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.