[FoRK] Boomer comeuppance

Adam L Beberg <beberg at mithral.com> on Thu May 31 11:38:55 PDT 2007

This sums up the situation really really well. Too many humans like a 
plague of locusts have greedily consumed everything in their wake 
without any thought of anything but "me me me" - we call them boomers. 
Now we're completely and totally screwed. A tipping point is coming (yea 
yea just one more) where the younger generation must either fight back 
or die off.

Prediction: Since almost all the money out there is just bits (450T in 
derivatives just to start) a crash and hyperinflation is unavoidable and 
will fix this all by wiping out _all_ fiat currency. Everyone will be 
completely broke, and then only those that actually do work and build 
things will have money.

Adam L. Beberg
http://www.mithral.com/~beberg/

================================================

 From The Sunday Times
http://women.timesonline.co.uk/tol/life_and_style/women/the_way_we_live/article1830703.ece

May 27, 2007
Because we're worth it
The baby-boomers’ culture of hedonistic consumerism has left their 
offspring with the crumbs from their table. And 65% of them say their 
children’s lives will be worse than their own. But are they bothered?
Bryan Appleyard

Elisabeth – a 51-year-old financial analyst – has banned her four 
children from using the sentence “I’ll put it on my CV.” A child of the 
1960s, a baby-boomer, her youth was one of freedom and fun. Now she 
watches in dismay as her children fret anxiously about their futures.

“My generation,” says Sally, her 20-year-old student daughter, “is faced 
with a huge amount of pressure to plan a career early on in life. Many 
of my friends at university are simply getting a degree as a stepping 
stone to work in the City.”

Sally asked her mother what she should do for her summer holidays that 
would look good on her CV. “I flipped,” says Elisabeth. The brightly 
coloured 1960s of her youth had given way to the grim noughties of her 
children’s.

Elisabeth is not alone. The boomer generation is suddenly waking up to 
the terrible truth that their legacy to their children is a nastier, 
tougher and more anxious world than the one they knew. And the young are 
waking up to the fact that it has happened thanks to the unthinking 
greed of their parents. Battle lines are visible in the sand; an 
inter-generational war is brewing.

“When I speak to my parents,” says Daniel, Elisabeth’s 21-year-old son, 
a PhD student, “I hear stories of how they campaigned against war, 
government, for freedom of speech, etc. No one my age seems to believe 
that what they do will have any impact on how the world is run.”

Money offers them no hope of salvation. Pensions can’t be trusted and 
property prices have put houses beyond the reach of the young.

“I was lucky,” says Maureen Ellis, a 55-year-old mother of three and a 
manager at a transport consultancy, “because I worked in a merchant bank 
and was able to buy a two-bedroom house in Wimbledon. That house today 
would cost £350-400K – if one of my children wanted to buy that house 
they would need to be earning £80-100K. Even a one-bedroom flat is way 
beyond their means.”

As a result, their children live at home. And pay rent. “I’m paying off 
someone else’s mortgage when I could be saving for my own,” says Holly, 
their 26-year-old daughter.

The Ellises (Maureen’s husband, John, 57, is a joiner) were mis-sold 
pensions in the 1980s, but, like many of their contemporaries, have come 
to think of their home as their pension fund, a safety net denied to 
their children. “We’ve always regarded our house as our pension,” says 
Maureen, “which means the booming housing market is great for us but not 
for the children. We’ve already decided we will have to help them out 
when they’re nearer to being in a position to buy somewhere. As we don’t 
have lots of savings, we’ll need to take equity from the house. We’re 
very lucky that even when things got really bad financially when the 
children were small, we managed to pay the mortgage. I know people who 
had to sell their houses to pay off debts.”

“I haven’t even thought about a pension yet,” says Patrick, her 
25-year-old son, who has gone into his father’s business. “I need to get 
somewhere to live first.”

The ageing boomers fear even more for their children as their own 
mortality looms. Maureen has contracted diabetes. “It’s funny getting to 
middle age and losing what you’d never valued previously. I was hardly 
ever ill, and overnight I became this sick person. I try not to let it 
get me down, as I don’t want to be defined by my poor health, but I 
often get very tired and worried about how things will work out for them 
all.”

