Tuesday, June 7, 2016

Generation Screwed

Every adult generation in human history has worried about the young generation. It’s part of the job description. It shows you are an adult.

And yet, just because everyone does it, this does not mean that everyone is wrong all the time. Nowadays, as America’s youth flocks to the candidacy of a self-proclaimed socialist it looks like the adult generation might really be on to something.

Think about it: countries like Argentina and Mexico are rejecting leftist governments in favor of more right-of-center governments. The Socialist president of France is in a fight for his nation’s life against leftist labor unions. Communism and just about every form of socialism have already been shown to have failed. And yet, America’s youth, beguiled by one or another Pied Piper, brainwashed to within an inch of their mental lives, believe that socialism is the solution.

That means: socialism is the problem, not the solution.

So says Niall Ferguson, a writer we always read carefully.

Ferguson quotes Bernie Sanders’ pollster:

His pollster, Ben Tulchin, said millennials support Sanders because their generation is “(expletive) unless they see dramatic change. What’s their experience been with capitalism? They have had two recessions, one really bad one. They have a mountain of student-loan debt. They’ve got really high health care costs, and their job prospects are mediocre at best. So that’s capitalism for you.”

And that’s not all, folks. This same younger generation is living in the midst of a social confusion and anomie the likes of which the world has rarely seen. They have rejected all of the old rules and roles, now to find themselves lost and adrift. They do not know who they are; they do not know what gender they are; they do not know their orientation; they do not know what they should or should not do. They are not only drowning in debt; they are paralyzed by guilt, over their privilege. More and more of them are graduating college and moving back in with their parents.

And this, in the midst of what is supposed to be an economic recovery. It’s not that capitalism has failed. It’s that the country has rejected capitalism and the gospel of wealth creation in favor of the gospel of social justice and income redistribution. The new gospel has it that the government owes you a living and a happy retirement. Instead of competing in the cold, cruel marketplace, we are happy to suckle at the teat of the Nanny state.

As Ferguson sees it, young people are not really at fault. Their elders have been living it up on borrowed money and are soon going to present them with the bill. Far from being rapacious capitalists, the older generations, especially the baby boomers, have been living off the successes of the Greatest Generation. 

Unwilling to compete in the world markets, they have folded up shop and are enjoying their comfortable retirements. The damage done by the Vietnam counterculture has not yet run its course.

So, China and the rest of Southeast Asia are embracing a raw version of capitalism. They are producing wealth. The West, even America, has been redistributing wealth and experimenting with social democracy, which Ferguson calls Marxism lite:

Communism failed, but social democracy — Marxism Lite — was very successful in the 20th century. It entrenched the position of trade unions. It created jobs for the boys (and, later, the girls too) in the public sector. It established generous pensions and other benefits for older workers, and subsidized or free health care. And when tax revenues did not cover the costs of all this, social democrats borrowed, claiming (seldom truthfully) that they were engaged in Keynesian demand management.

What was the consequence?

As we all know, the ultimate consequence of these policies was the great inflation of the 1970s. What to do? For the generation known as the baby boomers — conventionally, those people born between 1946 and 1964 — the best protection against inflation was to buy property. The next best protection was to abandon social democracy, which was what many of them did in the 1980s. However, their new-found conservatism was always qualified in a crucial way. In theory, they favored reform of the welfare state. In practice, they shrank from real reform. There were cuts, to be sure. Deficits and debts were reduced for a time. But health care? Public sector pensions? By the beginning of the new century it was painfully obvious that the job had been left half-finished.

The Reagan and Bush administrations fell short of a full embrace of capitalism. The nation had gotten into its head that the raw form of capitalism was too cruel, not nice enough, not kind and gentle enough. We had capitalism with a warm and cuddly socialist side, one that would shield you from the horrors of real competition while supporting you in the style to which you were accustomed.

We kept it going by borrowing money. One notes that some economists, in particular the polemicist Paul Krugman, keep insisting that borrowing money is no problem.

They are content with the knowledge that America can always print money. Or, at least, it will be able to print money as long as the world continues to act as though American currency is as good as gold.

As for that time when the credit markets froze and the economy was about to crash and burn— we solved it by printing more money. If no one wanted to loan us money we could print up a batch in the basement and loan it to ourselves, thus keeping interest rates low. If we were afraid that high mortgage interest rates would cause the price of housing to fall, put half of the homes in America under water and wipe out everyone’s savings, the Fed could buy up mortgages, keeping the cost of borrowing low and the price of housing high.

