‘Income only maintains consumption, but assets change the way people think and interact in the world. With assets, people begin to think in the long-term and pursue long-term goals. In other words, while incomes feed people’s stomachs, assets change their minds’
Michael Sheraden: a quote from his book, ‘Assets and the Poor’
The presentation given by Lord Willetts, founder of The Resolution Foundation, at Share Alliance’s Inter-generational Rebalancing Conference on 14/15 May was entitled ‘Intergenerational divides — and what can be done about them’. One of his most striking charts showed the huge contrast in the proportion of those who ‘wished they grew up in their parents’ childhood era’: 16% for Baby Boomers (born between 1945 and 1965) compared to 50% for Generation Z (born between 1996 and 2012).
Of course, people of the Baby Boomer generation were not far behind the devastating world wars through which their parents had struggled, so it’s understandable there was little wish to look back. However, the fact that 50% of Gen Z wish to return to their parents’ era reflects what is now a really challenging time for young people, with:
- youth unemployment and NEET status (‘Not in Education, Employment or Training) at very high levels;
- employment opportunities increasingly being replaced by artificial intelligence;
- a huge level of student debt for those graduating from university;
- an increasingly unstable family formation environment.
We urgently need to prioritise attention on the needs of young people; but that has proved very difficult for politicians of all parties over the past fifteen years — in fact, it’s been the case over several decades.
Professor Sir Julian Le Grand's presentation at the Share Alliance Conference included the quotation from Michael Sheraden at the start of this commentary. He also referred to evidence from US and UK longitudinal studies that individuals who own assets, when compared with those who do not, have better health, lower mortality, higher marital stability, less domestic violence, better educational outcomes for children, and higher savings when children become adults.
Over the past few months, report after report has evidenced the really difficult circumstances with which young people have to struggle today, and which has caused such a sense of despair. You may ask why seventy-five years of democratic socialism has failed the young in this way; the answer is debt: both personal and public.
David Willetts initially drew attention to the inter-generational challenge in his book, ‘The Pinch: How the Baby Boomers Took Their Children's Future’, first published over sixteen years ago, and The Resolution Foundation has worked hard over the intervening years to keep the issue in the public mind.
However, the appeal of debt funding as a substitute for re-thinking failed political strategies and imposing still more taxation has beguiled the short-term mindset of politicians, and it is now young people who are carrying, and will continue to carry, the can. The personal element of their debt burden is of course student debt, now averaging £53,000; the public component will be their responsibility to shoulder the massive quantum of public debt built up over these decades, which now stands at £2.9 trillion, or about £102,000 per household.
Meanwhile, there is no recognition of the significance of Michael Sheraden’s quotation on the importance of assets: indeed, the current Labour Government cannot even attach sufficient priority to delivering for low-income young adults the previous Labour Government’s initiative in this respect, the Child Trust Fund.
I don’t intend to say much more about student debt here. Its main impact was brought in under the Coalition Government, but it was embraced by all three main parties in England an Wales. It shows a complete disregard for the psychological effect of starting working life with such a massive burden to carry, and for the ‘stealth tax’ effect as a result of an additional marginal tax of 9% once their income exceeds £28,470.
But the real elephant in the room is public debt, which has reached astronomical levels in the first twenty-five years of this century and which is now requiring annual interest payments of well over £100 bn p.a., larger than any segment of public spending other than health and social care. Politicians may worry about their annual deficit and keeping in line with their fiscal rules, but they are content to overlook the sheer enormity of public debt, and the fact that it will drag down the prospects of generations to come. Why have we allowed these stratospheric levels of public debt to become commonplace?
Democracy itself has a lot to answer for in this respect. It is a fact of life that, unless we apply a self-discipline of thinking long-term, we all suffer from the natural inclination to discount the future. We do it as much in our political judgments as with climate change, and our politicians enjoy the convenience of being able to get us focused on just the immediately forthcoming elections.
Democratic socialism has fallen foul of this human characteristic; but autocratic communist regimes have proved its ineffectiveness in any event. Its denial of competitive public services results in bloated and inefficient welfare, and short-termism has beguiled us into financing so much of these services by borrowing, rather than by applying still more tax.
We should, of course, provide targeted support for those who really need it; but we should also require those who can pay, to pay. However, in the UK the Conservative answer to Labour’s addiction to universal services is just to accept them as a fait accompli, fearing that they will lose the votes of those older, wealthy generations of Baby Boomers if they make them pay for their own healthcare.
It’s not necessary for Government to fund and to control everything. In an article to celebrate the Great Exhibition of 1851, AN Wilson wrote in the Times on Saturday 23rd May, ‘Today we are so mired in the idea that politicians should pay for everything, control everything, and boss everyone, that all western nations are up to their eyes in debt and staring with dismay from one political nonentity to another, wondering who can get us out of this mess. Isn’t the answer to be found in the Crystal Palace [where the Great Exhibition was held]? That is, don’t expect politicians to solve our problems. They are the problem. If you want something done, heed Prince Philip’s oft-repeated words: ‘Just get on with it!’’.
We do indeed need to get on with something so that Gen Z and future generations of young people are not left to pick up the tab for the decades, if not centuries, to come. It is grossly unfair to impose such a burden on people who had no use of these services in the first place, and it's why the Share Alliance inter-generational rebalancing conference has been so important.
There are egalitarian answers to this conundrum, based on an appreciation of the importance of the individual ownership of assets and the building of life skills for young people, as set out by Michael Sheraden. But the challenges for them have also been amplified by the impact of social media, artificial intelligence, and wealth polarisation as a result of giant tech companies harvesting their data and creativity.
This week we're hearing more from Alan Milburn about the dire impact of social media on the young. As he says, ‘the welfare state was built for a different era and must change now if we are to avoid a generational, societal and economic catastrophe’. He's right about that.
And last week we heard that awful remark from the Chief Executive of Standard Chartered Bank Bill Winters, as he announced eight thousand redundancies in favour of using AI: ‘to replace lower-value human capital’. It put into sharp relief one of last week’s cartoons in Private Eye, showing a robot sitting under a sign saying ‘Inhuman Resources’ while handing a P45 to a young employee.
Let’s hope Pope Leo’s new encyclical on Artificial Intelligence helps humanity — including business leaders — in showing us how to use this extraordinary new tool to empower, rather than suppress, young people.
We need a determined shift in favour of egalitarian capitalism and inter-generational rebalancing, and we need to restructure governance to give much more emphasis to the long-term impact of political strategies.
Gavin Oldham OBE
Share Radio