The Saeculum Decoded
A Blog by Neil Howe
Jun 202012
 

“How not special you are.”  That seems to be a popular message older people want to deliver to the young these days.  In the last couple of years, I’ve started to notice this new tough-love refrain pop up in commencement addresses.  This year, it’s really ramping up.  Apparently, when middle-aged folk tire of apologizing to the young about how badly they have messed things up—they easily move on to remind the young how unworthy they are themselves.

See in particular the pugnacious and dismissive (if not contemptuous) address penned by Bret Stephens in the Wall Street Journal a few weeks ago, which got lots of attention.  He starts out with this happy note: “Dear Class of 2012: Allow me to be the first one not to congratulate you.”  And then he goes on:

Here you are, probably the least knowledgeable graduating class in history…

To read through your CVs, dear graduates, is to be assaulted by endless Advertisements for Myself…

Your prospective employers can smell BS from miles away.  And most of you don’t even know how badly you stink.

And so on.  OK, so Stephens didn’t actually deliver this address to an actual school.  But I’m sure someone will try.

Last week, David McCullough, Jr., a high school teacher at Wellesley High School (and son of the Pulitzer Prize-winning historian) gave a lighter, wittier version of a similar message: Shape up, you’re very ordinary, and your parents’ incessant praise won’t help you now.  “You’re not special” was his repeated refrain.  The video has gone viral.  Clearly, these “speeches” have struck a chord among some of today’s Boomers and Xers, those who find young people in schools, colleges, and workplaces just too confident, too full of themselves, and too “special” for their taste.  Apparently, it’s time for older people to take youth down a few notches—for their own good.

So what exactly is going on?

At some level, I guess I’m baffled by the sudden popularity of this trope.  Here we are at a time of historically high youth unemployment during the longest and most severe economic bust since the Great Depression.  Why would anyone think Millennials need to be reminded by graybeards that history won’t give them a free pass?  Just about everyone knows, moreover, that in the decades to come Millennials are eventually going to have save more and bear higher taxes (in just about any fiscal scenario) to pay for their parents’ unfunded retirement liabilities.  And, if those programs go bust, Millennials are conveniently situating themselves in or near their parents’ households so they can help out in person.  Shouldn’t these older people want to be nicer to these kids in anticipation of what’s ahead?  Shouldn’t they be at least hoping that this rising generation is indeed special enough to handle the challenges being handed to them?

It might be different, I suppose, if these young Millennials were aggressively attacking their parents for their alleged misdeeds—like young Boomers famously and loudly assailed their own parents for raping the earth, waging colonial wars, and subjugating women and minorities.  If that were the case, today’s older generations could plead self-defense.  Yet Millennials rarely make such attacks, and certainly don’t make them at public events.  I have attended a great many commencements, convocations, and ceremonies involving high-school and college students in recent years, and in all the them Millennials thank and congratulate their parents and teachers in the warmest terms.  Never do I recall a young person saying something like, “Mom and dad, I really don’t think you are very special.”

So it’s a weird and one-sided conflict.  If Millennials wanted to attack, of course, it would be easy enough to find targets to strike–starting perhaps with their elders’ greed, short-sightedness, and blind partisanship, which have recently brought the global economy to its knees and rendered the nation’s capital ungovernable.  Yet Millennials do not strike.  They bear perhaps the heaviest burden from their elders’ malfeasance.  But they do not attack.  Perhaps because they are just too nice to get nasty.  Or because they would rather not get into a conversation with judgmental Old Aquarians who simply won’t stop arguing until they win.

Maybe, some say, this whole anti-special, tough-love line is justifiable as a natural and welcome corrective to the excesses of the “self-esteem” movement in recent years.  According to psychologist Jean Twenge, mindless cant about every person’s preciousness is turning the young into raging narcissists.  Maybe staring young people in the eye and saying, earnestly, “You are not special” will humble them, teach them a lesson, and incentivize them to try harder.

Personally, I think this is nonsense.  Sure, I understand that parents or teachers must often tell young people that they aren’t meeting a standard—and instruct them in what they must do to improve.  That’s fine.  But I don’t see any reason, ever, to tell people publicly and officially—in groups or as individuals—that they are existentially not special.  And certainly not if you are trying to motivate them to become better people.

Think about it: Why do all of the major religions (especially the monotheisms, which account for two-thirds of the world’s believers) teach that every soul, even that of the lowest sinner, is special in the eyes of God?  Is that a huge mistake?  Would these religions do a lot better by teaching that most of us are just an indistinguishable putrefying mess in the eyes of God?  Or think about great moments in history: Caesar on the eve of Pharsalus, Henry V before Agincourt, Eisenhower before D-Day.  Can we imagine King Hal rousing his motley crew by telling them that tomorrow, on Saint Crispin’s day, you will all be feeling very ordinary—because that’s really all that you are?  Or think about pedagogy.  How often have you ever heard a person say about his or her former teacher, “Yeah, he was amazing, turned my life around.  He just made me feel so unspecial.”

