New Delhi, Nov. 27 -- Democratic socialist Zoran Mamdani's election as New York City's mayor has reignited the debate about the future of capitalism as practised in the USA today. Reacting to Mamdani's victory, PayPal cofounder and Silicon Valley venture capitalist Peter Thiel, who is accepted as the head of the PayPal Mafia group (the term was coined in a 2007 Fortune cover story by Jeffrey M. O'Brien), who still rules Silicon Valley, commented, "Capitalism is not working for a lot of people in New York City. It's not working for young people." Thiel expanded this concern in a recent interview with the Free Press, saying strict zoning laws and construction limits have been terrible for millennials, who are having an extremely hard time buying homes. Significantly, in January 2020, in an email to top new-age business czars, including CEO Mark Zuckerberg, President of Global Affairs Nick Clegg, and venture capitalist Marc Andreessen, among others, Thiel cautioned, "When 70 per cent of Millennials say they are pro-socialist, we need to do better than simply dismiss them by saying that they are stupid or entitled or brainwashed; we should try and understand why." Other prominent members of the PayPal Mafia group close to President Donald Trump are David Sacks (crypto czar) and Elon Musk.
Data reveals that US Millennials (born between 1980 and 1995) came of age during a global financial meltdown, a housing bust, the worst recession in the United States since the Great Depression, and soaring higher education costs. They entered the workforce during or in the wake of the Great Recession. Among Millennial college graduates, unemployment and underemployment, at 8.8 per cent and 18.3 per cent respectively, are historically high compared with the same age cohort in prior generations, and wages for employed Millennials have dropped 7.6 per cent since the onset of the Great Recession. High unemployment levels and low wages are making it difficult for many Millennials to make even minimal payments on their record-high amounts of student loan debt. The COVID pandemic has worsened the situation. Since then, the job market has become increasingly hostile for new graduates (Gen Z) as entry-level positions are drying up, with slower payroll gains, "ghost" jobs, and absent hiring managers due to artificial intelligence. Even for those who did everything right, like earning a four-year degree and applying for steady white-collar roles, the return on education is diminishing. While overall joblessness remains low, youth unemployment is rising. In the US, the rate for young workers hit 10.8 per cent in July, compared to 4.3 per cent overall. A growing number of young men in the US are being checked out of the labour force and education. In 2022, about 4.3 million Gen Z Americans were classified as NEETs - not in employment, education, or training. Globally, a fifth of people aged 15 to 24 fall into this category.
Analysts argue that the crisis is not limited to the new generations alone. Anarchic capitalism has made it impossible for everyone - young, middle-aged, and old - to compete today. Trade union rights have been gutted, and wages have flatlined in the last decade and a half, thus creating a generation of gig workers on temporary contracts with a life of precariousness and debts. Multi-generational poverty is a reality. FRED data reveals that the estimated percentage of people of all ages in poverty in the United States ranged between 11.3 per cent and 12.5 per cent between 2000 and 2023. But in 2011, the poverty level rose to 15.9 per cent.
Over a decade ago, German political scientist Wolfgang Merkel raised an alarming question in an essay: "Is capitalism compatible with democracy?" According to him, capitalism and democracy follow different logics - unequally distributed property rights on the one hand, equal civic and political rights on the other; profit-oriented trade within capitalism in contrast to the search for the common good within democracy; debate, compromise, and majority decision-making within democratic politics versus hierarchical decision-making by managers and capital owners. "Capitalism is not democratic, democracy not capitalist," Merkel argued.
Since 1970, the global financialization of capitalism - the kind of capitalism where stock prices, financial complexity, and speculation flourish in contrast with what economists would call real production and real income - has become wholly misaligned with the values of democracy. In this school of thought, it is believed that democracy and capitalism, while always co-existing with some tension, can exist together sustainably only if the State acts to temper that tension. This temperance was at its peak during the post-WWII 1950s-1970s, when a stronger welfare state and a more Keynesian "embedded capitalism" operated within the bounds of democratic goals. These bounds began to erode, especially in the 1980s, as global financialization broadened the aspirations of capitalists, observes economist Garth Brazelton.
Data on growing economic inequality in income and the backsliding of democracy substantiate Merkel's thesis. Inequality has been rising across the globe for several decades. Though a few countries have reduced the number of people living in extreme poverty, economic gaps have continued to grow as the very richest amass unprecedented levels of wealth. Among industrial nations, the United States is by far the most top-heavy, with much greater shares of national wealth and income going to the richest 1 per cent than in any other country. Compared to other countries, the United States saw the largest expansion of its billionaire class in 2024. The number of American billionaires rose from 751 in 2023 to 835 in 2024. By contrast, China's nine-digit club shrank from 520 to 427.
According to the Economist Intelligence Unit's annual Global Democracy Index report, the quality of global democracies hit an all-time low in 2024, and the US continues to be seen as a "flawed democracy." Democracy in the United States is in decline. This backsliding is part of a global trend that political scientists refer to as a "reverse wave." A recent study reveals that for the first time in 50 years, more countries are moving toward autocracy than democracy. More than a third of the world's population now lives under authoritarian rule. Over the past 50 years, the number of autocratizing countries has dramatically increased while the number of democratizing countries has dwindled. At the end of 2023, democratisation was occurring in 18 countries, representing 5 per cent of the world's population; autocratization was occurring in 42 countries, representing 35 per cent of the world's population. Significantly, today's democratic reversals are happening in mature, consolidated democracies that were expected to be secure, including the US, India, Brazil, and Greece, as well as newer democracies once considered stable, like Hungary and Poland.
The inherent contradictions, as flagged by Merkel, between capitalism and democracy have been exposed. Now, democratic states, including the USA and India, are increasingly governed by a handful of oligarchs. The young generations - Millennials and Gen Z - are the worst hit. Peter Thiel has rightly identified the problem, but the crisis is not restricted to the USA alone. It is spreading across the globe. A new system of governance that can contain aggressive capitalistic exploitation and ensure the basic democratic rights of the people is the only solution to this crisis. Though it is too early to comment, Zoran Mamdani's political views have attracted the common man, especially the young generation of New York City.
Views expressed are personal. The writer is a professor of Business Administration who primarily writes on political economy, global trade, and sustainable development
Published by HT Digital Content Services with permission from Millennium Post.