Her husband, John, blames his own generation for utterly failing to 
equip their children. “It’s always those who have had privilege that 
wish, in their twisted sense of egalitarianism, to seek to deny others, 
and this is particularly relevant to post-baby-boomer education for the 
majority.

I feel our generation benefited from an education system that was the 
envy of the world and which taught us the “tools of the trade” for life. 
Peace, love and happiness, equality for all, rich/poor, male/female 
liberalism of the post-1960s baby-boomers has robbed our children’s 
generation of an education that would have equipped them to stand on 
their own two feet.”

But for the youngest Ellis child, Jack, 19, higher education is 
desirable primarily as a way onto the property ladder. “If I go to 
university, I’ll take a great life experience away with me and a chance 
of getting a better job, in turn allowing me to save for a house a lot 
quicker and easier.” These thoughts, these anxieties, these dramas, 
these obsessions are being played out across Britain and the developed 
world. Dinner-party conversations may start with the banality of the 
“property ladder”, but soon spread to wider issues of guilt and 
responsibility. The baby boom – the generational bulge that followed the 
second world war – created demographic cohorts that were very different 
from, even remote from, their predecessors.

“We were all so much more detached from our parents,” says Maureen. “Our 
parents in general,” says John, “did not help with homework or take much 
interest in our education, as they generally believed the schools were 
doing a good job, or they themselves hadn’t been educated to the same 
standard we were.”

The boomers are not detached. They fret and fuss over their ambitions 
for their children, as if unaware that they are simultaneously bleeding 
them dry. The big, destructive points about boomers are that there are 
too many of them and they simply haven’t the good manners to die. The 
rise in birth rates that ran from the late 1940s to the early 1960s was 
followed by an equally sharp fall as boomers either put off having 
children or had fewer. This means that our demographics have become an 
upturned pyramid with ageing boomers squatting on top of the much 
sparser population of their children. Meanwhile, the boomer death 
shortage is becoming critical. The massive increase in longevity in the 
20th century was expected to level off in the 1970s, but it didn’t. Life 
expectancies have continued to rise. It means the boomer bulge will 
continue well into the future, with elderly boomers continuing to exert 
political power over the young.

They’re good at this. As the West boomed in the 1950s and 60s and 
government created vast programmes of state welfare and free education, 
boomers enjoyed spectacular pensions, free university places and ever 
more generous health provisions. Rising property prices underpinned the 
very characteristic boomer sense that the future would look after 
itself. Their parents, who had seen depression, war, austerity and 
endless sacrifice, murmured a few protests. But in their hearts they 
shrugged. The happy, timeless present of their children was exactly what 
they had fought, suffered and died for.

But now all the boomer chickens have come home to roost. The house-price 
explosion that kept their dreams afloat has inflicted a double burden on 
their children. First, they can’t get on the housing ladder, and second, 
it has left them with a dangerously unbalanced economy. A report from 
the National Institute of Economic and Social Research (NIESR) suggests 
that the boomers’ boom means that the real national debt is, in fact, 
130% of GDP, not the 40% claimed by Gordon Brown. And Martin Weale of 
the NIESR also estimates that the boom amounts to a transfer of assets 
from the young to the old of £1.3 trillion since 1987. Weale writes: 
“Working through the chain, the capital gains of the house-owners are 
transfers from first-time buyers. The political appeal of this situation 
is easy to grasp. The burden of rising house prices falls on current and 
future first-time buyers.”

Understanding this is crucial, because it casts serious doubt on the 
common boomer habit of using their homes as their pension fund. If they 
simply held onto their houses and passed them on to their children, 
their cash value would be much less important. What would matter is they 
had passed on a place to live. But if they consume the value of the 
house in the form of a pension, then they deny their children both the 
cash value – hence the staggeringly high figure of £1.3 trillion – and 
the home, thus burdening them with the need to get on the housing ladder 
as quickly as possible. Boomers are therefore leaving their children in 
a society catastrophically in thrall to the idiot god of property 
values. No less than 21% of the average household’s income goes on 
mortgages; in 1996 it was 11%.

Pensions, meanwhile, have collapsed. Boomers now retiring with their 
final salary schemes intact will seem fabulously affluent to their 
children when they retire. Workers will now retire on less than half 
their salary: on average they will receive little more than the minimum 
wage. An under-40 “generation X-er” on the average wage of £447 a week 
can expect £223 in retirement.