So how can we explain what’s going on?  I think we need to go deeper, to descend to America’s collective subconscious—and to recognize that generations sometimes give free reign to their worst instincts.

As America enters a Fourth Turning, characterized by a new mood of restraint and responsibility, older generations feel a need to exorcise their own attitudes of selfishness and habits of indulgence.  How do they do this?  Sometimes, atavistically, they do this by projecting these attitudes and habits on the young and blaming the young for them.  In the western tradition, this rhetorical response is encoded in the Jeremiad, so-called because Jeremiah (in the 7th century BCE) blamed Israel’s woes on the decadence of the chosen people in general, but especially on the corruption of the “rising generation.”  Ever since, throughout history, the Jeremiad periodically regains popularity as the need for its message arises.  In New England during the 1660s, Increase Mather responded to recurring famines by blaming the colonists, and blaming especially “the sad face of the rising generation,” whose “heathenish” and “hard-hearted” ways boded ill for their collective future.

We may indeed be hard-wired to “blame the victim” just to assure ourselves that some sort of moral order still prevails.  I know some parents who will scream at their kids for an accident they know wasn’t their fault.  No, it’s not fair, but then again the parents can (rightfully) point out that life is not always fair and their kids had better get used to it.  More optimistically, we call these “teaching moments.”

So I get why Boomers sometimes tell Millennials how unspecial they are.  It so fits their life story.  Boomers have spent a lifetime judging other generations.  Back when they graduated high school and college, their parents called them “special” and hoped for a nice conventional ceremony.  But young Boomers so often found a way to darken the mood and spoil the event.  Ditto, today—only now it’s the kids who just want to have a nice conventional ceremony.  And now it’s the parents who insist on delivering stern lectures about the selfish, complacent, and meretricious lives of a generation other than their own.  Oh, sweetie, was this supposed to be a happy moment?  Sorry!

I also get why Gen-Xers often echo the same line.  While growing up, they absorbed so many negative images of youth that many figure horrible dis-incentives are the only way kids can be motivated—from “survivor” games to “this is your brain on drugs” ads.  The very phrase “tough love” was invented in the ‘70s and ‘80s to describe the standard operating procedure for dealing with Xer kids.  My Los Angeles friend Marc Waddell has reminded me that the current anti-special message echoes the famous line spoken by Brad Pitt, in that Xer classic Fight Club: “You are not a beautiful and unique snowflake.  You are the same decaying organic matter as everyone else, and we are all part of the same compost pile.”  Throughout history, this has been the retort of skeptics, cynics, and materialists to all of the saints, seers, and visionaries.  Generationally, it has been the trademark response of the Nomad archetype to the Prophet archetype which always just precedes it.

Some Xers may also feel jealous: No one gave a damn about me when I entered college or got my first job, they recall.  So why am I required to be so solicitous toward these Millennials—with all their onboardings, parent meetings, mentorships, feedbacks, career pathway maps, and 360 reviews?  Sooner or later, Xers learn why.  Because Millennials came along at a different time.  That makes all the difference.  And as Xers raise their own kids, they understand better what motivates that difference.

The very word “special” has itself changed its meaning from one generation to the next.  During the Boomer and Gen-X ascendancy, the word “special” was increasingly used to single out individual excellence, as in the “special” academic or sports ace who in school performs better than everyone else.  Every sarcastic speech about precious youthful specialness thus contains at least one anecdote about how absurd it is that everyone on the team can receive a medal.  Echoes Wellesley High School’s McCullough, echoing everyone else: “If everyone is special, then no one is.”

But is that always true?  Imagine society veering back to a more collective understanding of “special”—something a bit more like how King Hal addressed his “band of brothers.”  Or imagine a generation of young people who, like Millennials, are more likely to reward everyone on the team simply for participating, who go back to pull forward anyone who needs help, and who don’t mind chopping up the valedictorian or homecoming award (recall the climactic scene in Mean Girls) among a large number of people?  Yes, this is a different understanding of specialness, one that has hibernated in recent decades, but surely it too has some legitimacy.  One hates to think that the few can be special only to the extent that the many are found deficient.  Or, to put it more bluntly, that heaven is rendered meaningful and desirable only by the sufferings of those in hell.

