Why millennials are embracing socialism

Throughout our history, hard work, risk-taking, and trust in our free-market capitalist system have propelled our nation and millions of people up the economic ladder. But now nearly four in ten Americans believe that hard work and determination are no guarantee of success. Even worse, millennials now view socialism more positively than capitalism.

What has undermined faith in our economic system and the very values needed to sustain it?

Much of the blame goes to crony capitalism, which is when government provides special favors to some people or businesses, and picks winners and losers in the marketplace. Cronyism certainly predates capitalism itself, as past rulers rewarded family and friends for eons. But it's unfortunate that cronyism remains alive and well in a democratic society that trumpets the values of the free market. From tax breaks to no-bid contracts, crony deals wreak havoc on markets and capitalism both ethically and economically.

Crony capitalism creates an uneven playing field and benefits the few over the many. It could be a favor in the regulatory code, or a tax exemption that gives a company or industry – almost inevitably incumbents who already are successful – a leg up. Cronyism also diminishes innovation. When a company can prosper on a subsidy rather than by winning in the marketplace, complacency sets in and breakthroughs plummet. All this places limits on our quality of life.

In a free-market, capitalist system, businesses should compete unassisted, and be rewarded only if their goods and services successfully meet consumer demands. Merit and fairness triumph over favoritism. But crony capitalism distorts this arrangement, often driven by our money-lubricated political campaigns. It erodes trust in our economic system, our government, and our businesses. A sustainable capitalism – one that fosters equal opportunity and rewards risk-taking and innovation – is what we all should seek. Fortunately, it is within reach.

Sustainable capitalism starts with reforming the federal tax and regulatory codes. Together, they have helped create the breeding ground for crony capitalism. When tax and regulatory complexity increase, so does the breadth and scope of government. And a more-involved, far-reaching government inherently has more channels of influence, providing more opportunities for people to exert influence for their own benefit.

Simplifying the corporate code is imperative. Closing loopholes and removing tax expenditures across the board will allow the overall corporate tax rate to be lowered. Besides removing opportunities for crony deals, this will have the added benefit of putting U.S. corporations on par with their global competitors. The burden must also be lightened on small businesses, given they employ over half of the private sector workforce yet can devote up to or more than half of their income to taxes – not to mention the effort just to comply with the complex system. Companies of all sectors and sizes should be on equal footing.

Streamlining regulation also is important. In 2015 the federal regulatory code clocked in at a record 81,611 pages, which spans 14 miles if laid out page by page. Many rules – from those covering energy to healthcare to campaign finance – are not reviewed to check if they achieve their objectives, or if economic change has proven them unnecessary.

It comes as no surprise that crony capitalism has sparked debate within both parties this election season. After all, taxpayers ultimately bear the brunt of cronyism, regardless of where they live, what they believe, or for whom they vote. Now, the issue must move off the backburner and into the spotlight. Candidates need to be discussing what we risk losing if our system is left to fester.

We risk losing the system that has created the greatest wealth and prosperity ever known to mankind, the one that has allowed us to project democracy and freedom around the world, and lift millions of people out of poverty. It is a system to be nurtured and protected from threats, and cronyism is a huge threat.

A sustainable capitalism requires a system free from the barnacles of favoritism and cronyism. Businesses and government together should stop this favoritism and work to re-level the playing field. Our economic system and way of life depend on it.

Commentary by Steve Odland, CEO of the Committee for Economic Development and former CEO of Office Depot and AutoZone. Follow him on Twitter @CEDUpdate and @SteveOdland.

For more insight from CNBC contributors, follow @CNBCopinion onTwitter.

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