiny,” he outlines how four repeating generational cycles (or Turnings) determine social attitudes and ultimately govern the social contract. You can find a one page summary on his website.

Howe’s hypothesis will ring true to any student of American History as he traces the impact of events on rising generations and how each generation changes the social order. The WWII generation was in the driver’s seat for the most recent First Turning, the “American High” following WWII when the crisis of the Great Depression gave way to a period of prosperity characterized by high levels of trust in institutions. 

The Fourth Turning in this model is crisis. The Stock Market Crash of 1929 began the crisis that preceded the American High. Four generations later, Howe tells us, “Today’s Hero archetype youth, the Millennial Generation … show many traits similar to those of the G.I. youth, including rising civic engagement, improving behavior, and collective confidence.”  It is they who will develop a new social order in the wake of the financial crisis of 2008.

My contemporaries doubt this.  Like all generations of elders, we collectively take a dim view of youth that that we see as addicted to their smartphones and cowering in their safe zones.  But, I take a different view.  Studies by Big 4 accounting firm Deloitte show Millennials tend to develop values consistent with their elders once they form families.  And, they are also becoming entrepreneurs.  Their future success will be enabled by technologies their elders are, to some extent, ignoring like broadband, social media and 3-D printing.

Still not convinced? 

How about this? Businesses change their approach to the market when it’s in their best interests to do so.  Corporate values will shift as Millennials become their core customers.

In the post-industrial 21^th Century, it’s getting harder to succeed purely on the basis of what you produce.  Your innovation can easily be copied, produced in a low cost factory overseas and exported to any market.  In a world where nearly every consumer can compare prices and features instantaneously, the spoils will go to the lowest cost producer not the innovator. 

To succeed in the 21^st Century, corporations will have to “outbehave the competition…” according to Dov Seidman.  His book, “HOW: Why How We DoAnything Means Everything,” outlines how companies must engage all of the talents of their employees to extend enduring value to customers.  Those that succeed will be those whose behavior is aligned with its customers’ values.  They will accrue enterprise value by becoming internetworked with the communities they serve. To do so they must engage their employees by treating them fairly and giving them good reasons to be proud of what they do and where they work. 

Granted, my argument is highly speculative (or full of holes if you prefer).  The future is hard to predict.  I truly have no idea how Millennials will ensure our continued prosperity.  I simply know that every generation does so.

To buy into my argument one must have faith.  My personal faith is best captured in a quote from the late John McCain:  “Our shared values define us more than our differences.  And acknowledging those shared values can see us through our challenges today if we have the wisdom to trust them again.”

Leaders of the Fourth Turning will be those who can merge our values with our aspirations.  It is they WHO WILL LEAD!

Let’s understand just what socialism means to us (redux)

I first wrote a post with the above title in 2015 when Donald Trump was polling second to Jeb Bush and Bernie Sanders was in the same place in their respective primary races.  I felt then (as now) that the only thing worse than Trump in the White House would be the crackpot from Vermont.  I also thought, once the election was over, the idea that socialism might be a superior economic system would fade away.  But, it hasn’t. 

Frankly, I can’t believe we’re having this conversation in the most prosperous nation on earth. But, we are.  Last week, a local NPR talk show hosted representatives of the International Socialist Organization (ISO), with no opposing viewpoints on the panel, for a solid hour. 

I could write pages of rebuttal of their economic thinking (if it can be called that).  But, I would like to focus on just a few troubling aspects of their presentation. 

The Scandinavia myth.  The nations most cited as a model for those promoting socialism in the U.S. are Sweden, Norway and Denmark. There is only one problem with this analogy:  those countries are not socialist.  And, I am not the only one who thinks so.  The Foundation for Economic Education (FEE) points out that, “like all other developed countries, the means of production are primarily owned by private individuals, not the community or the government.”  (Italics mine)  FEE is a self-described “non-political, non-profit, educational foundation…”

The folks from ISO like to compare data points from the performance of those countries to the U.S.  That’s like comparing bicycles to oranges.  Scandinavian countries (and Germany) have benefited from the creation of the European Currency Union, which has made the Euro the single currency of those countries who have joined the union.  It has enabled them to benefit economically by boosting exports, especially to the countries of Southern Europe.  The profits from those international sales are then reinvested by privately owned, capitalist companies to innovate new or better products or to improve the efficiency of their production.