I have found that Gen-Xers in particular find it hard to imagine how feeling special can mean anything other than a sense of individual entitlement.  As managers and supervisors, therefore, their natural impulse upon encountering special-feeling Millennials is to confront them with a tough-love, drill-sergeant message: In my eyes, you maggots are not special at all!  They admit to me that this approach, when they try it, often backfires—and at best does little good.  My advice?  Don’t fight the energy.  Channel it.  Say something like this: In my eyes, you young people really do seem special—and guess what, we expect special things from you!  Most of these Xers tell me this works better, and many admit that they had never before thought much about how to leverage positive self-esteem in a collective setting.

Jun 162012
 

There is a moment in Homer’s Odyssey when Odysseus—now reduced to only one ship and crew—is compelled to travel through a very narrow strait.  (According to tradition, this was the Strait of Messina between Sicily and Italy.)  Odysseus knows that he must avoid the deadly dangers lurking on both sides.  On one side is the he-monster Scylla, with six long necks and heads full of sharp teeth.  On the other side is the she-monster Charybdis, a gigantic whirlpool that can swallow the largest sailing ship.

In Homer’s account, Odysseus pretty much fails.  After Scylla plucks many of his best crewmen off the deck of his ship and eats them, Charybdis later swallows the rest of the crew and his entire ship.  Odysseus alone barely escapes with his life.

Now here is my question: As the U.S. economy negotiates its upcoming fiscal gauntlet, will America fare any better than the trickster from Ithaca?

Let me explain.  Most political, economic, and financial policy experts are today expressing growing alarm at the prospect of the “fiscal cliff” or “taxmageddon” that looms on January 1, 2013, less than two months after the November election.

In part, this timing is the accidental result of the expiration date chosen when the original “Bush tax cuts” were enacted in 2001 and 2003.  That date—January 1, 2011—was extended by two years in 2010 as part of the Obama stimulus package.  So the date is now January 1, 2013.  (We really should call it, in the spirit of bipartisan amity, the “Bush-Obama tax cuts.”)

Yet the date is also the deliberate result of the bipartisan deal both parties struck last August in order to avoid a political and constitutional crisis over the federal debt ceiling.  Like so many other drunkards and addicts, Congress and White House decided at that time (for approximately the 20th time over the last 40 years) that no, we can’t start cutting our deficit right now, but we will 15 months from now, on January 1, 2013.  And this time we really really mean it.

So what, exactly, did they really really mean?  On the revenue side, they meant the expiration of the 2-percent FICA tax cuts, an end to the indexing of the AMT (Alternative Minimum Tax), and several other minor tax hikes.  All this comes on top of the expiration of the Bush-Obama cuts.  On the outlay side, they meant a long list of spending cuts—most of all, an end to emergency Unemployment Insurance, large reductions in Medicare’s rate of reimbursements to doctors, and a large cross-the-board “sequestration” (percentage chop) of discretionary outlays (mostly for the military but also for infrastructure, colleges, police, and a thousand other things that are supposed to hurt).

Well, guess what, the 15 months are almost up, and the macroeconomic conditions for those big deficit cuts don’t look any better now than they did back then.  If Congress does nothing and lets all of the planned deficit cutting happen after January 1, CBO expects that in 2013 (actually, in the just last nine months of fiscal year 2013) total federal revenues will rise by 2.9 percent of GDP and outlays will fall by 0.9 percent.  That’s a massive one-year fiscal drag of 3.8 percent of GDP, over half a trillion dollars, which is easily enough, says the head of the CBO, Fed Chairman Ben Bernanke, and most other sentient economists, to throw our economy back into a recession in 2013 if we aren’t there already by then anyway.  Over the subsequent two years (2014-2015), current law dictates a further deficit shrinkage of 2.4 percent of GDP.

Here is the latest CBO projection, assuming we make no changes in current law and “go over the cliff”:

 

As you can see, the “cliff” takes us from a deficit of -7.6 to -1.5 of GDP in just three years.  By 2017, revenue would rise to the highest-ever share of peacetime GDP.  By 2020, discretionary spending would sink to near post-World War II lows.  Fiscal tightening would be extreme while (presumably) monetary policy would keep interest rates at near-zero.  It would be the complete opposite of the early Reagan years.  Though the CBO economists do say that this scenario will throw us into a recession in the first half of 2013, they hate to be bad news bears and promise that we will pull out of it in the last two quarters.  Obviously, the recession could be much worse.

This is Scylla.  Bottom line: If are not yet in recession by late 2012, the upcoming fiscal cliff—by suddenly removing hundreds of billions from aggregate demand—will throw us into a recession.

Now maybe you say, damn the torpedoes, let’s reduce the deficit even at the cost of a recession.  Great spirit.  I sympathize and admire your gusto.  But before you commit yourself, go back to your Macro 101 (that dog-eared chapter on Keynes) where you learned that, in a severe recession, falling GDP can itself increase the deficit as fast as your fiscal cuts reduce it.  You end up with lower production, lower incomes, higher unemployment, more poverty—and government borrowing nearly as big as it would have been without your austerity policies.

