The Saeculum Decoded
A Blog by Neil Howe
Nov 082010

This article gives an interesting description of the Millennial generation in China. There is quite a lot that is indeed very Millennial (born 1982-200?) about the rising generation in China: They are protected (in uniforms and behind gates), pressured (got to get a credential), conventional (they now all read Confucius), civic minded (look what they did after the earthquake near the Yangtse), and trusting in big institutions (they really do believe in “peacefully rising China”).  As many observers have pointed out, there would never be a raucous youth protest a la Tiananmen Square today.  And yes they are very optimistic.  Clearly, given their economy, they have a lot more to be optimistic about than Millennials in Europe or America.

I think the “risk” this Millennial was referring to is collective risk, not personal risk.  The operative word here is “we.”

Obviously, there is a gaping chasm in China between poor rural Millennials and affluent urban Millennials—a much larger gap, imo, than in any of the developed countries.  An outrageous degree of social  and economic Inequality is one of the vast challenges facing this generation.  Much as it was for the young “Long March Generation” back in the “warlord era” of the 1920s and 1930s

I’ve been looking at the “Little Emperor” generation for a while—and have read all the books and surveys about them I can find.  They are definitely of the hero archetype.  And when all the centripetal forces cause everything in China to fly to pieces, they will be the ones to build something new.  And I don’t think we’ll have to wait all that long for this to happen.

My favorite is “China’s Generation Y.”  See:

Nov 052010

Interesting piece in the NYT style section recently.  Apparently, in the very long wake of the Great Recession, people aren’t as attracted to the boyish waif look in men’s fashion anymore.  Interestingly, there was a lot of discussion as well about this in the couple of years after 9/11. Something that Bill and I used to suggest, and wrote about in The Fourth Turning: greater distance between gender roles in the [4T] and in the emerging Millennial (born 1982-200?).


Especially in a depressed economy, the editors concluded, the Details man was not well represented by the boys so fashionable a moment ago.

“It’s not just models, it’s actors, it’s advertising, it’s the movies,” said Sam Shahid, creative director of Shahid & Company and a force behind campaigns that first helped put Calvin Klein’s name on half the world’s backsides. “It’s trendy to do this, and everyone’s suddenly jumping on it,” Mr. Shahid said, referring to the abrupt rejiggering of masculine ideals.

Nov 022010

In the U.S., we’re raising our top marginal rate up past 50%–but without any of the huge spending cuts.  In 2010, the typical top marginal tax rate on ordinary income in America was about 44% (35% federal, plus 2.8 in uncapped Medicare tax, plus an average of maybe 6% for state taxes).  By 2013, due to the expiration of the Bush tax cuts, a hike in the Medicare tax (thanks to Obama’s health-care reform), and a phase-out of itemized deductions, this top rate will rise by about 7 percentage points—to just around 50%.  The top rate in New York City and California will be well over 50%.

A 50%+ top marginal tax rate is today high even by European standards.  So you might be wondering… if marginal rates on ordinary income are approaching (or even exceeding) Europe’s, why has Europe always been able to extract a much greater share of GDP out of its economy in the form of government revenues?  The answer is that Europe’s *inframarginal* rates have always been much higher—meaning that Europe taxes its middle and lower-middle classes much more heavily than we do.  The bulk of their welfare state, after all, is paid for by one-rate-fits-all value-added taxes and payroll taxes.  The U.S. federal income tax code, by contrast, leaves the middle class pretty much untouched, while ramping up steeply at higher incomes.

Europe is not cutting its high personal tax rates and in the UK David Cameron is even boosting them.  On the other hand, both Europe and the UK continue to cut their tax rates on *capital* income, so that over the last decade the U.S. has come to be regarded as a punitive outlier in its treatment of capital income.  (Case in point, Cameron’s proposed hike in the capital gains tax rate is the one hike that is not likely to be enacted.)  In this new “age of austerity,” Europe is following the brutal law of “efficient taxation,” to use the economists’ lingo.  To wit, you raise tax rates on those who don’t have a choice about whether or where to earn their income… and you lower tax rates on those who do.  As the age of austerity worsens, European voters may insist that governments pin down and regulate the wealth and income of capital owners more rigorously so that they can tax capital at higher rates.  We’ll see.  I can easily envision this happening in America.  Even if the GOP wins big, I doubt that a more populist GOP party will make big cuts in capital gains or estate taxes a big priority.

