After the socialist Zohran Mamdani’s win of the New York City mayoral election, Peter Thiel’s 2020 email to Facebook executives in which he urged them to understand why 70% of the Millennials are pro-socialist, went viral. In a recent interview with the Free Press, the billionaire venture capitalist and philanthropist explained that the reason for the Millennials’ lean towards socialism was the generational conflict between them and the Baby Boomers.
Thiel said that the conflict is rooted primarily in economics. The Millennials are buried under a very high student loan debt ($ 2 trillion in the United States in 2025), whereas the Boomers had very little debt upon graduation, had multiple job offers, and paid off any loans quickly. The Millennials are also struggling to afford housing, whereas most Boomers enjoy mortgage-free home ownership.
According to Thiel, the Millennials have been “proletarianized,” and he concluded that capitalism is the cause of the generational economic disparity: “Capitalism isn’t working for young people.”
Thiel should know better. We don’t have capitalism but a statist mixed economy where statism is, and has been, the cause of the economic struggles of the Millennials.
The government-subsidized student loan programs and government encouragement of college education to all as a key to prosperity has encouraged unprecedented numbers of students to go to college and take on student loans. Without such state intervention, many of these students would have pursued other educational job opportunities, such as those in the trades or learning on the job.
The number of university seats has not kept up with the demand, partly because of government funding cuts to public universities, and university tuitions and other attendance costs have skyrocketed. A four-year college degree at a public university in the United States now costs in-state students over $100,000 on average. For out-of-state students it is over $180,000. For Harvard University, it is $340,000, without any financial aid.
As Peter Thiel commented: “Too many go to college, don’t learn anything [that is another story as to why], and they end up incredibly burdensome student debt.”
Unaffordability of housing is also caused by the government: strict zoning laws and restrictions to new construction have led to escalation of real estate prices, which benefits the home-owning Boomers and makes housing unaffordable to the Millennials and other younger generations. The growing welfare state has also contributed to the higher cost of living for the Millennials that further erodes their ability to afford housing. Social spending, much of which goes to health care for the older generations, is now 30% of the U.S. GDP. This has increased government debt and interest costs, ultimately paid by the taxpayers.
The student loan debt crisis and housing unaffordability are not features of capitalism but the product of statist policies that seek equity for all, in student loans, in university degree, in housing – in prosperity. Obviously, these policies have failed. Thiel himself acknowledged that socialism (another form of statism) is not a solution to the housing problem. Rent controls and building restrictions and other violations of developers’ and landlords’ property rights will result even less, and more expensive, housing.
To help solve the student loan debt problem, in 2010 Peter Thiel established the Thiel Fellowship through which he paid students to drop out of college and build something new. I commend him for doing this and for pointing out the problems young people are struggling with.
But although Thiel calls for solutions, he doesn’t propose any fundamental ones, perhaps because he misidentifies capitalism as the root cause of the problems. Capitalism is not the cause of the younger generations’ economic woes but the solution to them. To fundamentally solve their economic problems requires systematically reducing the role of the state in the economy and adopting capitalism, “a social system based on the recognition of individual rights, including the property rights, in which all property is privately owned.”
There would be no student loan debt crisis in capitalism because all universities are private (offering varied programs at competitive price points to meet demand) and must offer value (actual knowledge and skills) to attract students who are willing to pay (funded by summer jobs, co-op placements, scholarships, or private loans) for such an education. These graduates would be sought after by employers.
Housing affordability would also not be a problem in capitalism because builders are incentivized by the profit motive – and by regulations that protect individual rights – to build and landlords to own properties to meet the needs of different buyers and renters.
The student loan debt crisis and housing unaffordability are urgent problems, but there are no instant solutions that are long-lasting. Transitioning from a statist mixed economy to capitalism needs to be gradual and systematic and will take time. But before such a transition can begin, people must want capitalism, starting with learning what it is and how it will increase prosperity and flourishing for all. A good place to begin is Ayn Rand’s essay collection “Capitalism, The Unknown Ideal.”
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