Someone at some point is going to pay for it. Who better than today’s youth. Ferguson offers a bleak assessment:

Young and as yet unborn Americans will either pay much higher taxes than their parents and grandparents or receive much less in terms of Social Security and Medicare, or some combination of the two. And something very similar can be said of most developed countries today. They have all, to varying degrees, broken what Edmund Burke called the “contract . . . between those who are living, those who are dead, and those who are to be born.”

Unfortunately, young Americans do not get it. Their teachers do not get it and have taught them not to get it. They comfort themselves with the dream of inheriting their parents’ wealth, unaware of the fact that the quantity of wealth depends on the market value of assets, and even less aware of the fact that much of it will be taken away from them, in order to pay off the debt.

Ferguson writes:

Far from signing up for Bernie Sanders’ superannuated socialism, young Americans should be looking for candidates who would reform the country’s bloated and inefficient entitlement system and reduce the power of public sector unions. Far from leaning leftwards, those millennials saddled with student debt and unable to find affordable homes in cities such as San Francisco should be asking themselves: Who runs universities? Who limits new house-building? Clue: not conservatives.

By his reasoning, conservatives, that is, people who are willing to reform the entitlement state, reign in the regulatory state, and promote free market competition have been AWOL Without an economy that creates wealth, the only questions is when, not if the bill is going to come due. We already know that the young generation is going to be stuck with the bill. In a strange way they know it too. The problem is, they have not received an education that will prepare them to deal with it.


Ignatius Acton Chesterton OCD said...

Feel the bern. While you still can. Today's the last day.

Socialism distorts reality. Socialism is a fantasy. Reality is the cure. Reality is truth. Today's young people need a heavy helping of reality.

Education -- real education -- is the civil rights issue of our time. If the government is going to enter into trade deals that pit unskilled, under-educated American laborers against foreign labor in Asia, we must revolutionize and upgrade our education system and expectations of parents and students. We are failing! We need more discipline, more rote teaching (3 Rs), and much more rigorous standards. Someone with a C average in school, under a true meritocratic regime, should be able to easily hold a skilled job... without the kind of rampant grade inflation in our schools today.

Our unskilled, under-educated American labor force cannot compete with Asian workers now in the reality of VALUE. This just in: real economics is about value. How are they going to compete when Clinton/Sanders/Democrats get minimum wage up to $15 per hour? The WSJ had a great op-ed yesterday by a guy who owns a car wash in New York City. He said the $15 per hour "living wage" would cause him to charge $30 per car wash, which New Yorkers will not pay. Assuming he wants to stay in business, he would have to invest rapidly in automation (which would be extremely expensive), so he could have to cut his labor force from 30 workers down to 2. That's change you can believe in. That's worker's rights. That's a living wage. That's unemployment for most (but not all) at the lower end of the wage/skill socioeconomic spectrum.

This is what happens when social democratic voters cannot do math, and don't have any interest in learning.

Special note to Paul Krugman, et al: Borrowing money is not a problem. In fact, it's easy. Until people won't lend to you anymore. And borrowing money isn't a problem, until people want it back. When they want it back, and you don't pay them, they shut off the spigot. Usually forever. And then the whole fantasy comes crashing down. Bleak? Truth hurts. Don't like hearing it? Wait until you hear this one... you're going to die someday, and you can't take your stuff with you. Ouch! Good luck.

Listen to this grand Obama pitch, and then the loud cheer: https://www.youtube.com/watch?v=0DjLdKU2a9M


Sam L. said...

His pollster, Ben Tulchin, said millennials support Sanders because their generation is “(expletive) unless they see dramatic change. What’s their experience been with capitalism? They have had two recessions, one really bad one. They have a mountain of student-loan debt. They’ve got really high health care costs, and their job prospects are mediocre at best. So that’s capitalism for you.” No, that's leftist government.

Ares Olympus said...

The left-right bickering seems rather tiresome.

Its easy enough to agree that the need for ever growing debt to stand still is a sign that the economy as we know it is on its last days, whether it lasts another week or 7 years is open to debate.

And comparing our irresponsibility to China is preposterous since they've created a debt bubble many times larger than ours.

The real problem now, after say 40 years of fiat money, based on nothing except blind trust, is that we don't know what "normal" is any more. Bernie Sanders doesn't know what normal is, and Donald Trump doesn't know either.

If you live in a system that has to add 5% more debt every year to avoid collapse, you don't have much room for testing alternative futures. We have perhaps $15 trillion in retirement account that are largely invested in asset appreciation markets that go up in value because we keep increasing the amount of new money competing for them. So if you imagine ALL asset markets are a minimum of 100% overvalued (i.e. worth half what we pretend now), then everyone with a brain would want to SELL before everyone else finds out that truth.