Again, the full implications of this need to be understood. Lower 
pensions, combined with lower savings in general, mean that boomer 
children are heading for very impoverished retirements. This will 
produce intense political pressure over the next few decades for 
government to intervene by raising state pensions. So boomer 
irresponsibility is creating a huge liability for the next generations.

Even welfare generosity has backfired. Higher education for the masses, 
for example, now means tuition fees, leading to debt – a further barrier 
to getting into the homeowner club.

“Everyone has a bloody degree,” says Daniel. “To differentiate yourself 
and get a job requires further education, which costs time and money, 
with the outcome that you ironically end up working for some lucky git 
who went into work straight after university and is less qualified than 
you but has more work experience.”

Boomer children are anxious and trapped in a future that stubbornly 
declines to look after itself. At the personal level, there are all the 
problems defined by Elisabeth and Maureen and their families, and at the 
global level, there is the threat of environmental disaster, the 
apparent restarting of the cold war with Russia, the confrontation with 
terrorism and uncertainties about food, fuel, water and the pressures of 
globalisation and mass migration. So now is the time for the boomers to 
ask themselves a very awkward question: have they wrecked the joint with 
their freedom and fun and left their impoverished, anxious children to 
make what they can of the wasteland that remains?

Economists, sociologists, philosophers, environmentalists and 
politicians are deep in debate about this. How we value the future, what 
we are prepared to sacrifice for our children, is one of the most 
intriguing and urgent debates of our time. But what are we prepared to 
do now?

“We have had a period of gradual incremental change following the shocks 
of the world wars in the first half of the century,” says Avner Offer, 
professor of economic history at Oxford, “but now new shocks are in 
sight – climate change, ageing, energy depletion, globalisation, 
immigration, runaway technology and maybe nuclear war. These cannot be 
dealt with by the means of changing prices, which is the current 
economic orthodoxy. I think we know what to do, but we don’t have the 
willpower to do it.”

This is unlikely to remain a merely academic debate for long. At the 
global level, the environment is raising questions about how much we are 
prepared to sacrifice in the present to protect the future. At the 
personal level, young people are protesting about the political power 
and greed of the boomers. In Germany, Dr Jorg Tremmel, 35, runs the 
Foundation for the Rights of Future Generations (FRFG). “Because of the 
labour market in Germany,” he says, “the present young are known as 
Generation Internship because they can’t get paid jobs. In 1970, a 
30-year-old was earning 15% less than a 50-year-old. Now the gap is 40%.”

Precisely the same income gap between young and old has opened up in 
France over the same period. Unemployment among the young has soared, 
with a quarter of all graduates without a job. In the recent 
presidential election campaigns, both candidates were falling over 
themselves to soothe the anxieties of increasingly disaffected youth – 
Sarkozy with interest-free loans and training allowance, Royal with more 
housing and guaranteed jobs. Meanwhile, savings ratios among the French 
young have collapsed. A group, Impulsion Concorde, has been founded to 
give young people a say in their future. One of its slogans, 
significantly, is “We will not pay your debt.” As in Britain, young 
people are forced to stay at home with their parents – 45% of Italian 
30- to 34-year-olds are still at home – as property prices keep them out 
of the housing market and ageing boomers fail to die and pass on their 
wealth.

The FRFG is campaigning to change the constitution of Germany to make it 
mandatory to consider the rights of future generations. This was tried 
by Chirac in France, but Tremmel says he just set up a committee of old 
professors. In Israel there is a Commission for Future Generations 
designed to take “a comprehensive view of the legislative picture with 
regard to any potential negative effect on the needs and rights of 
future generations together with the means to prevent such legislation 
from taking place”. And, as our own David Willetts, shadow secretary of 
state for education and skills, is fond of pointing out, the Iroquois, 
an American-Indian tribe, have, as a part of their “great law”, the idea 
of seven-generation sustainability. Every decision has to be taken in 
the light of its effects on the next seven generations. At the moment 
the FRFG is a small operation and Tremmel says there is not enough 
activity elsewhere. But he is sure the idea will spread as the young 
realise how much they have been expropriated by the old.