Want me to be dramatic?  Consider that cutting aggregate demand by 6 percentage points of GDP over three years is tantamount to raising oil prices to roughly $350 per barrel.  Now, for extra excitement, imagine that a slowdown in China or a meltdown of the Eurozone has already put us in a serious new recession.  Or maybe Bibi says time’s up to Mahmoud and hits Iran—and global oil prices really do hit $350.  In addition to everything else.

OK, by now you may be thinking, Scylla sounds really awful.  Let’s do anything to avoid that bad boy.  Let’s just pull the rudder way to the other side.  If so, you’ve got plenty of company: Most of the American public, who don’t want to pay higher taxes next year, and a whole slew of industries who pay for K-Street lobbyist, from major defense contractors and American Medical Association to professors and builders and growers and truckers.  They’re all pointing to the people who will have to be fired if the fiscal cuts go through, many of whom won’t be able to get another job soon.

In short, there are plenty of plausible reasons why Democrats and Republicans in Washington may overcome their partisan gridlock and agree to “undo” the fiscal cliff—and defer budget balancing to another day.  So let’s assume that’s what happens: We extend the Bush-Obama tax cuts, we put off the SMI physician-rate cuts, we cancel the defense cuts, etc., etc.   So what happens then?

Well, thanks to CBO’s latest annual edition of its Long-Term Budget Outlook (2012), issued just a few days ago, we have a pretty good idea of what happens then.  The CBO runs two scenarios.  The first is its “extended baseline scenario,” which assumes that current law is not changed and that the fiscal cliff happens pretty much as scheduled.  (That’s the scenario I’ve been quoting above.)  The second is its “extended alternative fiscal scenario,” which assumes that most of the cliff is dismantled exactly as we have been discussing.

This alternative scenario is by no means a stimulus scenario.  It still projects some fiscal tightening: Taxes will still rise and outlays will still decline; and the deficit is still projected to shrink—by 1.4 percent of GDP in 2013 and by another 1.3 percent by 2015.  Even in this scenario (with the Bush-Obama tax cuts extended), federal revenue as a share of GDP in 2016 climbs back over its historical average for the past 40 years.

Yet look at what also happens under this scenario to net federal debt held by outside creditors (“net” means we don’t include one federal agency owing another federal agency—like the Social Security trust fund debt).  Because deficits remain large, this debt steadily grows.  By 2021, nine years from now, the net federal debt exceeds 90 percent, which economists Carmen Reinhart and Kenneth Rogoff (in their articles and their book This Time It’s Different) say marks a sort of danger zone in which GDP growth slows sharply and debt default is common.  Historically, the United States has exceeded 90 percent in only three years: 1945, 1946, and 1947.  By 2026, 14 years from now, the net federal debt under this scenario hits a level having no precedent, even in World War II, and is by now racing steeply upwards.

You are now looking at Charybdis, the whirlpool that sucks us under.  Like the whirlpool of Homer’s legend, it kills us after we escape Scylla, but it kills us just the same.  Yet here’s what’s really scary.  Even this scenario may be contractionary enough to trigger (or worsen) a 2012-13 recession.  In which case—like Odysseus—we get may hit by both the hydra and the vortex.

There is no reason to be overly pessimistic about the outlook.  While the window of opportunity for the U.S. economy is lot narrower than it was a decade ago, it is by no means shut.  We do need to avoid bad luck: If the U.S. economy is hit by a big shock from abroad (major Euro-zone exit, crash in China, war in the Mideast) or experiences a sudden surge in interest rates (driven by inflation expectations or declining global confidence in the U.S. Treasury), then there may be no happy “middle” outcome no matter what we do.  And even if we avoid bad luck, our fiscal navigation will require shrewd timing and trusted leadership.  Clearly, much of next year’s “cliff” has to be removed to avoid Scylla—but at the same time, a graduated fiscal tightening in the out-years must be implemented that will get us around Charybdis.  Yet would today’s public trust a fiscal promise to tighten in the out-years?

Sure, it’s possible.  But frankly, I don’t think it’s probable.  Not with America’s current generational line-up, in which so many zero-sum Boomer ideologues remain in power, too few Gen-Xers have yet stepped up into positions of political leadership, and Millennial engagement in national politics remains episodic and unfocused.  But I’ll discuss the politics—as opposed to the economics—of  the fiscal cliff in another post.

Let me just return to just one central question that may lurk in the minds of many readers: How did we get into this mess?  Why is the fiscal arithmetic so unforgiving now, when it didn’t used to be this way?  I can point to two main reasons, both of which have major generational implications.

