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article imageOp-Ed: Economic obsolescence — When demographics just don’t work at all

By Paul Wallis     Apr 13, 2014 in World
Sydney - The slow slither of new retirement and revenue policies being adopted by Western governments indicate that governments want more revenue and to spend less. The problem is that the economics of the near future will be nothing like the current model.
In the past, people worked pretty much continuously for decades, in fairly stable price and income environments, if rather stingy ones. Most people had reasonably secure jobs, and simply worked their way up the ladder as a career. It was a pretty reasonable expectation that at the time of retirement you would own a home, and have enough money to live on, with a small pension, perhaps.
That model is now ridiculous. Since the 1980s, downsizing, outsourcing, price gouging, and absurd home prices have obliterated any possibility of that model working. For politicians, lobbyists, and other protected psychotic species, apparently this news hasn’t filled through yet.
It will, in the most unambiguous way. Many Boomers, Generations X and Y are already finding that not only do their incomes not go far enough, financial planning is as much of a raffle as anything else. Boomers around the world are already having to return to work, having had totally inadequate retirement savings. While doing that, they’re keeping younger people out of work and not really earning very much money, even if they can get a job, which most of them can’t.
Generation X was the first to encounter the on/off switch of modern employment, often having more jobs in a decade than many boomers had in a lifetime. Generation Y is going to get the full blast of workplace automation, high prices, shortage of housing, and a murderous, inefficient, insulting job market.
The idea of people having to work longer in jobs that don’t and very probably won’t exist leaves a lot to be desired. The idea of earning vast amounts of money to pay for basic life needs is simply a request for chronic systemic crime.
Do policymakers really believe that modern employment and income patterns will support the economic and revenue models of the 1950s? If so, why?
In Australia, we came up with a novel solution for estimating the cost of living. Our real estate sector is a multitrillion dollar industry, so we deliberately excluded housing costs from our CPI figures. Housing prices in Sydney have quadrupled in the last few decades. Incomes haven’t.
Then we decided in our infinite wisdom to raise the price of basic amenities like electricity by 75%, leaving many people to wonder whether or not they could afford to turn on an extra light or charge up their wheelchairs. Have incomes increased by 75%? No.
Bear in mind that all this brilliance is happening in a country like Australia, which if it was run by anybody with a working brain cell would have no problems at all, except those it creates for itself. Treasurer Joe Hockey, aged 48, has recently “almost” announced that his generation will have to work longer.
While Treasurer Hockey does not appear to be any sort of idiot, he may find that in the year 2036 the economics of 2014 are not the working model. He may also find that an extra 22 years of work is less fun than it might seem.
You have to wonder who benefits out of reducing the capacity of huge numbers of people to earn and contribute to the economy. The more people who are unemployed, the more pressure on revenue, the less money the government takes in, and the more prices are likely to fluctuate. Serious deflation is likely to be a real issue, and hyper inflation caused by increasingly worthless currencies devalued by price increases is another scenario.
Even the rich, bless their airhead, insular ignorance, don’t benefit from the rest of society going broke. All being rich means when an economy collapses is that the rich go broke a bit more slowly than everybody else. It also means that the tax burden naturally shifts to people who do have money, rather than people who don’t.
Australia also came up with another solution to prevent people from retiring with enough money — tax superannuation. Australian superannuation is taxed at 15 percent on gains. This is more than a credit card, and absolutely ensures that the value of superannuation savings is severely reduced.
The government, in its quest for revenue from this source, effectively ensured that retirees who didn’t have enough money in their super would also need government age pensions. Age pensions, it so happens, are also the major demographic which is scaring the hell out of Australia’s revenue experts.
Self-inflicted problem? Yes, but this particular problem is going to do a lot of damage to everybody. Using an old model to solve a new problem was never going to work. Using old economics to try and predict revenue needs for what is sooner or later going to be a totally different economy is merely ridiculous.
Meanwhile, three generations are going to be subjected to the astonishingly slow process of the evolution of better economic models. Poverty, homelessness, and absurd aged care plans, and the rest of the pitiful litany of failure have been hardwired into the system.
Global mistakes — Different cultures, different countries, same problems
It is extremely unlikely that other countries are any better off than Australia. In Japan, for example, a work and savings economic model which turned postwar Japan from a ravaged, semi-radioactive cinder of a country into what was the world’s second biggest economy was simply thrown out. Japan has now had 20 years of economic stagflation and not much has been achieved to solve the problems.
In the US, health care costs, a nutcase-based employment market, and arguably the most petty minded, bitchy-snitchy, brattish minimum wage in the Western world has progressively ground down the original economic model which made the United States a superpower.
So the question is — what new disasters are going to be inflicted on the global public, destroying economic security?
It’s not like anyone is going to explain anything to anyone on this subject. American labour statistics have already managed to make people vanish from inconvenient demographics. The “disappearing workforce” is now a fact.
The “disappearing public” is the next logical extension of this process. It’s about time that this collection of overpaid buffoons gets their heads out of their damn spreadsheets and starts looking at what is actually being done and not done.
(The irony of the situation is that anything that needed doing was being done in the US alone, it would generate a global recovery and more business than anybody has ever seen before, almost overnight.)
Balance sheets are not people. Financial statements do not deflect bullets. If global poverty and economic mismanagement get bad enough, forget about elections. People will vote with their anger, and they won’t need a polling booth to do it.
Capitalism uber alles? Don't bet on it
Global capitalism has been pretty smug since the fall of communism, as if it had nothing else to fear. Snuggling up to corrupt, mediocre politicians and even more mediocre organised criminals may be folksy, but it’s no guarantee of survival when billions of people have nothing to lose. Capitalism cannot win a global Vietnam, and it should know that.
Ironically, capitalism’s infatuation with its own success may well be the catalyst for a revival of communism. People with no options will make options. Redistributing wealth may be lousy mathematics, but it is the visible option. People who have been dispossessed are more likely to consider that dispossessing others is the solution to their problems.
Stupidity is often its own reward. A society which refuses to acknowledge economic problems can only make those problems worse.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
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