WITH a general election just a few months away, the class-war trumpets are sounding loud and clear in Britain. From the Labour ranks come tired jibes about Conservative policies designed on the playing fields of Eton. From the Conservative benches a more interesting proposition has appeared.
WITH a general election just a few months away, the class-war trumpets are sounding loud and clear in Britain. From the Labour ranks come tired jibes about Conservative policies designed on the playing fields of Eton. From the Conservative benches a more interesting proposition has appeared.
In the worry about the shift of resources from the increasingly workless working class to the increasingly unleisured leisure class something new and important is being missed, says David Willetts, a Tory MP and one of his party’s relatively few acknowledged Deep Thinkers. It is the massive and crippling shift in resources to retiring baby-boomers from the slimmer generation coming after them. Britain is ever more divided by age.
Altogether British people are worth about £7 trillion ($10.9 trillion). This can be divided roughly into £1.6 trillion in personal financial assets (shares, savings), £3.7 trillion in housing (£2.5 trillion if you subtract mortgages) and £1.8 trillion in personal and company pension schemes. It is logical that older people should have accumulated more wealth than younger ones. But the proportions seem to be shifting sharply in favour of the older cohorts, especially those aged 55 to 65.
Half the population are under 40 years old but they hold only about 15% of all financial assets. People under 44 own, again, just 15% of owner-occupied housing. Comparing the financial and housing wealth of different age groups in 1995 and 2005 the Bank of England found that those aged 25 to 34 had seen their wealth fall, whereas those aged 55 to 64 had seen theirs triple. It helped that inflation was galloping when the older group was borrowing to buy homes, but slowed thereafter.
If pensions are counted, the situation is even more skewed. Lushly funded final- salary schemes are now broadly closed to new members, in the private sector at least. Baby-boomers can chuck the day job at 60 or 65 and head off into the perma-tanned sunset (they will probably prove freakishly long-lived), borrowing against the inflated value of their houses as they do so. Their children must slog on towards an infinitely receding retirement age, squirrelling away money for their meagre defined-contribution pensions as a growing proportion of state spending is devoted to the needs of a massive generation of the elderly.
Young people have little chance of building up similar wealth. They are struggling to get on the housing ladder, though close to a fifth of people between 50 and 59 years old own a second home. Jobs for the young were getting scarcer even before the crash. Yet more and more older people are working and earning more, relative to young workers, than before.
On top of this, older baby-boomers have dodged two speeding bullets, leaving their descendants squarely in the line of fire. The first is the bill for bailing out the financial sector; the second, the effect of climate change on the cost of energy, water, flood-prevention and the like. Other countries have ageing populations, but the problem in Britain is especially acute. British baby-boomers tended to believe their houses were all the piggy bank they needed. They neglected to make other comparable savings or they borrowed against property to finance their old age. (One result of rock-bottom savings rates was that British banks, which did not have the same access to retail deposits as banks in other, more provident countries, got into trouble leaning heavily on the volatile wholesale markets for their cash.)
Mr Willetts is not the only writer to worry about baby-boomers crashing through society like a flash flood. Nor is this his first take on it. But two things distinguish this book from other offerings.
The first is the attempt to construct a logically compelling theory of self-interested altruism and reciprocity, enlisting anthropologists, Enlightenment philosophers and today’s game theorists to do so. There is an unvoiced contract that binds the generations. Parents look after their children, with a view to helping them do at least as well as they themselves have done, and grown-up children look after their parents, in the hope that their children will do the same for them one day. But there is now “a breakdown in the balance between the generations”, thanks to the colossal size of one of them. And it has brought social consequences as well as economic ones, including the disappearance of trust between unrelated adults and children and a long, messy transition to independence for young people today.
The second reason to read this well-written book is the wealth of social detail that Mr Willetts, with his wonderful magpie mind, spreads before the reader. He looks, for example, to England’s historically smallish, nuclear families for an explanation of the country’s early adoption of markets and the rule of law. Weaving together birth rates and immigration policy, he has an ingenious explanation for why workers from Lodz flock to London, where housing costs are higher than almost anywhere else in the world, whereas workers from Liverpool on the whole do not. As society becomes more segregated by age, he points out, some council estates now have ratios of adults to hormone-heavy adolescent males more typical of violent Yemen or Somalia than of developed Western countries. He turns up statistics showing that most women, employed or not, spend more time caring for their young children now than they used to, and suggests that most people have become better parents (doing more for their own children) but worse citizens (doing less for others). The end notes alone are a feast.
This is not a party-political book. It is, however, a polemic. Mr Willetts places a big bet on demography, giving short shrift to other factors affecting behaviour, such as technology and religion. This allows him to touch plausibly on many hot- button themes—the erosion of social capital, entrenched inequality and social immobility—but it stops short of a full explanation of them. He is also a little hard on the boomers, who have, after all, presided over economic growth, cloned sheep, become gay-friendly, spent a lot of time and money looking after their children and grandchildren, and who will not escape the current financial storm unscathed.
In the end we are left with a question. Are the baby-boomers a lucky generation or a selfish one? Mr Willetts, born in 1956, is too prudent to answer categorically, but his arguments suggest that if nothing else they are certainly a careless one. Prolonged economic growth tends to make people assume that future generations too will grow richer, and hence to make less provision for them. Yet the Victorians built railways and city halls for their descendants in what was one of Britain’s most optimistic eras. And the boomers’ descendants may have more cash but they are also likely to face far higher costs. Mr Willetts cites, approvingly, the way some American Indian tribal councils used to take decisions in the light of how they would affect the next seven generations. In Britain, alas, it is painfully hard to see beyond the next election.
V.SURYANARAYANA
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