I count myself as one of the last of the so-called baby-boomer generation. In the first four decades of my life real British incomes per head almost tripled. As I approach my 50th birthday, something seems to have gone horribly wrong. Over the past decade, those incomes have risen just 4 per cent. The economic dynamism which provided the backdrop to my formative years has gone, replaced by what increasingly appears to be an enduring – and distinctly unappealing – era of stagnation.
Even as China, India and other parts of the emerging world continue to press ahead, the West has lost its way: indeed it is now in danger of entering its second “lost decade”. For my children – and for the children of millions of other baby boomers – it is hardly an encouraging picture.
We all, directly or indirectly, own pieces of paper or rely on political promises that make claims on future economic prosperity
Many of the factors that led to such scintillating rates of economic expansion in the Western world in earlier decades are no longer working their magic: the forces of globalisation are in retreat; the boomers are ageing; women are thankfully better represented in the workforce; and, once too low, consumer debt is in many cases now much too high. Wages are being squeezed as competition from the emerging superpowers hots up and, as those superpowers demand a bigger share of the world’s scarce resources, Westerners are forced to pay more for food and energy.
As a result, Western economies have slowed dramatically. Even before the financial crisis, Western economies were no longer offering the vitality of old. The crisis itself – both in terms of the depth of recession and pace of recovery – has only made things worse.
Based on our collective belief in ever-rising living standards, we have spent the last half-century watching our financial wealth and our political and economic “rights” accumulate at an incredible pace. We all, directly or indirectly, own pieces of paper or rely on political promises that make claims on future economic prosperity. Only a handful of years ago, we were so confident in continued economic progress that we could be educated yesterday, consume today, retire tomorrow, have excellent healthcare the next day and create a better life for our children while, at the same time, saving very little. We hadn’t just mastered our economies. We had mastered time itself.
What happens, however, if the future is worse than we hoped it would be? What happens if, collectively, the claims incorporated in our pieces of paper and our political promises cannot be honoured?
Through our pensions, our healthcare, our high levels of debt, our (fast-waning) belief in financial alchemy and our refusal to accept that this is anything other than a cyclical economic setback, we are persistently trying to consume tomorrow’s income today. It is time to drop the pretence that we’re simply living through a cyclical blip. Instead, we urgently need to tackle the structural problems that threaten all our economic futures. That means tough political decisions, not an all-too-frequent wave of the monetary magic wand.
When the Money Runs Out, the End of Western Affluence by Stephen D King, is published by Yale University Press, £20