This, as Tremmel says, is a confrontation that is only just beginning. 
We are used to class wars, but are facing an inter-generational battle. 
Realising their predicament, the young will want to fight the 
expropriations of the old. Avner Offer welcomes this. He sees it as a 
way in which the political market can offset the baleful effects of the 
economic market. In the end, he points out, the old can’t go on stealing 
from the young for ever. “How can the old seize everything? The young 
will rebel? They’ll simply go on strike.”

This will mean the boomers will have to be deprived of some home 
comforts. There are any number of ways of doing this. Gordon Brown’s 
1997 raid on the pension funds might just be the beginning. One obvious 
way would be a massive liberalisation of the housing market by allowing 
new building on an unprecedented scale. This would slay the idiot god by 
driving down house prices and, of course, it would impoverish millions 
of boomers. Unsurprisingly, this step is not being openly advocated by 
any party.

Our leading thinking politician in this area is “Two Brains” Willetts. 
He has a lecture on the issue that, Al Gore-ishly, he takes around the 
country to spread the news. He strongly believes we have to focus more 
on the needs of future generations, but thinks the sting can be taken 
out of this for the boomers: “I’m an optimist. I think we can rise to 
this challenge. What it requires is a different way of thinking, of 
making policies that take account of the future. The question of whether 
we can appeal to anything above the selfish gene. But I’m not a 
reductionist; I do think there’s more to life than the selfish gene.”

Willetts believes that government must take responsibility. “Government 
and society is an inter-generational contract and one task of government 
is to maintain that contract so that no one generation exploits the others.”

He is pressing for incentives for long-term thinking to be included in 
the next Conservative manifesto. “There are several things we are 
working on: a regulatory regime for utilities that rewards and 
encourages investment; a simpler, more attractive savings vehicle to 
make it easier for young people to get started with saving?”

As yet, no manifesto decisions have been made, perhaps because the 
problem is, as Willetts knows better than anybody, highly complex. The 
question of how exactly we should value the future is one that evades 
all academic disciplines, though the economists have tried very hard to 
give an answer, notably through the strange idea of the social discount 
rate (SDR). If I offer you £100 now, you know exactly what it is worth. 
But what if I offered it to you in a year? How would you value it? 
Probably at less than £100 because, apart from anything else, you might 
die or the world might end. So your SDR involves a reduction in value 
over time; indeed, it is standard practice. The Treasury applies an SDR 
of 3.5%, plus inflation – about 6%: so £106 in a year’s time would be 
worth £100 today.

Infants tend to apply a staggeringly high SDR. Researchers offered 
children a choice of one sweet now or two in the near future. A minority 
chose two in the future; the rest applied an instant SDR of 100%. 
(Unsurprisingly, the prudent ones were found to do better later in life.)

You might think it would be virtuous to value the future more highly 
than the present, and thus apply a positive SDR, making your cash worth 
more in the future. But beware. Lenin and Stalin applied a very high 
positive SDR by valuing the present as nothing and the future as 
everything. Millions died because they had no value.

This dusty aspect of economic theory became urgent with the publication 
of Sir Nicholas Stern’s report on climate change. Stern is one of the 
world’s leading economists and he applied a very low SDR of below 1% 
(meaning £100 will be worth almost the same in the future as it is 
today), calling for sacrifices and long-term investments now to ensure 
the wellbeing of the next generations. He ran into fierce criticism. “It 
was a ludicrously low figure,” said one economist, “that would mean 
present generations would impoverish themselves for the future. He did 
it to make the climate-change figures look big.”

On the other hand, Stern may have just been offering a corrective to the 
instinctive boomer belief that the future will look after itself, as 
economic growth would ensure that successive generations would grow 
richer and their wealth would outstrip our present concerns. After all, 
the SDR is arbitrary: mine is as valid as Stern’s. It can be anything we 
want it to be. If we are selfish, it is high; if unselfish, low. For 
boomers it has seemed high because they expect the economic growth they 
have enjoyed to continue for ever.

Americans, in particular, seem to take this view for granted. In their 
book The Coming Generational Storm: What You Need to Know about 
America’s Economic Future, Laurence Kotlikoff and Scott Burns argue that 
current government schemes – notably Medicare, which provides health 
care for the elderly – are based on deluded economics and are liable to 
explode, placing a huge, almost incalculable tax burden on future 
generations. The official debt figure of the US is understated by 
trillions of dollars.

