Will There Be A Millennial Revolution?

Aristotle: ‘If the number of children exceeds what the amount of property will support, difficulties must necessarily follow. . . It is difficult for men who have suffered that fate not to be revolutionaries’.

This is a tale of three revolutions. Two revolutions past that serve as lessons. The second is a counter-revolution, a result of not learning those lessons. And the third revolution, well, it begins in 2030, but stirrings of it are already being felt.

The twin revolutions were a century apart, and while they had different outcomes, they had similar causes. They were the English and French revolutions.

The second was slower – a gradual dismantling of the common good – a counter-revolution instigated by the most invested in generation in history: the Baby Boomers.

The third. The new Jacobins? The Jacobin Millennials? The Young Roundheads? For now, they pay unjust taxes to service the elderly King’s debts, are locked out of the housing market, earn wages stagnant since the 1970s, are surrounded by underinvestment and crumbling infrastructure, and are gradually getting angrier.

At first glance, the English Civil War and Glorious Revolution of the 17th century don’t seem to have much in common with the French Revolution at the end of the following century. Their goals and outcomes were very different, but they were both instigated by a general crisis.

The crisis – as most crises do – had its roots in money. More specifically, in debt.

But to understand the millennial revolution of the future, we have to first go back even further.

Around 1500, the plague ceased in Europe for the first time in hundreds of years. Mortality declined, people lived longer, and the population across Europe increased. In fact, throughout this period the global population doubled.

From 1540 to 1640 – before the civil war – England’s population rose from just over two million to five million. In a century the population more than doubled. London grew from 50,000 inhabitants in 1500 to 400,000 in 1650.

Parliamentarian Humphrey Gilbert complained that, ‘England was pestered with people’.

Rapid population growth meant two things: competition and inflation.

Inflation occurred because the increase in demand meant the prices of food and resources were being driven up. And as inheritance traditionally went to the eldest son, larger populations meant more children without inheritance, competing to hold onto their status.

One aristocrat in England complained that, ‘I have a brother… who together with his wife and six small children are supported almost entirely by myself, and whose callings and livelihood I must inevitably provide for’.

Population growth can, under the right conditions, be good for a society. Especially if the economy grows with it. But in 17th century England food production did not keep pace with the growth in population. Wages decreased as there was more competition for work, and prices continued to rise.

The king – Charles I – was in trouble, too.

At the beginning of the 1600s, as Civil War approached, the King was broke. The Royal finances were in a critical state.

He’d fought a disastrous war with Scottish rebels in which the army was underpaid, underdisciplined, and unenthusiastic. The Scots were welcomed in places in Northern England with celebration.

Englishmen were refusing to pay taxes. Some of those taxes – like the Ship Tax – were deemed illegal and paid, or more often avoided, with irritation.

Inflation was crippling the Royal purse, too. Soldiers became more expensive to equip and feed. Between 1530 and 1630 the price of paying and supplying each solder increased by a factor of five.

Charles was desperate.

He sold land, took loans, and tried to increase taxes on the aristocracy.

But elites avoided the tax by undervaluing their own land. Sir Walter Raleigh said at the time that the incomes recorded were not a ‘hundredth part of our wealth’.

But while many in the country were struggling, others were getting richer.

In 1530 there were 6,300 gentry families in England. By 1640 there were 18,500.

One commentator observed that, ‘The number of nobility and gentry is greatly overgrown. Now there is increased a very great number, more especially since the beginning of King James… Whereas in Queen Elizabeth’s time there was but two or three knights in the shire, now there is sixty, besides many pretended esquires and gentlemen’.

The elites competed for favour, for position, for business and land, but it was a time when fortunes were lost as quickly as they were made.

Many became unhappy that they weren’t getting the positions they thought they deserved. Increased competition meant that rivalries and quarrels were more common.

All the while inflation continued, and the Crown’s finances deteriorated further.

The king tried to debase the coinage so that it contained less silver and gold, he sold honuors and ranks and royal monopolies, and, more and more, he continued to borrow.

In the 1640s the king was told by his financiers that his loan requests had been rejected, forcing Charles to call parliament.

The rest is history: civil war, a king losing his head, a brief dictatorship, and a lasting parliamentary democracy and constitutional monarchy.

Let’s fast-forward a bit.

1946: America is the richest, most powerful country in the world. The Great Depression has passed, the war is over, the economy is booming, and the birth-rate skyrockets across both America and Europe.

Between 1946-65, 75 million are born in the US, increasing the population by 50%.

At the same time, the GI bill helped soldiers returning from the war to purchase houses and start businesses. In the 1950s Eisenhower – impressed with the autobahn in Germany – set about building 50,000 miles of the Interstate Highway System, only finished in 1991.

