The current affordability crisis is creating fertile ground for a new wave of socialist ideas, particularly among Generation Z, according to Diogo Costa, president of the Foundation for Economic Education (FEE). Costa warns that a perception of the American Dream being out of reach is leading young people to embrace policies like price controls and increased government intervention, despite recognizing the benefits of a market economy.
Costa identifies this trend as a form of "cost-of-living socialism" or "affordability crisis socialism," distinct from earlier iterations of socialist thought. "Young people, they want to live in a market economy. They don't want to move to Venezuela or Cuba, but they want price controls in everything," Costa stated during an interview at Freedom Fest in Las Vegas. He noted desires for rent freezes, subsidized public transport, and government intervention in grocery pricing as examples of this phenomenon, which he sees as a global trend.
This emerging ideology represents a significant challenge to free-market principles, Costa argues. He suggests that while technology has advanced significantly, the underlying economic ideas that support market economies are not as widely understood. The rise of artificial intelligence, for instance, is often met with pessimism about job displacement and societal disruption, rather than an understanding of its potential within a market framework. Costa believes that economic education is crucial for safeguarding these principles.
Drawing on the work of economists like Joseph Schumpeter, Costa explained that capitalism can be economically powerful yet culturally weak. He posits that the complexity of market systems can become abstract, making it difficult for individuals to see their connection to and benefit from them. FEE attempts to address this by illustrating the intricate processes behind everyday goods, such as a single pencil, to demonstrate the marvels of the market system.
Costa's own perspective has been shaped by his experiences growing up in Brazil during the hyperinflation of the 1990s. He recalled instances where prices changed daily, necessitating constant vigilance when shopping, and how his parents had to stockpile goods due to rampant inflation. "Your life starts to be designed around these big issues," he said, contrasting this with the economic stability often taken for granted in other countries.
He also experienced the effects of protectionist policies in Brazil, where strict trade barriers limited access to goods like video games. Costa referenced Milton Friedman's observation that economic lessons are often learned individually or by generation, and that as societies move away from periods of hyperinflation or protectionism, the lessons fade, making it easier to "drift towards inflation, to drift towards protectionism, to drift towards anti-economics." He stressed the need for economics to be re-taught to each new generation.