From Brexit to the US presidential election and beyond, prepare for the clash of generations

Niall Ferguson says it’s no wonder youths in many developed societies want change, having been forced to inherit a world burdened by debt and liabilities – but don’t blame capitalism

PUBLISHED : Wednesday, 08 June, 2016, 2:05pm
UPDATED : Wednesday, 08 June, 2016, 2:05pm

“The history of all hitherto existing society is the history of class struggles,” Marx and Engels famously declared in their Communist Manifesto. A century and a half later, with communism seemingly buried under the rubble of the Soviet Union, Samuel Huntington predicted a clash of civilisations.

But what if the great struggle of our time turns out to be between the generations? Writing in 2001, in a book called The Cash Nexus, I warned of a coming conflict of economic interests between the young and the old. The only question in my mind was when this conflict would surface politically. Well, now it has.

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Just consider the generation gap on the question of Brexit. According to data published recently by YouGov, voters aged 18 to 29 are strongly in favour of Britain remaining in the European Union, by 72 per cent to 27 per cent. At the other extreme, voters aged 60 and over are Brexiteers by 65 per cent to 35 per cent.

Or look at the contest between Hillary Clinton and Bernie Sanders for the Democratic presidential nomination. On the latest figures, the under-30s preferred Sanders by a 71-to-28 margin. A quarter of Sanders’ total votes came from young voters, compared with just 10 per cent of Clinton’s.

Meanwhile, it seems likely that the Democratic lead over the Republicans will increase when the election finally arrives in November. In 2012, 62 per cent of voters between the ages of 18 and 29 voted Democrat, compared with 42 per cent of the over-65s.

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The political generation gap is not confined to the English-speaking world. All over the Arab world, the revolutions that began in 2010 revealed the extent of youthful frustration with senescent dictators. In southern Europe, too, the economic crisis had a polarising effect, perhaps most evident when young Greeks flocked to Syriza and voted “No” in the 2015 referendum on austerity. And in Latin America, the backlash against corrupt and incompetent governments (notably in Brazil and Venezuela) is also youth-led.

It’s not really capitalism that has f****ed the young. It’s socialism

Sometimes, generation gaps arise when things change fast. In Russia, pensioners nostalgic for Soviet stability are a key source of President Vladimir Putin’s support. In China, there is not so much a gap as a chasm between those who lived through the Cultural Revolution and those born after 1980 (the balinghou). More commonly, however, the clash of generations happens when the young feel obstructed by the old.

Of course, that kind of generational conflict is as old as the hills. Marx was right in arguing that, for most of the past century and a half, class mattered more than age. From 1848 to 1968, youthful frustration was easy to channel to the side of the proletariat.

That is essentially what Bernie Sanders has been about. In the words of his pollster, Ben Tulchin, millennials supported Sanders “because their generation is so f****ed, for lack of a better word, 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.”

There’s just one small problem with this argument. It’s not really capitalism that has f****ed the young. It’s socialism.

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Communism mostly 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 when tax revenues did not cover the costs of all this, social democrats borrowed.

In theory, baby boomers favoured reform of the welfare state. In practice, they shrank from real reform

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, 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 favoured reform of the welfare state. In practice, they shrank from real reform.

Half-reformed welfare states plus lengthening lifespans proved to be a toxic combination for the fiscal systems of most developed countries. Already in the late 1990s, my friend Laurence Kotlikoff had spotted that the true liabilities of the US federal governments vastly exceeded the stated government debt. He drew my attention to the system of generational accounting, which makes explicit the gap between the government’s future outgoings and its future revenues – and therefore the difference between this generation’s fiscal burden and that of future generations. To close today’s fiscal gap would require every federal tax to be increased by 53 per cent, or every federal expenditure to be cut by 34 per cent.

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Kotlikoff’s point is, of course, that no such thing will happen. Young Americans will either pay higher taxes than their parents or receive less in terms of social security and Medicare. And something very similar can be said of most developed countries today.

Young Americans should be looking for candidates who would reform the country’s bloated 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 should be asking themselves: Who runs universities? Who limits new house building? Clue: not conservatives.

Young Britons are right to oppose Brexit because they, not pensioners, are the ones who will pick up the tab if the UK votes to leave the EU. But why do the millennials not also lend their support to domestic policies that would create jobs and build homes rather than do the reverse?

The term “false consciousness” was first used by Engels in 1893, long after the publication of the Communist Manifesto. It applies rather well to the state of mind of many young people today.

Niall Ferguson is Laurence A Tisch professor of history at Harvard and a senior fellow of the Hoover Institution, Stanford