In 1957, in response to the Soviet’s Sputnik, NASA and what is now DARPA were formed. The government quadrupled funding for the National Science Foundation and in 1958 the National Defense Education Act invested money in schools to produce more scientists and engineers.

The percentage of the population receiving a college education increased from 9% to 32% by the early 70s.

Lyndon B. Johnson launched Medicare in 1966, the same year that investment in research and development peaked at around 6% of GDP.

In short, a generation was born that became the most heavily invested in in history. The economy and the population boomed.

Republican president Richard Nixon was more left-wing than Bill Clinton and Barack Obama. Noam Chomsky has called him the ‘last liberal president’.

So we see a population boom similar to 17th century England. But what about the inflation and state debt that lead to the English Civil War?

As Western economies faltered in the 1970s, Baby Boomers began to demand cuts. Ronald Reagan and Margaret Thatcher argued that tax cuts would pay for themselves. As businesses and individuals had more to invest, they argued, the economy would grow, and tax receipts with it.

Taxes, including inheritance and capital gains taxes, were slashed, and banks were deregulated and then further deregulated by presidents up to Clinton in the 1990s.

Neoliberalism was the order of the day.

The idea that tax cuts and deregulation would pay for themselves was explained to the George W. Bush Administration’s Dick Cheney and Donald Rumsfield by economist Art Laffer over lunch when he scribbled it on a napkin. The so-called Laffer Curve was mocked as being ‘voodoo economics’. The problem was simple. To cut taxes in half and collect the same amount the entire economy would have to double in size.

And while these cuts continued throughout the 80s, 90s and 00s, Baby Boomers had Medicare, retirement, education, police, and social security to pay for.

Government debt inevitably continued to rise.

Every president knew this was a problem. Bush senior even tried to raise taxes after telling the public, ‘read my lips: no new taxes’, and was punished by being kicked out of office after one term.

And debt continued to grow.

But let’s rewind.

In 1600 the plague returned to Europe. Population increases across the continent slowed by 1650. Conditions – unless you were dead – improved. Food was cheaper.

Around 1700 the plague ceased again, and inflation returned.

In the 18th century, France was the richest and most populous country in Europe.

And it continued to grow. Through the 18th century the economy and the population boomed. The French population grew by 30% in the 18th century and the economy – aided by manufacturing, industry, and colonialism – was strong. But while the new capitalist class was doing well, the older agricultural sector was struggling with poor harvests. Grain production was not growing in line with the population. Bread was expensive. Peasants were hungry.

And France had been fighting expensive wars against Britain in both the American War of Independence and the Seven Years War before that.

King Louis XVI was in desperate need of money. Louis borrowed, sold offices, and levied more taxes.

But bankruptcy was looming.

A recession in the 1770s and 1780s was the final straw, and in 1789 Louis called representatives from around the country – the Estates General – to help decide what to do.

They drew up a list of grievances while hungry peasants rioted.

The Third Estate – merchants and businessmen – rebelled against the king, drew up a constitution, sided with the Parisian mob, and soon after, like Charles I before him, Louis lost his head.

In both the English and French revolutions population growth, inflation and debt led to a fiscal crisis.

While the lower classes were hungry, the elites were competing for status. Both periods saw an increase in university enrolments without an increase in elite offices and positions. Intra-elite conflict resulted from some trying to maintain their positions while others tried to climb the social ladder.

In moments like this, ideologies of transformation became more appealing and embittered elites – those with new money or education but less likely to find positions in the old hierarchy, like Robespierre and Oliver Cromwell – are likely to find support for their cause from the frustrated and hungry.

But lets fast-forward back to today. In fact, lets fast-forward a bit further.

Welcome to 2050. Things aren’t looking good. Every single person on earth has been cancelled, Barron Trump is president, the emerging sars-covid-58 virus is apparently nothing to get too worried about, and a 95 year old Jordan Peterson has just published his 30th book, another 12 rules for life.

But there’s an even bigger problem, and it is demographic.

In 1960, the proportion of the population in retirement in the US – not of working age – was around 9%. In 2020 it was around 20%. And now, in 2050, it’s around 30%.

Europe has lost 25% of its working age population. In 1950, the US had 16.5 workers for every 1 person not working. That’s down to 4.6 in 2017 and is on course to drop to 1.9 by the end of the century. That means two people working have to support one person not working. Compared to sixteen doing that task in the 1950s.

The West’s ageing population means there’s more people to look after, higher social security bills, and rising medical bills. And no-one’s saved any money for it.

Over 65s can expect to spend $280,000 on healthcare through the remainder of their lives. Only 33% have this.

The savings rate has been decreasing for decades. Between 1950 and 1985 it was around 10%. In 2020 it’s dropped to 5%.