Reason number one.  Our economy has entered an extended era of painful deleveraging—a long bust, if you will, following a long boom–something America has not really experienced on anywhere near this scale since the 1930s.  Such eras are characterized by sagging employment, production, equity prices, and confidence; by deflationary pressure; and by large declines in tax revenue at just the time when government is called upon the spend more.  Very large deficits are the result.  The G.I. and Silent Generations mostly cashed out their homes and financial assets before the bust hit—and probably don’t have to worry much about benefit cuts.  Boomers and Gen-Xers, on the other hand, have been hit by far the hardest by the recent crash and recession (see recent blog post)—and probably should worry (or simply expect) that impending budget austerity will raise their tax and cut their benefits as well.  As for Millennials and Homelanders, we may be setting them up, eventually, to buy into an economy with low valuations and enjoy growing prosperity thereafter.

Reason number two.  Benefits to Americans age 65+ keep rising as a share of GDP–thanks to the insane design of public health-care programs; to the elevated benefit levels we now think seniors deserve; plus, looking forward, to the daunting demographics of the Boom Generation.  Eventually, this means that senior spending crowds everything out of the budget.  Consider this: Back in fiscal year 1962, total federal health spending plus Social Security amounted to 2.8 percent of GDP; by 1972, 4.4 percent; by 1982, 6.8 percent.  Now look at the tables I’ve presented above.  In 2012, the number is 10.4 percent.  By 2022, according to the scenario in which Medicare reimbursement is not cut–I don’t think these cuts will ever happen—the number will be 12.6.

Now contemplate these numbers for a second.  (Yes, I know, some federal health-care spending doesn’t go to seniors, but then again we’re not counting lots of benefits, like SSI and nutrition and federal pensions, that do; let’s accept this as a rough proxy.)  So here we are—going from 2.8 percent of GDP in 1962 to 12.6 percent in 2022.  Let’s also keep in mind that federal revenues have averaged 18.0 percent of GDP over the past 40 years.  And let’s say that, at a minimum over the last 40 years, 1.5 percent of GDP needs to be allocated to the payment of interest.  Conclusion?  Back in 1962, the federal government could spend 13.7 percent of GDP on things other than transfer payments to seniors and creditors—and still not exceed a typical year’s revenues.  By 2022, the feds will only be able to spend 3.9 percent of GDP on things other than transfer payments to seniors and creditors—and still not exceed a typical year’s revenues.

These tawdry numbers may clarify a lot.

For example, you might have wondered how, back in the 1960s, America’s federal government was able to pay for massive infrastructure investments (dams, bridges, harbors, parks, interstates, subsidies to colleges), plus the “Great Society” (including LBJ’s “war on poverty”), plus a stupendous Apollo project to put a man on the moon (using absurdly primitive IT)—yet also pay for a gargantuan defense establishment (did I mention the building of ICBMs, MRVs, and millions of G.I.s fighting in Vietnam?), which was roughly twice the size of today’s military as a share of GDP.  And we did it without running a deficit!

Today, by contrast, the federal government invests little, builds less, and repairs only when it has no other option.  It charges user fees where it can, has frozen the size of the civil service, and vigorously shuns any of the ambitious agendas we once embraced–such as employing the poor, educating the young, or sending humankind to new planets.  (Today, indeed, NASA is an endangered agency.)  As for defense, our policy makers are budgeting for the age of cruise-missile and predator diplomacy.  In 2012, the military spends (at 4.6 percent of GDP) less than half of what it spent in the mid-1960s—and by 2015 the OMB expects it to spend (3.1 percent of GDP) only a third.

Yet even so, the federal government is today projected to run large deficits as far as the eye can see.

OK, this post is too long already.  Time to close down.  Two posts to come I promise: One on the generational politics of the fiscal cliff; and the other on different ways of looking at the federal budget.

Jun 132012
 

This cartoon (thanks to citizensforsafetechnology.org), which has been knocking around the Internet for a few months, is good enough to show again here.

Entering an office today full of Millennial knowledge workers (say, a law firm or investment firm) is a curiously subdued experience.  Not a lot of talking, folding, walking, singing, stapling, photocopying… or even moving.  Everyone is intensely focused, busily attending to many tasks, and (usually) communicating with others, often with many others at the same time.  But it’s all done with a screen, keyboard, and headphones.  To the outside observor, there seems to be almost nothing going on.

I am reminded of the climactic scene in Arthur C. Clarke’s Childhood’s End (1953), when Jan (the last real “human”) returns to earth and finds all of the earth’s children, in the hundreds of millions, lying motionless on one continent, not even opening their eyes.  But they are communicating through telepathy, and soon they begin to move and reconfigure the planets through telekenesis.  As I recall, Jan stays to witness the transformation of the rising generation into pure mind (this is where it gets real Boomer!), which finally happens in a Stanley Kubrick-style flash of pure energy that destroys the entire solar system.

