People are losing faith in capitalism. The world needs a new approach

Editor's Note: (Michael Klowden is CEO of the Milken Institute, which will open its annual Global Conference on Sunday in Los Angeles under the theme "Driving Shared Prosperity." The opinions expressed in this commentary are his own.)

Surveys suggest that a growing number of people are losing faith in capitalism and the free market system, convinced they are being — or will be — cast off as detritus in the wake of globalization and advancing technology.

These sentiments are helping to fuel political polarization and populism in the United States, Europe and elsewhere.

Last year, a Gallup survey found that only 45% of young adults in the United States have a favorable view of capitalism, while 51% see socialism in a positive light. Among all US adults, only 56% gave capitalism a positive rating, the lowest since 2010.

If we are to restore their faith in capitalism and free markets, we must find ways to ensure that the rewards extend to far more people in the United States and around the world. Achieving that will require candid dialogue and close collaboration between government and business.

The challenge is complex. Social and economic disruptions, including income disparity, a shrinking middle class, the uneven distribution of the benefits of globalization, and the threat of job loss due to automation all contribute to the declining confidence in our economic system. Studies indicate that young people in both developed and developing countries can no longer assume that they will have a higher standard of living than their parents.

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In the United States, 90% of Americans born in 1940 earned more than their parents by age 30, compared with only half of those born in the 1980s, according to Harvard's Opportunity Insights group. Diminishing mobility isn't just an American problem. The World Bank reports that intergenerational mobility is slowing around the globe as opportunities for better education and higher-paying jobs fade.

There is an imperative for us to bridge the polarization that has stalled our national discourse. We must bring together people from diverse backgrounds to collaborate and seek solutions rather than reiterate their standard talking points.

Many corporate executives believe — as I did when I was president of a publicly traded company — that their primary objective is to maximize quarterly profits. But as I have come to realize, the best way to serve shareholders over the long term is to recognize and adjust to a changing world. And what the world urgently requires of capitalism's proponents is that we find ways to leverage the system to create better opportunities for more people.

When the free market system functions as designed, it can drive solutions to alleviate suffering and lift individuals to their fullest potential. For example, we can witness the dramatic transformations underway in China and Vietnam.

The challenge isn't that we simply make a better case for the free market system. The most persuasive argument will fall on deaf ears unless real change accompanies our words. Only then will we replace today's skepticism with renewed confidence.