As for the bond markets, it is true that the U.S. can borrow freely at very low interest rates and will probably continue to be able to do so unless or until the global economic situation becomes truly catastrophic.  The reason is that, due to America’s unique superpower status, bad news anywhere in the world (even here in the U.S.) causes people around the world to invest in U.S. bonds as a safe haven.  So even our own bad decisions cause only others to suffer.  Valéry Giscard d’Estaing (former Finance Minister of France), in a closely related context, once called this America’s “exorbitant privilege.”  Other countries do not have this privilege.  So the UK, Japan, France, and Germany all have to take bold measures against the specter of fiscal insolvency lest the same thing happens to them (sudden hikes in interest rates, and a bond market crash) that has happened now to several of the PIIGS countries.

This explains why—to bring the discussion back around to turnings—America may be the last place in the world to experience the “age of austerity,” that is, to experience the 4T mood in its full economic brutality.  To America, and to America alone, there seems to be no penalty at all to endless borrowing at zero interest rates… and if that is so, then why do any of us need to worry?  Of course, I may be mistaking here the opinions of America’s elites (e.g., Paul Krugman) for the opinions of ordinary citizens.  The midterms may be very revealing in this regard.  I’ve had several opportunities in the last few months to visit cities in the Midwest.  In each of them, I ask my hosts, what issues really concern local voters in the midterms?  And they say, the huge and growing federal deficit.  And then I say, yes, of course, sure, but what do they *really* worry about?  And then the hosts say, no, honestly, they are *really* worried about the country going bankrupt.  I found these conversations very ominous and very [4T].  Bankruptcy is all in the eye of the beholder.  If most people come to view an institution or government as insolvent, a landslide of distrust, hedging, aversion, falling confidence, and nonparticipation begins to feed on itself until, in the end, the institution or government does indeed become insolvent.  Most Americans believe that their government cannot continue to borrow for long without toppling off the brink.  That becomes an important social fact, regardless of the opinion of the Council of Economic Advisors.

Nov 012010

I have recently run into discussions where there is confusion about the date boundaries and sizes of generations. Even the word “generation” can sometimes be up for contention. On the definition of “generation,” I don’t get hot and bothered about it.  The etymological history of the word “generation” is sufficiently broad (having been applied to families, computers, eras, what have you), that people are pretty much free to call any arbitrary cohort group a “generation” if they feel like it.  Most of these definitions, however, are ad hoc.  Even the famous Census Bureau definition of Boomers (which they define as 1946-64) is ad hoc, determined entirely by an arbitrary uptick and then downtick along a broad fertility-rate swell.

Very few of these definitions pretend to adhere to general rules about how social generations arise in history—which is what Bill and I have worked hard to do.  If you would like a definition of a social generation that puts all generations on a level playing field, so to speak, and links generations in some reliable way to historical events and trends, you may like what we have to offer.  But if you don’t care for such a definition, you probably won’t bother.

Now, on how and whether America’s demographics is or is not linked to an “age of austerity.”  This is a question on which I have written a lot.

The demographic challenge facing America is not as severe as the challenge facing near all of the other developed countries (and even some of the developing countries, like China).  The reason is pretty simple: We have a higher fertility rate and we have a higher immigration rate.  Indeed, we are the *only* developed country experiencing  “replacement rate” fertility.  And we are the only developed country whose total population is projected to continue growing (albeit very slowly), and not turn negative, through to the end of the next century.  The U.S. fiscal situation is also helped by the fact that our pay-as-you-go cash pension system is smaller and less generous, relative to GDP, than those of other countries.  But this plus is more than offset by our super-expensive health-care entitlement edifice, which is much more expensive as a share of GDP than any other country’s and is growing faster as a share of GDP.  (I’m very disappointed by Obama’s missed opportunity here, btw.  Rather than fix this broken system, the administration put new fuel into it, made it larger, and then called it “reform.”  But I’m digressing.)