So Baby Boomers in retirement, on average, are expected to take much more from the social security pot than they put in. One study has shown that a couple born in 1950 might on average expect around $1 million from the government in retirement, having only paid in about $700k in taxes over their working life. In the US in 2017, there were 51 million claiming social security pensions. By just 2035 that’s expected to increase to 57 million.

And while older generations will need more in social security, younger families are earning less.

Let’s rewind to today.

Median income and wages have been flat for decades. Since 1970, middle class wages have increased by only 6%, the amount low-wage workers take home is down 5%, yet the top earners – the 95th percentile and above – has seen a 41% increase in their income.

In 1966, average weekly take-home pay, adjusted for inflation, was $770. Today it’s $720.

And Millennials, in particular, are paying for it. The unemployment rate at the peak of the recession in 2009 was 10%. But for Millennials it was 16%.

In 2017 almost one in five under 34s across Europe were in the NEET category – that’s not in education, employment or training. Older workers with more skills and experience are often kept on at the expense of younger workers. And of course, this has only been exacerbated by the pandemic.

In 2014, adults aged 18-34 were more likely than not to be living with their parents for the first time in 130 years.

Manufacturing jobs continue to leave the West, businesses are investing more in automation than in training new employees, and the labour share – that’s the percentage of GDP paid to workers – is down from 64% in the 1960s to 56% today.

So population is up, the economy has been struggling, but more and more people are needing financial support in older age.

And governments are turning to two experts for advice: Charles I and Louis XVI.

Financial crises – like the 2008 crash – tend to happen when an economy has become too reliant on debt and unable to settle. An economic downturn leads to mortgages not being paid, which leads to banks not giving out loans, which leads to less mortgages being paid until all of the dominoes topple.

Every English monarch from 1500 to 1640 amassed larger and larger debts, and eventually simply could not pay for their wars.

Thomas Jefferson wrote that, ‘No generation can contract debts greater than may be paid during the course of its own existence’.

And Alexander Hamilton wrote, ‘the creation of debt should always be accompanied by the means of extinguishment’.

Here’s what the US Government Accounting Office said in 2015: ‘Increasing numbers of baby-boom generation members are becoming eligible for Social Security retirement benefits and for Medicare… The aging of the population and rising health care costs will continue to put upward pressure on spending and, absent action to address the growing imbalance between spending and revenue, the federal government faces an unsustainable growth in debt’.

Throughout history, the US has run a small surplus on its budget that only went into deficit to pay for wars and was quickly paid back afterwards though increased taxation.

Since the Second World War the government debt slowly came down to its lowest point in the 70s. And as tax cuts became the norm, governments had to borrow to keep their heads above water. It increased into the 90s, dipped a bit in the 2000s, and then the 2008 crash happened. The debt balance sheet has expanded from $5 trillion in 2000 to $28 trillion today.

When asked about starving the beast of government in 1985, a White House Reagan official admitted that, ‘we didn’t starve the beast… it’s still eating quite well—by feeding off future generations’.

And here’s the rub, if that wasn’t enough.

Governments hide how much this is a problem. They account for actual debt but not for generational debt, not debt that’s going to be owed down the line in payments as people get older.

Including social security, Medicare, highway repairs, and others, economist Laurence Kotlikoff argues that the true fiscal gap is $206 trillion, ten times larger than the official figures. He says ‘our government is dead broke’.

The governmental Ponzi scheme, he writes, works like this: ‘The politicians take money (e.g., Social Security contributions) from young people, give it to old people in cash or healthcare benefits, but keep the young people happy by promising them large benefits when they’re old’.

Historian and sociologist of revolutions Jack Goldstone has remarked that, ‘It is quite astonishing the degree to which the United States today is, in respect of its state finances and its elites’ attitudes, following the path that led early modern states to crises’; ‘The parallels between U.S. fiscal policy in the 1980s and French fiscal policy in the 1770s are startling’.

Ideologies of revolutionary transformation become more likely to be theorised and adopted in contexts like this. And it’s naïve to think that revolutions only occur under conditions of absolute poverty. The American Revolution, for example, was not motivated by poverty.

Of course, it is difficult and contentious working out what form that transformation could take. This is for the simple reason that we don’t know what works and what doesn’t until something is tried. The French Revolution was bloody in part because no-one knew what they were doing.

Any problem has more radical solutions and more pragmatic solutions and personally, I believe that if you don’t know what’s going to work you should keep an open mind and have an experimental attitude. For the sake of not making this video about everything let’s look briefly at some practical solutions that seem to be relevant to the problem at hand: investment, housing, and taxation.

First, what made the Baby Boomers so wealthy? Today, millennials hold only around 5% of wealth in the US, and boomers hold over 54%. And when boomers were the age millennials are now, in 1989, they held 21%.

As we’ve seen the Baby Boomer generation was the most invested in in history. But they benefited from that investment as a generation and closed the gates behind them.

