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How Do You Talk to The Next Generation About Capitalism vs. Socialism?


Answer: It Ain’t Easy​


By Pat Soldano

Maybe we can thank Bernie Sanders for those awkward, maddening, head-shaking family conversations around the dining table. Perhaps you know them all too well, the ones pitting bad capitalism against good socialism, Boomer versus Next Gen, fairness against greed.

Maybe it’s not just Bernie, but university professors, too, or maybe the sexiness of the Nordic Model. Maybe we can blame the French for all that alluring free healthcare and good wine.

Capitalism versus socialism is a tough topic to discuss under controlled conditions, but I hear time and again how parents are having a very tough time grappling with these foundational issues in their board rooms and dining rooms.

The discussion often turns ugly. It easily devolves into “The Case for Economic Freedom versus Social Equality.” Choosing freedom over equality is a dead end. Beware! Do not drive down it.

So, how do you approach this touchy subject? How do you warm up Next Gen to the idea that profits are okay, even good? They even pay for things that help the community, create jobs, create foundations, fund colleges, and support charities. And, lest we forget, create a pretty cushy life.

First, offer some facts for some much-needed mutual understanding. 

Fact 1: There is no country on Earth that is a 100 percent capitalist system. Most prosperous, developed western-style economies are considered “mixed economies,” that is, they are democratic, capitalist-based economies with some socialist aspects. That fact should be an easy one to forge some mutual agreement.

Fact 2: Communism has been tested and it has failed painfully. Socialism scares the bejesus out of the Current Gen and is, after all, just one “ism” away, like a gateway drug, from the very bad communism. Offer up that historic context and mention the collapse and ultimate fail of the United Soviet Socialist Republic, assuming anyone under 45 remembers the USSR.

Fact 3: There are only three or four shining examples left of a full-blown socialist/communist system: China, Cuba, Laos, and North Korea. I mean, come on, really? Do your kids really want to buy real estate and live in these countries? I don’t hear about a big US migration to China.

So, maybe the idea of economic freedom is a good place to start. So, you might ask your future family business leaders: “What’s the most economically free country in the world?”

Of course, your children will dejectedly say, “the United States of America.”
Wrong. Not even close.

The most economically free country in the world is Singapore, the small island nation at the southern tip of Malaysia. Next is Switzerland and then Ireland, and then Taiwan.

The United States doesn’t rank in the top ten, or top 20.  According to the Canadian think tank, The Fraser Institute, the United States ranks No. 25, just behind United Arab Emirates, but ahead of Mauritius and Uruguay. It is the lowest ranking the US has ever held.

So, the US isn’t the capitalistic beacon your heirs may think it is. We’re kind of middling. This may open the eyes of future family business leaders. They may even go to their iPhones and Zillow Singapore real estate prices. I can tell you, it’s expensive.

My good friend Frank Luntz is the best word strategist I know. With the work he has done with voters and focus groups has re-branded capitalism to the term “economic freedom”; and after all that is what it is!

A brand makeover might help in discussions. It might help to understand that in the stew of all the world’s successful economies, and countries, there is a large heaping helping of capitalism and then a plentiful pinch of socialism. It’s really a matter of how much of each ingredient that makes for a successful, and happy, economy.

Don’t think of a pinch of socialism like USSR socialism, which was more like a sledgehammer of mad, brutal Stalinism cloaked in the friendlier sounding word, socialism. Your heirs likely don’t know any of this history. They are thinking more about French democratic socialism or German democratic socialism, you know, striking for higher wages and then finding a nice café for a beer.

Fact 4: The term capitalism has obvious negatives. There’s a steely edge to the word. The word greed sits side by side with capitalism. It’s a tough thing to shift.

So, maybe you phrase things differently around that table. Don’t call it capitalism, call it the best system to date for “Economic Freedom.”

And, if you can find common ground that there are some good things with soft social programs, like healthcare, education, and retirement safety, you can agree to name these, “Societal Plus Benefits.” You could combine the two, and have the best of both worlds, Economic Freedom, with Benefits.  Or, maybe as some pundits call it, Capitalism-Plus.

Words do matter, particularly when you’re talking about the future of your family business. You could bring up some old-timers like Winston Churchill, who said: “The inherent vice of Capitalism is the unequal sharing of blessings. The inherent virtue of Socialism is the equal sharing of miseries.”