The U.S., by contrast, is a net importer of goods and services.  Why? Because, first, we are the most prosperous nation on Earth, enabling us to buy more stuff.  And, second, because we are a consuming rather than saving nation.  So, we must recapture capital differently than net exporters.  We attract Foreign Direct Investment (FDI).  The Bureau of Economic Analysis reports a positive flow of $269 Billion in 2017, slightly below the historical average. “As in previous years, acquisitions of existing businesses accounted for a large majority of it,” according to the BEA.  In other words, our economy attracts investors from other countries who are spoiled for choice.

The Poverty myth.  You can find a lot of conservative sources – from the Cato Institute to the American Enterprise Institute – that will describe the ways in which capitalism has reduced poverty.  I know because I’ve been reading them for years.  To create a more balanced perspective, I searched for and found a non-partisan group focused on the topic.  The Huffington Post describes the Borgen Institute as “an incredible non-profit organization… addressing poverty and hunger and working towards ending them.”  Borgen cites free market capitalism as a key driver in the effort to reduce poverty, citing data showing a reduction by half in industrialized countries between 1990 and 2010 (from 43% to 21%).  Meanwhile, they say, “China increased per capita income 13-fold since the beginning of its economic reforms in 1978.  The country pulled 680 Million people out of poverty between 1981 and 2010… In India, income rose three-fold after the country liberalized its markets.”

There can be no doubt that liberalization of trade and the spread of free-market principles have improved the prospects of hundreds of millions of people throughout the world. 

Innovation. All of the advances in technology, healthcare and efficiency have come from capitalist countries. The Scottish enlightenment began in the 1690’s when liberalization of the economy gave rise to a spurt of innovation from the steam engine to canal locks as entrepreneurs worked to improve economic conditions.  In colonial and early American, the shortage of labor drove innovation in the form of steel plows and the cotton gin.  Throughout history, such innovation has improved the economic prospects of nations that have allowed capitalism to flourish. 

Since WWII, innovative improvements in healthcare, information technology and lifestyle  – polio vaccine, computers, jet travel, air conditioning – have all come from capitalist countries.  Driven by motivation to earn a living free of the constraints of central planning, free-market capitalism always has and always will improve the lives of those who have the good fortune to live under its umbrella.

No discussion of capitalism can exclude the dark side in these politically correct times.  For many, income inequality (which is increasing in the U.S. by many measures) is the reason we should consider another approach to managing our economy.    We often frame these arguments in the context of the Top 1%, or even the Top 0.1%.  But, that doesn’t describe the challenge appropriately, in my view. 

Hedge fund billionaire Ray Dalio has produced a study that outlines the critical challenges of the United States economy by comparing the fortunes of the Top 40% to the rest.  While pointing out that it is dangerous to form opinions by relying upon averages, he nevertheless describes the conditions of the 40/60 in a few resonant data points.  “The average household in the Top 40% earns four times more than the average household in the bottom 60%,” he tells us.  The result is “[t]hose in the top 40% now have on average 10 times as much wealth as those in the bottom 60%.  That is up from six times as much in 1980.”

It’s popular in conservative circles to point to economic outcomes for those less fortunate as the result of people making poor choices.  Indeed, that trope resonates with me in a big way.  That said, we should all be concerned about trends that ultimately destroy the middle class families on which the stability of our economy relies.  As it continues, the interests of the middle class will become aligned with those of the working poor.  There are economic, political and social consequences that will result. 

In a future post, I will outline what I foresee as the shift that will ultimately save our nation from destruction.  Stay tuned!

WHO WILL LEAD?