Let’s look at a few investments: infrastructure, businesses, children.

Infrastructure investment has fallen from 4% in the 1960s to 2.5% today. Economist Larry Summers has warned that in both the US and Europe that number is functionally zero, adjusting for money spent on wear and tear.

American infrastructure has been rated D+ overall and the last report in 2013 stated that it was in ‘poor to fair condition and mostly below standard’. America has no high-speed trains. Airports and mass transit are both rated D too.

In the UK, the story’s the same: infrastructure investment remains at a historic low. Consistent investment in roads, railways, internet, airports is key.

The thing that gets in the way is not the economics, but the political will.

Similarly, businesses are investing in capital, technology, and automation but not in workers or training.

Investment was central to the productivity boom of the 50s and 60s. Gross investment grew on average from 3.6% in the 50s and 6.5% in the 60s. It lost steam again in the 70s.

Political policy should be designed to incentivise investment in workers, labour, and training, as much as in automation.

Another thing we could invest in: more children which would grow up to help pay for the growing cohort of retirees. This could take the form of increased childcare support or longer leave for new parents.

But, I hear you ask, what about that debt, the biggest problem? Doesn’t this cost?

While social security – the biggest fiscal problem – is costly, investments – smart investments – yield tax returns (unlike lower taxes, surprise surprise). The academic literature and research on this is quite clear: a $1 investment in infrastructure generates between $1.40 and $1.80 over time.

And when it comes to social security, many economists now advocate for ‘generational accounting’ so that one cohort doesn’t have to pay disproportionately for another. This would be mean benefits for retirees are linked to how much money their generation – or year group – paid in. And if people are healthier and living longer, and younger people are paying without any increase in their own salaries, then the retirement age might have to increase too.

It’s not a cause of ‘we shouldn’t have to pay for you’, but about simple accounting, a lack of funds, and debt.

And there’s another area in which Millennials are disadvantaged: housing.

At the beginning of the 20th century, home ownership was around 47%. That number grew to 55% in 1950, and rose to 63% by 1970.

The 1946 GI bill subsidised mortgages for the Baby Boomer’s parents with no down payment. But by the 70s ownership started declining again, so by the 90s governments in the West were loosening fiscal rules to try and get more on the property ladder.

But this led to the rise of risky subprime loans and the 2008 crash. In the aftermath, governments were focused on saving homes already owned. The amount of new mortgages – mostly to millennials – declined, the value of already existing homes increased, and millennials have been priced out of the market.

Here in the UK scarcity is a problem, driving prices up further. The population is increasing faster than homes are being built, and prices are rising while wages are stagnating. Green belts stop building in and around cities, and NIMBYs – not in my back yard, usually Baby Boomers – protest and put a halt to new developments.

Of course, this benefits pre-existing homeowners, whose property values skyrocket. Ironically, even more wealth is flowing from skint Millennials to Baby Boomers in rents.

Housing stock matching the growth of population is obviously essential to generational fairness. But while the ability to afford a mortgage is effected by the supply side, the demand for housing is just as effected by the wider economy, those stagnant incomes, and investment.

Which leads us to the elephant in the room: taxes.

It’s pretty simple: more older people needing care means higher taxes. Investments means taxes. Now, this is a complicated topic and one that really needs an entire video. Increasing the higher tax rate and implementing wealth taxes have their problems – capital flight being one – where companies and individuals relocate to another country to avoid taxes. But there are plenty of solutions. One influential paper by Nobel laureate Peter Diamond has argued that top rate should be around 73%. And French economist Thomas Piketty and many others insist a wealth tax of 2% is needed on wealth held in value of over $10 million – that’s houses, cars, stocks, boats, planes, whatever. But what’s more crucial than the economics is the political will – it has to be argued for effectively, supported by a coalition of political groups, and accepted culturally.

But the tide is turning. A wealth tax is a policy that has bipartisan support in the US. 53% of Republicans now support one, as well as 77% of Democrats.

Some have argued that revolutions are unpredictable. But as we’ve seen, there are some factors that serve as warning signs. Goldstone’s study doesn’t just look at the English and French cases, but state crises in the Ottoman Empire, China, and Japan, too. He says the warning signs are pretty clear: population bombs, state reliance on debt, and potential new ‘elites’ – graduates, for example – without positions for them to fill.

To many, including Goldstone, we’re alarmingly close to situations that have preceded state breakdown in the past. But the difference is that we know more about ourselves now, and we have the potential to change course before things deteriorate further.

There’s a growing consensus on both sides of the political aisle: neoliberalism has failed to produce the results its advocates argued it would. And history teaches us that if peaceful social solutions designed to mitigate against excess and injustice aren’t tried, then more chaotic, violent, revolutionary attempts at solutions inevitably follow.