All that being said, it is not true that we don’t face the same adverse demographic trends that these other countries face.  We do, only to a somewhat lesser degree.  We also face it more suddenly than Europe or Japan because we experienced a larger-than-normal swing from a (relatively small) generation of new Silent (born 1925-1942) retirees to a (relatively large) generation of new Boomer retirees.  So whereas Europe and Japan have their “aging” spread out over many decades, the U.S. age wave is all compressed into the just the next two, the 2010s and the 2020s.  This aging will exert a severe multiplier on U.S. entitlement spending (again, Medicare and Medicaid especially) at the worst possible time—since we enter these decades already running vast deficits, with a weak economy, and with new strains on unrelated auxiliary benefit spending, like disability and unemployment.

If you’d like more detail on exactly how our fiscal projections compare to those of other countries, take a look at the presentation of results from our new CSIS study  for Prudential:  I think the numbers speak for themselves.  To read our Op-Ed on the GAP Index that appeared in a recent NYT, see

Finally, on the issue of generational size.  I think I’ve said this before on the: The “baby bust” that America experienced during the most of the Generation X (born 1961-1981) birth years resulted in a sizable dip in the number of births—but this dip is hardly visible anymore when you look today at population by age bracket.  The reason: Immigration.  Gen X is by a sizable margin the largest generation of immigrants per capita of all of today’s living generations.

Take a look at the table (for 2009) I’m inserting below.  It’s shows pretty much the same number of Americans by age bracket until you get to the early wave Boomer (born 1943-1960).  Normally, in a society with more traditional fertility, the number per age bracket would decline sharply across the entire x axis.  So the fact that the line is level until about age 50 is itself a sign of an aging society.  You can also see, anomalously, a slight rise in the late 40s and early 50s, which is a lingering sign of the “boom”—still visible, despite the rising mortality in these brackets.  But clearly it is *not* true that the Xer cohorts today are dramatically smaller than the Boomer or Millennial (born 1982-200?) cohorts.

Chart of US Population by Age group
Chart of US Population by Age group

We’ve always thought that including the 1961-64 cohorts as part of Gen X *clarifies* the generational distinction. This is the group which has no peer connection to the youth rebellion crescendo of the sixties and early seventies. This is also the group that includes so many of the iconic leaders of Gen X (including the guy who gave it its name). Plus, per my reading of the surveys, the arrival of this cohort into each new age bracket—starting with their filling of colleges and the military in the early Reagan years–has coincided with a seismic recognition that something big was changing in that age bracket. I noticed it as a teaching assistant at grad school back in 1980s… we Boomer Teaching Assistants all talked about it. And this was years before I ever thought about writing about generations.

Needless to say, both our chapter on “The 13th Generations” in “Generations” (1991) and our book “13th GEN” (1993) were hugely influenced by this “dazed and confused” leading-edge cohort group, who were then in their late 20s… about where Millennials are today. Boomers, not. Imho.

Nov 012010

Interesting article on “The Wisdom of Crowds“. Of all the new books out there on the wisdom of crowds, by far the best in its analytical sweep IMO is Cass Sunstein’sInfotopia.”  Sunstein examines each of the major modes of group decision making–some old, some new and web-enabled.  He explains mathematically why averaging many guesses so often produces better results that individual guesses, and points out important cases when this is not true.  He explains why forecast markets have such a phenomenal track record, much better for example than guess averaging, and why these markets are being started by so many large institutions to guide internal decision making.

Most fascinating of all is his examination of the traditional “deliberative” decision making process, whereby experts are brought together to confer and discuss and gradually reach a decision.  (Examples include Cuban Missile Crisis or WMD in Iraq.)  He shows why this process has such a horrible track record, why it gets the smartest and most reasonable people to suppress their real views.  Amazingly, studies show that many deliberative processes actually *worsen* the decision outcome, meaning that the average of people’s views before the process is actually superior to the consensus reached after the process.

Anyway, great book, very worth the read.