Thankfully, most Millennials are as yet engaged in more prosaic activities: emailing their boss, IMing their friend, checking out a YouTube video, airbrushing something out of their Facebook wall…

Jun 122012
 

Every three years (or so), the Fed’s Survey of Consumer Finances releases a report on “Changes in U.S. Family Finances.”  It’s a goldmine of information on how families are doing financially—specifically, how their assets and liabilities and net worths are changing by various demographic categories.

Yesterday, the Fed released a new report for 2010, its first since 2007.

I anticipated that the news was unlikely to be good, given the carnage done to family financial assets and home prices during the recent Great Recession.  I suspected net worth would be down overall, and down the steepest for younger families.  I had already seen preliminary Fed estimates of 2009 data.  And I had already ruminated over the depressing Census 2010 report on income and poverty.

But I have to admit, I wasn’t prepared for results as bad as these.  Here’s the bottom line:

Net worth basically means the total assets–real and financial, including home–minus the total liabilities of every U.S. “family.”  (Though the Fed uses the word “family,” it really means households; a “family” can consist of only one person.)  In 2007, the median for all families was $126,000; in 2010, it was $77,300.  That’s a fall of 39 percent.

What happened?  The value of homes and financial assets (often in 401(k) retirement plans) crashed—and though the Dow has partially recovered, the prices of homes haven’t.  The middle 60 percent of the income distribution was hit hardest, percentagewise, for just this reason: Most of the lowest 20 percent don’t own homes, and for most of the highest 20 percent homes constitute a smaller share of their net worth.  The hardest hit region was the West (median net worth down 55 percent) mostly, again, for the same reason—homes.

Another interesting angle: The share of families with credit card debt is down, while the share with college debt is up.  For the first time ever, education loans make up a larger share of a family’s average debt than car loans—which is suggestive of where Millennials and their families are, and are not, making their investments.

But what I want to draw real attention to is the differing trends by age.  Gen-Xers and late-wave Boomers between the ages of 35 and 54 (down by 54 and 40 percent) have been hit by far the hardest.  They bought late into the real-estate market, they borrowed most against the value of their homes, and they tended to buy in the newer, faster-growing,  and exurban regions where home prices crashed the most steeply after 2006.  They also (I suspect) tended to invest their assets aggressively, as most investment managers say young adults should.  Early-wave Boomers age 55-64 (down by 33 percent) have fared a bit better.  As for Millennials and late-wave Xers under age 35, their trend (down by 25 percent) doesn’t mean much since their net worth is still so small.

But now let’s look at families age 65 and over, a group dominated by the Silent Generation.  They have done much better (down by only 18 and 3 percent).  Most of the Silent traded down from their primary residence at or near the top of the housing boom.  Most sold or annuitized their financial assets at a much better moment in the history of the Dow.  Even if they didn’t, they are more likely than Boomers or Xers to be getting retirement checks from DB (defined-benefit) corporate or government plans that are unaffected by the market.  And even if they couldn’t or wouldn’t retire, they have been less likely to lose their jobs: 65+ Americans are the only age bracket whose employment-to-population ratio has risen continuously through the recent recession.

The new Fed study looks at income as well as net worth.  Its verdict is the same as that of the annual Census reports (cited earlier): The age 65-74 and 75+ age brackets are the only ones to experience rising real median incomes between 2007 and 2010.  Families in every younger age bracket experienced substantial declines.

OK, you might say: We’re only talking about the last three years.  Things go up and down.  Maybe this is just Brownian motion.

No, it’s not.  It’s all part of a much longer trend.  Let me now show the results going all the way back to the earliest Fed reports—that is, going back to 1983, and updating everything into inflation-adjusted 2010 dollars.

As you can see, the real median net worth of every age bracket under age 55 was better off back in the early Reagan years than it is today.  (Remarkably, the situation for age brackets under age 45 never improved much after 1983.)  Over age 65, things are much better today than at any time before 2004.  And in 2010, for the first time ever, the age 75+ bracket is actually the best off of any adult age bracket.  Back in the early 1960s, by most accounts, it was the worst off.

Now let me restate these results in a fashion that makes the generational point a bit clearer.  In the following table, I express the median net worth of each bracket as a percent of the median net worth of 35-to-44 year-olds in that year.  Take a look:

Here’s the take-away.  Back in the early 1980s, when the 35-to-55 age brackets were dominated by the Silent Generation, people that age were roughly on par with the household net worth of the elderly.  Interestingly, a 50-year-old family was 39 percent wealthier than a 75+ family.  The Silent, in short, were doing pretty well—as they continued to do relative to other generations as they grew older.  Today, a 50-year-old family is 54 percent poorer than a 75+ family.

