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.’