It’s a great line, but I’m not sure it will land. He also said: “Democracy is the worst form of government, except for all the others.” Another beauty that will likely illicit squint of eye.

Fact 5: Being pro capitalist democracy does not mean you’re against beneficial social programs.  There is plenty of room for common ground here, and we are doing that in the US, Europe, Asia, and around the world.

When managing the delicate conversation about capitalism versus socialism, it helps to frame it with more simple history.

The big shift came about 250 years ago. This is when the industrial revolution kicked into high gear, which brought about the rise of modern capitalism. The foundational idea was anyone can create their own wealth.

This was a new idea. We take it for granted today.

All you needed was to start a private business that made things or sold things, like many family businesses. You could invest in technologies to scale up, or what became known as mass production. The more you make, the more you can sell. The more you sell, the more profit you can make.

The best part was capitalism allowed successful individuals to invest in things like other businesses, real estate, gold, or silver, or anything. Of course, you had the opportunity to lose your money too. It allows successful individuals to contribute to charitable organizations that help find a cure for cancer or Alzheimer’s, save children from poverty and pets from death, provide more and better education for everyone and generally make America a better place for all of us.

Capitalism was created as the antidote to medieval feudalism, while socialism was supposed to be the antidote to industrial-era capitalism. Fast forward to today, it turns out theirs been a merger of the two systems among successful economies.

That knowledge may calm the discussion. There is humor too. 

There are some clever analogies you’ve probably heard, or know about, that can help illustrate the differences between the two concepts. Here’s one called The Two Cows. It goes like this:

You have two cows.

In a Communism/Marxism system, the government takes your two cows and distributes the milk evenly among you and your neighbors.

In a Fascist system, the government takes your two cows and sells you the milk.

In a Socialist system, the government leaves you with your two cows, but takes most of the milk and distributes it to your poorer neighbors.

In a Capitalist system, you sell one cow and buy a bull.

In these types of discussions, it’s generally not a good idea to think you’ll be changing minds immediately. Expecting instant agreement will likely lead to ever more disagreement.

Your daughters and sons may feel threatened by authority because they are just beginning to know life themselves and want the freedom to explore other options. They will come back to reality in time.

Consider these steps:

Step 1: Take a deep breath and say this to yourself “my daughter/son is not crazy, this is a something I need to address.”

Step 2: Prepare to have an intelligent conversation. Focus the give-and-take using some of the information above. You are not creating a right/wrong argument, but you want to understand their view properly. Talk very little. Listen honestly.

Step 3: Give them room to understand the history, the development, maybe even suggest they live in a partly socialist country and learn through that experience.

There may be some wild idea rants, many dead wrong, but come back to the history, the experiences, and stories of how these various systems have succeeded or failed throughout history. It’s all been tested.

If you consider the above facts and steps, who knows, you might end up being the hippest, smartest parent and family business owner ever.

Be safe in knowing that since the dawn of civilization huge social inequalities have existed, and along with that people and governments trying to overcome them. At least you’ve given it your best shot.

The only other remedy is time, and the reality that surviving in a world battling between economic freedom and economic slavery is not easy, and never ends.

Pat Soldano, President of Family Enterprise USA, and the Policy Taxation Group, both are non-partisan organizations advocating for family businesses of all sizes and are the organizers of the Family Enterprise USA Annual Family Business Survey.

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The need for fact-based reporting of issues important to multi generational businesses and protecting a lifetime of savings has never been greater. Now more than ever, multi generational businesses and family businesses are under fire. That's why Family Enterprise USA is passionately working to increase the awareness of issues important to generationally-owned family businesses built on hard work, while continuing to strengthen our presence on Capitol Hill. The issues we fight for or against with Congress in Washington DC include high income tax rates, possible elimination of valuation discounts, increase in capital gains tax, enactment of a wealth tax, and the continued burden of the gift tax, estate tax and generation skipping tax.

Family Enterprise USA promotes generationally owned family business creation, growth, viability, and sustainability by advocating for family businesses and their lifetime of savings with Congress in Washington DC.  Since 2007, Family Enterprise USA has represented and celebrated all sizes, professions and industries of family-owned enterprises and multi-generational employers. It is a bi-partisan 501.c3 organization. Family foundations can donate.

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