Billionaire private equity chief Stephen A. Schwarzman believes that free market capitalism isn’t the main problem when it comes to inequality — but a broken U.S. education system is.

Raging cultural debates about income inequality and executive pay have eroded public support for capitalism, and led a growing number of wealthy individuals to speak out about the need for reform.

Yet Schwarzman has a different take. At the Yahoo Finance All Markets Summit in New York on Thursday, the CEO of The Blackstone Group (BX) explained that part of the underlying reason more Americans are becoming disenchanted with the current system is that around 40% can't write a $400 check in an emergency, according to a study from the Federal Reserve.

"What that means is this 40% of the population basically doesn't have savings,” he said. “And, they are having a really really tough time, which is why our politics has become poisonous because we've got a large percentage of our population that's not doing well. I think you have to address that," Schwarzman added.

Still, he insisted that capitalism "isn't broken per se. What's been broken is our educational system.”

The 72-year-old is also the product of a public school education at Abington High School in Pennsylvania, who later attended Yale for his undergraduate degree, then Harvard Business School.

When he was growing up as a public school student, the U.S. educational system was ranked among the best globally. Since that time, it's dropped significantly in the rankings compared to other countries, especially in mathematics.

"If you're producing a workforce that is dramatically inferior to competitors on the global scale, we're going to have a lot of trouble,” he told Yahoo Finance.

‘Not a recipe for success’

Schwarzman said he was in China a few weeks ago meeting with a top government official. In that conversation, it became increasingly clear that the U.S. educational system is lagging.

According to the billionaire, the Chinese official told him: “'You know what we are going to do in education?' We spent an hour on education. He said, 'We are going to require that every student in China take computer science.'“

He added: “And, I'm sitting there going, 'O.M.G.'"

Schwarzman noted that only around 5% of primary and secondary students are taking computer science at a time when technology is becoming integral to every sector of the economy.

"It is not capitalism that's broke,” he insisted.

“Imagine we are competing with a county where everybody is computer literate, and we've got hardly anybody. This is not a recipe for long-term success,” he said.