Age Shock

How Finance Is Failing Us

Robin Blackburn

• Publisher: Verso
• Year: 2012
• Print ISBN:
  9781844677658
• eBook ISBN:
  9781781683828
• Topic: Economics
• Subtopic: Economic Policy
• Index: Economics

Most countries face the future with an ageing population, yet most governments are cutting back on pensions and the care services needed by the elderly. Robin Blackburn exposes the perverse reasoning and special interests which have combined to produce this nonsensical state of affairs. This updated paperback edition of Age Shock includes a new preface explaining why the credit crunch and eurozone crisis have had such a devastating impact and outlining a way to guarantee decent pensions and care provision.

1

The New Life-Course: Its Shape and Costs

Today we are moving towards unprecedented family forms and a new life-course. Parents find themselves economically responsible for adult children and, increasingly, they will find that they have fewer siblings with whom to share care of the elderly. In Europe as in North America, young couples start a family by acquiring a pet instead of having a child. The majority of people now have more parents than children. In most advanced countries women have fewer children than are needed to reproduce the population. This, as was observed in the Introduction, is as powerful a factor behind the ageing of populations as is increased longevity. The ageing and learning society is expensive and so, as public authorities and employers seek to contribute less and less to such costs, families struggle to cope. The multitudinous and extended families of the nineteenth and early twentieth century had greater resources and flexibility. Grandparents were younger, and better able to help with childcare, while there were far fewer of the really old. The modern family is quite small and vulnerable, with many one-parent and one-child families, and with two-parent households where both partners now go out to work. Domestic intimacy and family ties are still fundamental to the development of identity, character and social capacity, but families struggle with expensive and lengthening periods of dependency in youth and old age.

Instead of making timely provision for the future costs of the ageing and learning society there is, rather, a foreshortening of perspectives, with the claims of both past and future sacrificed to a greedy present. Public pensions have been attacked nearly everywhere, successfully in much of Europe, without success, so far, in the United States. This is part of a wider social pattern in which time is flattened by ‘financialization’, with its techniques for denominating every future liability in terms of discounted present values. Individuals and generations are expected to look out for themselves and not to rely on social insurance or to count on spreading risk between generations. Instead they are invited to enter an unequal partnership with finance houses and commercial suppliers. These privatizing trends have provoked widespread resistance because they target established and well-understood programmes. But it is still far from clear whether these will continue to receive the extra resources they need in societies where both the family form and the life course are undergoing a far-reaching transformation, and where privatizing trends are backed by influential lobbies. The predictable costs of new social patterns, with their widening horizons, should be anticipated in good time.

Consider the new life course. The periods spent outside work – the years of schooling and of retirement and old age – have become extended. Working life itself is interrupted by spells of sickness, unemployment, retraining, maternity leave, or, less commonly, paternity leave. The young often stay at college until they are in their mid- or late twenties. The years spent in retirement have been extended by growing life expectancy – and ‘early retirement’, whether voluntary or not, has often added to the years outside the labour force. The student will take a gap year and intersperse learning with paid work or travel. The employed will go back to college for a refresher course or extra qualification. Someone retiring at the age of fifty-five or sixty well hope to have decades of busy life ahead of them. The trend to early retirement is being resisted. Indeed the word ‘retirement’ is itself becoming a misnomer. Many look forward to it as an opportunity either to get on with their real work, or as an opportunity to devote themselves to something new, perhaps something less demanding but more engaging, something they are really interested in. This species of retirement would be best thought of as an extension of free time.

The need for enhanced spending on education has a utilitarian component. Some spend on education for clearly vocational reasons, whereas some see it as an investment in the hope of a future middle-class status. But rising levels of culture and skill, and a more generous framework of civic formation, benefit others apart from the immediate recipient and are therefore worthy of public support. And even such external justifications of expenditure on education would not work unless those on the receiving end identify with the educational process. Much education is centred on personal self-development, or on finding a meaningful niche in the wider reproduction of culture and social life. In the changeable context of the knowledge-based economy even highly vocational studies need to incorporate general aptitudes, a global perspective, awareness of a diversity of traditions and openness to learning.

The challenge of financing these new social patterns is considerable. We live in societies where what is called ‘human capital’ looms ever larger. This terminology reminds us that many varieties of human self-development later turn out to have economic advantages – advantages for the whole society, not just the individual concerned. Such terms have their uses. But it would be upside-down thinking to believe, as some calculations might imply, that the use of free time is implicitly justified only because it later turns out to be economically beneficial. The same goes for ‘social capital’ and the acquisition of cooperative, networking and entrepreneurial capacities harnessed to personal development rather than to financial gain.

The more that complex possibilities open up, the longer it takes to become fully adult. A newspaper reports: ‘Once you were an adult at 18 but now, say researchers, that should read at least thirty . . . Research in Britain and America found that less than a third of thirty-year-olds pass three tests of adulthood – having completed their schooling, left home and become financially independent. If a fourth test – marriage and parenthood – is added, the figure falls further. The results illustrate the rate of change in western societies. There are also implications for later generations – around a quarter of the cost of raising children is now incurred after they are 17 years old.’¹ The high rates of youth unemployment in continental Europe have had the same effect there, and one by no means confined to the middle class. In Italy, a pioneer of new demographic trends, the phenomenon of ‘mammismo’, the young adult’s dependence of their parents, has become a familiar stereotype. Young men don’t just show up to dinner at Hotel Parent (with a bag of washing), but they live there and also need cash. On a visit to Naples in 2002 I read a report in the local newspaper of a thirty-three- year old who was suing his parents for continued maintenance because they had stopped his allowance – he won his case.