“The official debt is not really the measure of anything,” says 
Kotlikoff. “You have to look at something fundamental, which is the 
generational imbalance? I realised we were flying blind – we had no idea 
what our true generational policy was. We were looking at numbers that 
had no clothes – you’re probably familiar with the Emperor’s New Clothes 
story. In current economics every single institution is looking at the 
wrong numbers routinely.”

Kotlikoff also points to the key political force sustaining these 
delusions: the brute boomer power of numbers. “I think certainly the 
elderly as a group, when it comes to election day, have nothing to do 
but vote. You know they’re not working, so they’re a group that gets a 
lot of attention from politicians and are well organised because they 
have nothing to do but organise.”

Our position is not quite as bad. Our hospitals aren’t, on the whole, as 
good as American ones, but the NHS does keep costs under control. 
Medicare, in contrast, is an open cheque written by the boomers but 
drawn on their children’s account. Also, our Treasury does do some 
inter-generational accounting that discourages the writing of open 
cheques. Yet politically we are dominated by the boomer bulge, and 
culturally we share the American fondness of living on credit: spend now 
so someone else will pay later.

At this point it becomes clear that economics can only describe the 
symptoms: the disease itself is political and, ultimately, cultural. As 
Avner Offer writes in his book The Challenge of Affluence, “Contracting 
for the future is difficult, For example, consumer choice finds it 
difficult to cope with providing support for everyone’s old age. The 
time gap between consumer decisions and their consequences is just too 
long. It is up to politicians to craft durable commitments for 
inter-generational transfer.”

But how do they do it? At one level, human beings are just bad at 
thinking coherently about the future. The great philosopher David Hume 
said it all in the 18th century: “There is no quality in human nature, 
which causes more fatal errors in our conduct, than that which leads us 
to prefer whatever is present to the distant and remote.” But, at 
another level, it seems the boomers are historically bad at planning for 
or making sacrifices on behalf of the future. This raises the question: 
are they a uniquely selfish generation?

No, says Avner Offer, we cannot blame one generation, it is simply what 
has happened. The welfarist assumptions of the immediate post-war period 
gave way to market liberalisation and the cult of the individual. This, 
in turn, led to what he calls a “retreat from commitment”.

“? in embracing the tide of new rewards,” he writes, “cognitive, 
occupational, and material, men and women have had to choose, and they 
have often chosen the shorter view. In particular, they appear to have 
given a lower priority to the longest of horizons, that which transcends 
the individual, and extends beyond him and into the future, by means of 
his or her children.”

Individualistic boomers loosened the ties of family and future just 
because, in essence, they could do so. The loosening was done with an 
excess of enthusiasm amounting to self-indulgence and greed. Qualms were 
overcome by the thought that, just as the boomers had been much richer 
than their parents, so their children would be much richer than them.

This led to more dangerous developments than just credit-card debts and 
stratospheric mortgages. It led to widespread short-termism. Investment 
payback times are now calculated in a few years, so all projects are 
subject to instant obsolescence. In the European context, Britain is 
very good at short-term profits and very bad at long-term investment. In 
an American context, we are very bad at incubating businesses. Our 
venture-capital groups are only interested in buying existing 
businesses; in the US they pursue start-ups. We are also ridiculously 
indulgent to the insanely short-term ambitions of private equity 
operators, complacently watching as they manoeuvre to overthrow 
long-established companies. Government is little better. Gordon Brown’s 
PFI scheme is a short-term way of keeping debt off the government 
balance, but one day someone will have to pay.

At the heart of this short-termism is the deep cultural truth that 
boomers have lost the old, philanthropic view of the future. Look at it 
this way: Sir Joseph Bazalgette was a Victorian civil engineer who built 
the Thames Embankment and the London sewers that suppressed cholera. 
Both are still in use today. Peter Bazalgette, his great-great-grandson, 
produces Big Brother. No new London buildings – nor sewers – are 
designed to last as long as anything the Victorians built.

Can the boomers be persuaded to think their way out of their 
short-termist, profligate ways? It would be nice to imagine they could. 
The problem is that the philosophers haven’t got much further than 
pointing out that economic devices like the SDR are meaningless. How can 
they explain the need for sacrifice?

