The old are the new young

April 17, 2020

 

For a public united in solitude, talk of generational warfare over a post-Covid settlement should ring hollow. If there is going to be a world worth returning to then we cannot bring with us our maladies. Not only Covid, but oligarchic institutions booking profits offshore and in the shadow banking system. The fruits of our labour, which has grown the global economy by 250% since the GFC, is held at a remove while we decide who will take the pain of the austerity to come.

 

Michelle Grattan writes a thoughtful piece about how this might be divvied up, quoting Bob Breunig from the ANU as floating the idea of "a broad-based land tax", as well as harmonising taxes on assets. The present system “taxes active people heavily, it doesn’t tax inactive people so heavily,” says Bob.

 

The generation gap is mainly down to the reliance of the old on our labour - which is getting cheaper all the time - so that certain demographics of voters don’t take a hit when the bad times come. We can acknowledge that most of us don’t perceive these structural forces until they affect us directly, and even then only in facets. So it is nothing personal, just as availing of negative gearing is not immoral.  

 

Oscar Wilde said that morality is an attitude we adopt to something we dislike, and this is true also of the hyperbolic accusations that accompany these discussions; brittle insults which became the basis of a new culture war. It is not such a simple binary. There is no better time to set a goal of zero growth in the house prices, with a large building programme of public housing and new, long-term cooperatives. This would have the happy side effect of bringing down rents while bearing down on prices. Once the party is over we look after the savers and run a generous entitlement programme for those relying on liquid assets for their cost of living.
 
There is a case for examining the effect of investor-owners and negative gearing on the property market. We could bear down on house price inflation by decommodifying the housing stock, banning speculation, encouraging zero inflation of housing prices for many years while allowing wages and prices elsewhere to rise. This would affect savers and individuals with property investments, as it would represent a managed decline of the value of their assets. You could aim for inflation on the low side for a time after the effect of the wealth transfer has been achieved to let things stabilise, by which time the lower rents and prices could contribute to a low-inflation environment.
 
Achieving a wealth transfer by taking these steps would be less about punishing the old, and more about putting our resources to productive use. Otherwise we continue to mortgage the future of the young to protect the comfortable. There is no such thing as perfect equality and Stalin’s war on the kulaks was a bloodbath, but that’s not where the conversation is at. The West, with its debt binge, febrile property markets, “just in time” supply lines and casual labour is crisis-prone. The rewards being hoarded offshore have created powerful monsters, with the three major financial crises in less than 20 years providing ample opportunity for rent-seeking by the financial services industry, growing ever fatter on sovereign debt.
 
So fresh thinking is required. Solutions that enfranchise people cannot be created by partisan nationalists who promise only a coercive sort of unity that turns the other side into supplicants. It cannot either be achieved by the name-calling of the so-called left, wherever they are labelled as such for making use of identity to understand society. The two forces are not in opposition, but have a common language of intolerance. The desire of activists who reach for these tools is to put a face to faceless system but, like the demagogue who speaks of the untermensch, we can't understand individuals without understanding the forces that guided them to wealth, or to want; to the boardroom, or to the street corner.
 
We need an honest conversation about who pays and what's fair. We shouldn't  permit a retreat into sound-bites when lawmakers describe to the public the necessity of their plans. Whether it is the conversation at the federal level about opening Australian schools, the blame game around PPE (personal protective equipment) in Britain, or the many public meltdowns of the American leader,  the opportunity-seeking and shrill tone should tell you much. The case after 2008 for reforming the global financial architecture looks unlikely to be made in the U.S. by Joe Biden, who presided over the State of Delaware's re-positioning within the U.S. as a domestic tax haven. So the conversation becomes again one about what happens within that system, and about austerity.

 

The best platform for making policy like that would be a national government, representing all those parties able to engage.  If everyone is invited with all ideas on the table, a conversation about long-term economic planning shouldn't dissemble into the usual, reflexive comparisons to the enslavement of the peasantry of the Soviet Union, 88 years ago. In any case absence of evidence, is not evidence of absence; as Naomi Klein puts it, quoting Milton Friedman, “only a crisis — actual or perceived — produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.”
 
The only process which makes sense after Covid is one that takes everyone along, young and old; because if you’re not at the table, "you’re on the menu".

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© David Murphy 2020