Social research shows that there is something beyond anecdotal evidence to support this stereotype, with adult children often living at their parents’ home in Europe’s Mediterranean countries. But this research also suggests the reverse pattern – namely that parents receive support, or are even rescued from poverty, by co-residence with their adult children. In Northern Europe young adults are much keener on living on their own, and often experience poverty as a result. While it is common knowledge that young children, the very old and the unemployed are all disproportionately likely to live in poor households, poverty is also widespread among young adults, even where they are able to find a job. ²

Yet those who are deemed old enough to vote or to die in foreign wars should not be kept in an infantilizing dependence on parental support, but rather given the resources to acquire the long-term skills and autonomy they will need in the knowledge-based society. Obviously such help should be universally available, perhaps, as Bruce Ackerman has suggested, in the form of a lump sum available to all from the age of eighteen. While Ackerman urges that no restriction should be set on the use of this grant, Unger proposes that it should only be used to acquire education, or a house, or to establish a business.³

The new life-course is the result of a variety of developments involving, no doubt, the greater time needed to acquire a diverse set of skills, but also economic constraints and the search for self-fulfilment. Greater longevity and smaller families interact with the demands of unceasing waves of innovation. The succession of generations is no longer rapid enough to carry forward the torch, so the re-learning process has to be intra-generational as well as inter-generational. Thanks to medical science and a healthier environment we not only live longer but, on average, remain fitter and more active as well. UN demographic figures still assume that those aged 15 and under, and those who are sixty and over, will be economically dependent while those between sixteen and fifty-nine will be employed. But in the developed world, and some developing countries, people are now beginning to spend nearly a third of their life learning and they may spend almost another third outside regular, full-time employment. We should allow for even more intermingling of life stages and late learning, but must resource them better, since neither extended education nor active ageing are cheap. And while it is vital to nourish the autonomy of the young adult and the older person this should by no means be confused with the compulsions of commodification.

The Debt Generation

Already a century ago Thorsten Veblen warned that ‘business principles’ were infiltrating every aspect of life. Veblen did not deny the formidable efficiency of these principles but he did think that they were corroding education, literary production, politics and welfare.⁴ The huge effort to defeat the fascist powers in the Second World War engendered a striking advance in economic equality and a surge in free public provision. ‘Business principles’ were held in abeyance as education and health were extended, and great scientific and construction projects undertaken, at public expense. This fed into the remarkable postwar boom. But over the last three or four decades ‘business principles’ have staged a strong comeback and are scarcely less important now than they were in the Gilded Age, with its robber barons, self-help manuals for a pinched middle class, and poor, huddled, migrant labourers.

Higher education, with its elaborate hierarchies, is more than ever an engine of privilege. US tuition fees at the top private universities reached an average of around $20,000 a year in 2005 and had risen by nearly a third since 2000. If books, room and board are added the total cost reached $29,000 a year at private colleges. Fees at public universities are lower, averageing just over $12,000 a year in 2005, but subsistence costs add to these and they are rising too.⁵ The overall cost of going to college for four years – which can easily reach six figures – is daunting to the poorer student, notwithstanding loans and ‘needs-blind’ admissions. Access to the best schools shows a strong link to parental social class. By 1993 children from the richest 25 per cent of families were ten times more likely to go to university than children from the poorest 25 per cent of families. In 1979 the multiple – at four times more likely – had been much less while today we may be sure it has grown.⁶ The education available at elite private institutions, with their generous endowments, is better insulated from the crasser pressures of ‘business principles’ than the colleges that cater to the mass of students. With diminished public support, the great public universities and historic ‘land grant’ colleges are now often reduced to bidding for sponsorship by tailoring their research and courses to the needs of business.

In Britain the fees that universities could charge nearly tripled to £3,000 a year in 2004, and up to £9,000 in 2010, with further student loans available to help meet the cost. Parents of students from poorer backgrounds could submit to a means test to claim some rebate but total costs – including subsistence – remain intimidating. Early indications showed a drop in application rates. In January 2006 it was reported by the Student Loans Company that already 4,000 recent graduates had filed for bankruptcy, with 3,486 still insolvent. Average indebtedness at graduation was expected to rise to about £33,700 by 2012.⁷ According to one estimate, the cost of raising and educating a middle class child in the United States over twenty-two years was no less than $1.45 million.⁸ College education can spell debt for parents as well as children.

Government-sponsored loans in the US are taken up by 60 per cent of students. Most also need to take term-time jobs to help get them through college. The proponents of the financial revolution hope that those indebted to pay for their own study will learn the calculus and compulsions of a financialized world. This may work at the lucrative end of highly vocational fields of study like law or medicine, but it has proble...

Table of contents

• Cover
• Title
• Dedication
• Copyright
• Contents
• Preface to the Paperback Edition
• Introduction: The Need for a New Collectivism
• Chapter 1: The New Life Course: Its Shape and Costs
• Chapter 2: The Divided Welfare State and the River of Time
• Chapter 3: Commercial and Corporate Failure
• Chapter 4: The Murky World of Grey Capital
• Chapter 5: The Limits of Reform and Shareholder Activism
• Chapter 6: The Need for Strong Public Pensions
• Chapter 7: How to Finance Decent Pensions – and Tame the Corporations
• Epilogue: Living in the Presence of Our Future Selves
• Afterword: Social Protection after Globalization: Proposal for a Global Pension
• Index