“We have no theory of ethics involving future generations,” says Stephen 
Gardiner, a British philosopher working in the US. “And I don’t like 
this notion of sacrifice. If I’m overspending on my credit card and 
someone tells me to cut back, can I say that is sacrifice?”

The sad reality is that individual boomers are realising they are 
trapped by the world they have made, at the same time as they realise 
the extent of the damage their generation has done.

“It’s distressing,” says Elisabeth. “You want to wave a wand and tell 
your children it will be fine, that they will manage, but you know it’s 
going to be really, really tough.”

“I think,” says her daughter, Sally, “we live in a very narrow-minded 
and decidedly selfish society. We ought to seek to succeed where our 
parents have failed? but instead we have become cynical about it.”

The final irony is that even as environmentalists – the one 
unconditionally virtuous role they have invented and passed on to their 
children – the boomers fail. One academic study called Greening the 
Greys observed that boomers have the biggest carbon footprint of any 
demographic sectors: 13.5 tonnes a year, up to 20% higher than anybody else.

The boomers have poisoned the wells and ploughed salt into the fields. 
Their post-war idyll is over; the world is returning to its default mode 
of confrontation and violence, now made more ominous by looming 
catastrophes like global warming. In the midst of their success and 
greed, the boomers forgot Edmund Burke’s most imperishable insight – 
that society is a contract with three interested parties: the dead, the 
living and the unborn. Their children are paying the price of their 
amnesia. For the moment, they seem resigned, but, soon enough, they’ll 
want their world back.

Generation gap: Quids in

Sarah Cook, 20, Sedgefield, County Durham

My mum had a tough childhood in comparison to mine. She was the eldest 
of four children and had to look after the others, but she passed her 
11-plus, got to grammar school and became a teacher. My Dad was a 
teacher too. After he was offered a job lecturing at Durham University, 
my parents moved to Sedgefield. At that point, they didn’t have much 
money, but they managed to buy their own house. House prices were low 
then because of the miners’ strike. I guess my parents got lucky at the 
right time. It wasn’t easy for them bringing three of us up and paying 
off their mortgage at the same time. But things have worked out. When I 
decided to go to university they were very supportive, just as they had 
been for my brother and sister. I didn’t qualify for a grant, but I do 
have a student loan. I’m careful with what I get and make the money 
last. Mum and Dad didn’t want me to get a job so that I could focus on 
my degree, so they help me out as much as they can, paying my rent as 
well as my tuition fees. I think I am quite lucky in comparison to 
friends at university. And the fact that my parents have worked in the 
public sector has given me a real sense of security. I know that there 
are systems in place for public-sector workers, such as pension schemes 
being automatically set up for you. It must be a relief. With their 
pensions, their house and the money they’ve saved over the years, I hope 
Mum and Dad will be able to enjoy their retirement. When I think about 
the future I worry about money, but I am sure things will be okay. Mum 
and Dad definitely won’t be leaving me with any debt, that’s for sure.’

Generation gap: Quids out

Matt Gibbins, 21, London

‘I am very worried about money and I see myself leaving university with 
student-loan debts of around £15,000. My parents have helped me a little 
financially, but they like to enjoy life, rather than saving for my 
inheritance. I’m not complaining about it. It’s what everyone does now. 
They have bought a house in Spain, a villa with a swimming pool, which 
they are going to use as their retirement home. They sold our 
four-bedroom family home in Woking, and are living in a downsized 
two-bedroom flat. They love their house in Spain and I don’t begrudge 
them spending the money now, even though I did expect more from them. 
I’m an only child, too. I work in an office during the day in the 
holidays, and in the evenings I work in a pub. I am permanently worried 
about money, and even though I’m earning a reasonable amount in the 
holidays, I still need student loans to tide me over. When I leave 
university I’ll be on my own, and I can’t imagine getting on the 
property ladder around here — a little flat in Woking costs at least 
£200,000. It will be years before I can afford my own place. I do have 
friends whose parents have paid for them to go through university and it 
can make me feel envious, but my parents have their own life and I don’t 
see why they shouldn’t enjoy themselves. It’s just hard for me to set 
off in life with all this debt round my neck like a millstone. I am very 
worried for my children in the future, as going to university is 
becoming more expensive, coupled with the cost of living. People don’t 
expect to save in the way that they used to, so there is going to be a 
growing expectation that children have to fend for themselves.’

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