Today’s headlines on the Fed report say the median net worth of all families has fallen to 1992 values.  Which is true, averaged across all families.  But it is also true that today’s young families are doing much worse than like-aged families in 1992—and that today’s senior families are doing much better.

All of this, by the way, was long-ago predicted.  Back in 1987, the eminent demographer Richard Easterlin wrote Birth and Fortune, a book in which he tried to explain why Americans born from the late-1920s to the early 1940s (the Silent Generation) had always done so well in the economy relative to the generations that came before and after them.  Easterlin noted that one of the most remarkable features of the 1950s and early 1960s was how the typical young man at 30 could earn more than the average wage for all working men—and could certainly live better than most “retired” elders of that era.  He also noted that since the late 1970s, the economic conditions facing young late-wave Boomers had become much tougher.  Easterlin called the Silent the “Fortunate” or “Lucky” Generation, and attributed their high incomes to their relatively small numbers—pointing out that they were the product of the “birth dearth” of the Great Depression.

Bill Strauss and I always thought that the explanation lay somewhat deeper than just demography and was connected to their location in history and their archetype.  The Silent were socialized early in life to get ahead by following the rules in a fresh-built system that actually rewarded rule-followers.  This they did, and it worked.  A good Silent joke (popularized by Woody Allen) is that 80 percent of life is just showing up.  I know very few Gen-Xers who think this is true—or even funny.

In case you’re interested, here’s what Bill and I wrote about the economic future of the Silent back in our first book, Generations, published in 1991:

No American generation has ever entered old age better equipped than the Silent.  Today’s sixtyish men and women stand at the wealthier edge of America’s wealthiest-ever generation, poised to take full advantage of the generous G.I.-built old-age entitlement programs.  Armies of merchandisers and seniors-only condo salesmen will pounce on these new young-oldsters as they complete a stunning two-generation rags-to-riches transformation of American elderhood.  Where the 1950s-era elder Lost watched their offspring whiz past them in economic life, the 1990s-era elder Silent will tower over the living standards of their children.  In 1960, 35-year-olds typically lived in bigger houses and drove better cars than their 65-year-old parents.  In the year 2000, the opposite will be the case.

Now let me contrast this to what we predicted back then about the future of Gen-Xers:

Sometime around the year 2010, Xers will hit a hangover mood like that of the Lost in the early 1930s and the Liberty in the late 1760s: a feeling of personal exhaustion mixed with a new public seriousness.  The members of this forty- and fiftyish generation will fan out across an unusually wide distribution of personal outcomes, reminiscent of a night at the bingo table.  A few will be wildly successful, others totally ruined, and the largest number will have lost a little ground since the days of Boomer midlife.

Going back to these 21-year-old passages is so much fun!  Let’s not stop here.  Consider the following remarks, especially what we predicted back then about the intense protectiveness of Gen-X parents.  (Anyone catch the “Are You Mom Enough?Time Magazine cover last week—pitched to a whole generation of attachment parents?)  Here they are:

Gen-Xers will make near-perfect fifty-year-olds.  On the one hand, they will be nobody’s fools.  If you really need something done, and you don’t especially mind how it’s done, these will be the guys to hire.  On the other hand, they will be nice to be around.  More experienced than their elders in the stark reality of pleasure and pain, Xers will have that Twainlike twinkle in the eye, that Trumanesque capacity to distinguish between mistakes that matter and those that don’t.  In business, they will excel at cunning, flexibility, and deft timing–a far cry from the ponderous, principles-first Boomer style.  In sports, the combination of Xer coaches and Millennial players may well produce a new golden era of teamwork and civic adulation.  In the military, Xers will blossom into the kind of generals young Millennial soldiers would follow off a cliff.  Their leading politicians may strike old Boomers as affable, sensible, quick on their feet–and more inclined to make deals than to argue about abstractions.

In the early 21st century, Gen-Xers will make their most enduring mark on the national culture.  Their now-mature keenness of observation and their capacity to step outside themselves will kick off exciting innovations in literature and filmmaking.  They may become the best on-screen generation since the Lost.  As parents of growing children, they will by now be too affectionate, too physical–too eager to prevent teenagers from suffering the same overdose of reality they will recall from their own youth.  In so doing, Xers will tip the scales toward overprotection of children–much as the Liberty did in the 1780s, the Gilded in the 1860s and the Lost in the 1930s.  Midlife parents (mothers especially) may hear themselves criticized by Millennials for “momming” a pliant new generation of Adaptives.

