Saturday 16 November 2019

David Quinn: Generation Me forgot age-old retirement plan: invest in babies

A sunny scene yesterday in Essen, Germany, a country where one-in-five people are over the age of 65, compared with one-in-10 here
A sunny scene yesterday in Essen, Germany, a country where one-in-five people are over the age of 65, compared with one-in-10 here

David Quinn

Having rightly scapegoated and punished Fianna Fail for the economic mess we're in -- although it was by no means exclusively their fault -- we are now seeking another scapegoat.

Obviously it's way too early to scapegoat the new Government so it looks like we're settling on the EU instead for the time being.

However, as Thomas Molloy pointed out in this paper, we'd be much better off taking ownership of our own problems rather than trying to dump them on someone else.

That's not to say Enda Kenny shouldn't try to soften up his fellow leaders at the EU leaders' summit ending today in the hope of easing the terms of our bailout package.

But even if he does eventually secure something -- a cut in the interest rate, say -- it will save only a few hundred million a year off the tens of billions that we owe.

The leaders' summit has been looking at ways to avoid a repeat performance of the current almighty mess, assuming we manage to clean it up without destroying the euro or the EU itself.

But even if we do manage to clean up the mess, and put in place effective safeguards against a repeat performance, there is another economic calamity coming our way in the form of an immense demographic crunch. We need to do much more talking about this.

Thomas Molloy alluded to this problem (Irish Independent, March 22) when he said what EU leaders want "is a solution to Europe's economic problems so that they can continue the process of restructuring their own economies before their dying populations overwhelm their social welfare and pension systems".

I wish them luck, especially the Germans who basically don't believe in having children anymore. They may be frugal, but that's not going to solve the problem of a very rapidly ageing population.

Here are some facts. In Ireland, one-in-10 people are over the age of 65. In Germany, the figure is already one in five.

In less than 20 years, the German figure will be one in three. Eventually there will be a pensioner for every worker.

Germany is simply an outlier in this regard. Even Britain, which has a fairly healthy birth rate -- meaning it's not too far below two children per couple -- is going to be in trouble.

A report published last week calculated that a British 65-year-old today has received from the state £223,000 (€265,000) -- more than they've paid in taxes over their lifetime.

But a baby born today will pay £160,000 (€180,000) more in taxes than they receive.

This means young people in the future are going to be hit with an enormous tax burden to pay for the health and pension needs of older people.

Either that, or there will be a massive rebellion against the welfare state and it will be chopped down to size. However, all those pensioners will fight hard for the welfare state and politicians will be terrified to defy them.

That could mean lots of young people will emigrate to countries with a smaller proportion of elderly people compared with Europe, and that probably means America, even though America is also ageing.

Meanwhile, Europe will have to massively increase its intake of immigrants if it doesn't want to fall off the cliff completely.

The first decline in our birth rates happened when people left the farms and moved to the cities. But the second dip, which academics call 'the Second Demographic Transition', brought birth rates way below replacement level in many countries and it coincided exactly with the rise of the Me Generation.

The Me Generation didn't care so much about having children as they got in the way of their freedoms. They didn't much care for the traditional family as it also got in the way of their freedoms.

They voted in favour of a lavish welfare state because it suited them to have generous pensions and a fantastic healthcare system when they retired.

And as we found out during the boom, it even suited them to drive up house prices so as to feather their own nests at the expense of their children.

But they didn't do their sums properly because you've got to have children to keep the show on the road and that's why the show is going to come off the road in the most dramatic way. The Me Generation tried to have it both ways and is soon to discover it can't be done.

What all this means is that compared with the crisis to come, the current crisis is just a throat-clearing exercise.

It is a crisis that has been long prepared by the unwitting members of the Me Generation and no amount of EU summits can stop what is coming. Brace yourselves.

Irish Independent

Today's news headlines, directly to your inbox every morning.

Don't Miss