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US MBAs are the last skeptics of capitalism

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You might expect to find skeptics of capitalism in sociology or anthropology departments – and let’s be honest, capitalism doesn’t have as many fans lately. But you would think that the basis of our great American economic system could at least count on the approval of business students. As one recent MBA graduate put it, earning an MBA should be “the purest expression of capitalism.” The mission of a business school is to train capitalists – people who own and run businesses.

And yet, recently, the former dean of Columbia Business School, Glenn Hubbard, wrote that his students were skeptical of capitalism. In 2019, Harvard Business School dean Nitin Nohria said his biggest challenge was a lack of faith in capitalism. Several economists who teach in business and economics departments have told me that they are experiencing a similar setback in their courses.

It could be the changing profile of the average student. Business schools are increasingly accepting women and international students from leftist countries. The top business schools were once populated by people who worked in finance and consulting, but now the student body includes people from less traditional backgrounds who have worked in nonprofits and government.

A professor described the change: “There were always students who came here to change the world. Ten years ago, they hoped to achieve this by earning a lot of money and then becoming a philanthropist. Now they come from the NGO [non-governmental organization] world and want to bring those ideals to big business.

Harvard MBA data suggests that many applicants still have backgrounds in finance, consulting and private equity compared to 10 years ago. A professor told me that he sees the biggest change in students coming from the consulting industry. Their attitudes may reflect the evolution of this sector.

Traditionally, management consulting firms made no apologies for having the goal of helping companies become more profitable. Now, they help companies to implement a capitalism of stakeholders, where profits are sometimes secondary. Young MBA candidates have spent years simmering in an environment where enthusiasm for unbridled capitalism is no longer good business. And some board-bred MBAs genuinely believe that another path isn’t just possible, it’s better. Harvard Business School offers a course called “Reimagining Capitalism,” taught by an accounting professor.

I spoke to a self-proclaimed capitalism skeptic who is preparing to attend Harvard Business School after starting his career in consulting and then working in finance. He says his disillusion comes from seeing how capitalism has become (or has always been) about getting as much market power as possible. He doesn’t support socialism – and I haven’t found an MBA that does. But few call themselves capitalists either. A student told me that even students who embrace capitalism are reluctant to admit it because of the political implications.

At the very least, skeptics of capitalism are concerned about inequality. I was struck by all the talk of market power and inequality, but without any discussion of the trade-offs that might come from system change. For example, more equality could also mean less growth and higher taxes. A professor told me that when he brought up this point, some students think less growth can be a good thing. They believe that growth necessarily degrades the environment. An MBA candidate pointed to high drug prices as a failure of American capitalism. When I asked him if he thought that might be the price of innovation, he said he thought it would be better to have less drug innovation if it saved people from the medical bankruptcy.

The other thing that struck me was students seeing the capitalist economy as inherently zero-sum. If someone gets rich, someone else must be poorer. If there is more growth, it must be bad for the planet. I was taught something very different: that everyone enjoys growing prosperity, even if some grow more than others. Elon Musk and Jeff Bezos got super rich, but they also built things that made us all better. And that sustainable growth comes from productivity gains, so we get more output using fewer resources and productivity also includes greener and better technology. But the students I spoke with equated success at Musk’s level with less competition and more corruption.

The difference in our outlook can also come from a different life experience. I’m old enough to remember the Cold War. Young people may have less enthusiasm for capitalism because their memories are dominated by 9/11, the financial crisis and Occupy Wall Street. A skeptic told me he had never heard a good, credible defense of capitalism.

Perhaps today’s MBA students are simply much more idealistic than average. Inequalities have worsened during their lifetime. But it is still remarkable that they care so much about it. An MBA from a good school is a golden ticket to the top 5%. Surveys show that the average American, who likely earns significantly less, does not see inequality as their top concern.

But maybe they also act like good capitalists. Rejecting capitalism can be a good career move for them. Today, there are more and more high-paying jobs to define and implement actor models in consulting firms and financial companies. Also, if you are in such a position and you can say that your value is not limited to increasing your company’s results, your job performance is more difficult to assess.

Although the economy is not zero-sum, MBA graduates may believe it is because that is how the economy they live in works. There are so many elite jobs in top companies and government. Finance no longer offers the same huge salaries to people in the middle of the pack. MBAs may be for the top 5%, but reaching the top 1% or 2% is much more difficult and more ruthlessly competitive. A professor told me that his students were shocked that earning $500,000 a year puts them in the top 1%. They think it takes a lot more.

Perhaps that is why capitalism is so prevalent in top 10 MBA programs and on the East and West coasts, without necessarily infecting students around the world. I asked a Texas A&M economics professor if his students were skeptical of capitalism, “No,” he replied. “This is Texas after all. If anything, I have to convince them that sometimes regulation is warranted.

More other writers at Bloomberg Opinion:

College graduates too valuable to work in factories: Shuli Ren

Britain takes school snobbery to new heights: Thérèse Raphaël

The Rot at the Heart of Stakeholder Capitalism: Virginia Postrel

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Allison Schrager is a Bloomberg Opinion columnist covering the economy. A senior fellow at the Manhattan Institute, she is the author of “An Economist Walks Into a Brothel: And Other Unexpected Places to Understand Risk”.

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