So I don't have any idea how this disaster will end, but I'm sure partisan bickering is basically about rearranging the chairs on the deck of the titanic.

If we want capitalism then we had to accept that markets overvalued like ours have 90% corrections, and the rich who time things right will buy up everything in the next crash.

If we're going to worship markets, we should accept that markets are not our friends. A market is the friend of whomever has the most power to manipulate it in their favor. But strangely the U.S. is in this position at the moment, while Trump whines about China and India cheating us in bad trade deals. It's a joke.

Oh, so what should "Generation screwed" do?
1) Get a cheap public education and refuse to take on debt outside the family.
2) Live with their parents, add an addition as needed, raise a family, use family daycare.
3) Take care of elderly parents and inherit the home.
4) Repeat for next generation.

At least that's the conservative approach if you don't want to be screwed. But perhaps 75% of youth won't find themselves with this option and will have to hope the world isn't as cold and cruel and Capitalism promises.

Ignatius Acton Chesterton OCD said...

Ares Olympus @June 7, 2016 at 12:29 PM:

"The left-right bickering seems rather tiresome."

Surely you jest.

Andrew_M_Garland said...

The modern student receives a constant and consistent leftist worldview from kindergarten through college. He knows that this schooling is required. His parents are concerned and vocal about him attending and doing well. This training is even provided free. He reasonably sees this content as important and true.

News reports confirm what is taught in school. A political minority of selfish Republicans or other crazies complains that the schools are deceptive, with no proof or political power. Why would a reasonable student doubt what he is learning?

The student will not question his studies if his parents are middle to left, and will question his middle-right parents as being uninformed. Holding an independent view is not useful for doing classwork and would alienate friends.

Given this indoctrination, I am suprised that there is significant free market sentiment remaining in young adults. Few people will change their political views from those of their early development. They just won't accept that they saw the world wrongly for 20 years. They will not accept that the government is wrong after it has guided their lives for 20 years.

They have been taught that modern, scientific Socialism is providing the benefits that capitalism might provide only after 20 years of work, and uncertainly. They are told that the remaining oligarchs of capitalism stand in the way of a full and fair flow of wealth to them. They can all have $15/hour starting wages by merely voting. Why would they question the modern and universal messages which have been delivered to them? Only a fringe believes differently, certainly not a majority.

JK Brown said...

von Mises had our number back in 1947. He saw that the US and other anglosphere countries were on the path toward the German model of socialism, even as the Nazis were being tried for their crimes. You can call it "government-guided enterprise" as professor Sumner Slichter did, but it is still increasing interventionism and deprivation of "the right to labor at any trade, to earn one's living in any lawful manner; and the right to be protected in this from any hindrance of others, either physical or by contract in restraint of trade; from combinations of the Guilds, or from monopolies created by the State."(F.J. Stimson, The American Constitution)

"There is the Soviet pattern of all-round socialization of all enterprises and their outright bureaucratic management; there is the German pattern of Zwangswirtschaft, towards the complete adoption of which the Anglo-Saxon countries are manifestly tending; there is guild socialism, under the name of corporativism still very popular in some Catholic countries. There are many other varieties."


"Many advocates of interventionism are bewildered when one tells them that in recommending interventionism they themselves are fostering anti-democratic and dictatorial tendencies and the establishment of totalitarian socialism. They protest that they are sincere believers and opposed to tyranny and socialism. What they aim at is only the improvement of the conditions of the poor. They say that they are driven by considerations of social justice, and favour a fairer distribution of income precisely because they are intent upon preserving capitalism and its political corollary or superstructure, viz., democratic government.

"What these people fail to realize is that the various measures they suggest are not capable of bringing about the beneficial results aimed at. On the contrary they produce a state of affairs which from the point of view of their advocates is worse than the previous state which they were designed to alter. If the government, faced with this failure of its first intervention, is not prepared to undo its interference with the market and to return to a free economy, it must add to its first measure more and more regulations and restrictions. Proceeding step by step on this way it finally reaches a point in which all economic freedom of individuals has disappeared. Then socialism of the German pattern, the Zwangswirtschaft of the Nazis, emerges."

von Mises, Ludwig (2010-12-16). Planned Chaos (LvMI) (Kindle Locations 132-141). Ludwig von Mises Institute. Kindle Edition.

priss rules said...

Free trade favors the globalist elites. Hire cheaper labor abroad, make more profits.

If it must be capitalism, we need national capitalism.