The Youthquake Begins

I always get a chuckle whenever I hear someone ‘of a certain age’ ask innocently why their children and grand-children are worse off than them, as if they don’t already know. ‘It’s because you ate all their pudding’ I tell them.

The baby-boomers defined the politics of the postwar West. Born amid peace and prosperity, when the generosity of the welfare state reached its highest point, their sheer numbers made them the dominant cohort once they started reaching voting age in the 1960s. They demanded, and got, freedom, choice, and ever-improving well-being.

As I write in my new book, governments were able to meet these demands for as long as economic growth could generate the tax revenues needed to fund them. But once growth began slowing at the turn of the century, the well started running dry.

By then, the promises the boomers had made themselves, via the politicians they’d elected, had become a bit dear. When Western governments introduced public pensions early in the twentieth century, for instance, the average time a person spent in retirement was about a half dozen years. Today, you don’t have to look hard to find someone who has spent, or will spend, more of their life collecting a pension than they did paying into it.

The model was plainly unsustainable. But rather than accept a change in their lifestyles, the boomers elected politicians who cut spending elsewhere to maintain their share of the pie. The obvious target was young people – numerically a smaller group, and prone to skipping polling queues on election day.

Governments preserved spending that targeted the boomers – like pensions and health care – and slashed spending on young people, like tuition subsidies at university or entry-level jobs. Private employers most often followed that cue, cutting entry-level wages so as to squeeze enough revenue to keep funding ever-more expensive pension-pots – all while restricting generous defined-benefit pensions to the boomers, telling younger workers they’d have to be make do with more meagre defined-contribution schemes.

Unions generally went along, their membership – and leadership – tending to still be dominated by older members. They thus began negotiating differential contracts, whereby older members got to retain their privileges but new hires had to accept lower wages and less-generous pensions.

When the financial crisis hit a decade ago, many young people saw it as an exciting time of possibility. New blogs and websites, from Lena Dunham’s chronicle of life in the recession to radical mags like Jacobin started to crop up. There were bold experiments in communal living, the sharing economy emerged and above all, the collapse in property and share prices now made it possible to contemplate finally affording a house or starting a business.

Fat chance of that. Whatever renewal might have resulted from low asset-prices, existing asset-owners in the older population, and the institutional investors – pension-funds included – that serviced them were going to take a huge hit. So, central banks flooded the markets with cheap money, buying both government and corporate bonds in order to restore asset values. As a result, while today real wages for young people continue declining and the dream of owning a house is once again a distant prospect, the baby-boomers are now more than £2 trillion richer than they were before the crisis started. That buildup of debt will in turn sap future growth – in effect, robbing from future generations to spoil the present one.

But now, quite suddenly, young people have decided they’ve had enough. In the recent US and British elections, participation by first-time voters surged, tipping the balance towards a new, more radical left, most notably in Britain. While Theresa May was correct to say there’s no ‘magic money tree’ to pay for all the promises Jeremy Corbyn has made, she was also being just a wee bit disingenuous. Her government has been robbing young people for years in order to pay the rich – the pensioners who vote Tory consequently being the only group in Britain whose real incomes have risen since the Great Recession.

If you’re just settling into a quiet retirement and looking forward to a couple of quiet and prosperous decades, you can always hope the life-cycle effect, whereby people grow more conservative as they get older, kicks in. Then this youthquake might dissipate as everyone finds their favourite chair. However, the life-cycle effect is largely a function of the fact that as they get older, people accumulate assets, including houses, thereby augmenting their investment in the status quo. But with a generation now priced off the property ladder permanently, that effect may no longer operate.

Instead, as it becomes clear there is no magic money tree to feed everyone, the rising cohort of younger voters may decide it’s now time to turn the tables. I’m going to go out on a limb and make a prediction. If things continue the way they’re going, in another decade or so, we’ll still have populists like Donald Trump roiling our politics. But instead of  ‘Mexicans’ or ‘Muslims,’ they’ll substitute the word ‘pensioners’ in the angry speeches they make.

 

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