Enough wild digression.  Let’s get back to the main point of this posting.  Just-released Fed data confirms what we have always known about likely economic trajectory of today’s generations: Through the Third Turning and into the initial stages of the Fourth, the Silent will prosper, Boomers will cope with declining expectations, and Gen-Xers will get hammered.

Thoughout history, we have argued, inequality both by class and by age reaches its apogee entering the Crisis era.  Indeed, part of the historical purpose of the Crisis is tear down dysfunctional institutions, vacate positions of entitlement and privilege, rectify the inequality, and create a tabula rasa on which the rising generation can build something new.

Jun 072012
 

Allow me to turn our attention again to generations abroad—this time to the emerging Millennial Generation in Mexico. And to offer an account about what’s happening generationally in Mexico in the context of the 2012 general election (scheduled for July 1, 2012), I am going to quote at length from a news-rich report emailed to me by Edwin Carcano Guerra. Edwin is a Gen-X polymath:
He teaches business and economics in the International Business College of Yucatan; he starts businesses; he appears frequently in the Mexican media; and he has written books on both economics and chess (check out his study of “Bobby Fisher”). But what’s most interesting for our purposes is that he has been studying the generational history of Mexico for years—and it is in the course of that study that we met and became friends.

Before letting him speak, let me just highlight one great irony in the “Mexican Spring” he describes. Mexico’s rising Millennials—potentially a hero-archetype generation—is protesting against the political tactics of the PRI (the Institutional Revolutionary Party), which was originally created by the last hero generation during the last Fourth Turning. The one-party PRI state was the final and exhausted outcome of an era of indescribable chaos and suffering—beginning with the Mexican Revolution of 1910 and extending through the civil wars and regimentation of the 1920s and ‘30s practically until the eve of World War II.

What will be the final outcome of the era of troubles in which Mexico currently finds itself? Hard to say. We’ll have to have to watch how effectively the young mobilize—and where their mentors (like Edwin) lead them.

Now, Edwin:

For the last six years Mexico has faced tremendous challenges. The War on Drugs has taken nearly 90,000 lives. Young people no longer feel free to go out at night or have fun like students did fifteen years ago. After graduation it’s difficult to find a job. A few in power seem to get everything and the rest are on their own. Mexican youth are tired of it, and they are beginning to fight against the worst of Mexico: corruption, mass-media manipulation, and wealth in the hands of the few.

The Mexican Millennial Generation was born between 1983 and 2006. They represent the largest and most educated generation in Mexico’s history. History indicates that they may turn out to be a civic powerhouse.  The country’s previous Hero Archetype generations have produced 28 presidents and governed 73 years out of 200 since independence from Spain.

President Carlos Salinas de Gortari governed Mexico in 1994. During his term he worked hard to make the country one of the world’s strongest economies, and he spoke constantly about economic and social progress. Mexicans believed in him and the future looked very bright. That year, the number of Mexican births reached its historic peak (according to INEGI) as Mexican families looked forward to the future.

Those 1994 babies—right in the middle of the Millennial Generation—are turning 18 this year and they will be voting for the first time in a Presidential Election. The presidential candidates are prepared for “business as usual.” But they won’t get it. They have missed the generational shift from pragmatic young Gen Xers to the civically engaged Millennials. As a Hero Archetype generation, the Millennials are known for their community spirit, their technological prowess, and their support for strong national institutions.

In the 2012 presidential election we have four contenders:

• Enrique Peña Nieto (Gen Xer, born in 1966): He belongs to the PRI and is now the top contender in the polls (42.80%).

• Andres Manuel Lopez Obrador (Boomer, born in 1953): This is his second run for the Mexican Presidency. He belongs to the PRD, Mexico’s left-wing party. Today he ranks number two in the polls, though still far behind Nieto (27.40%).

• Josefina Vazquez Mota (Gen Xer, born in 1961): She belongs to the right-wing party PAN. Today she ranks third place in the polls (26.20 %).

• Gabriel Quadri de la Torre (Boomer, born in 1954): He belongs to the PANAL party, which is also the Teacher’s Union Party. Today he is the last contender in the polls (3.60%).

These candidates are finding themselves embroiled in a new Millennial movement. It all started in May 11 when candidate Enrique Peña Nieto visited the Ibero University and students began shouting protests against him. The PRI tried to minimize the student revolt and the mass media ignored the students, suggesting that they were not real students but hired agitators with orders to sabotage Nieto’s presentation.

However, 131 students released a video that day identifying themselves as real student-objectors and not hired agitators. The video was uploaded to YouTube and heavily promoted on Twitter. Soon, sympathy from other students and other Universities began to mount. In order to show their support, the phrase “I am 132” gained new currency. What began as a social network movement grew rapidly into a large-scale national political movement. The Topic Trend #YoSoy132 became the number one Twitter Topic Trend not only in Mexico, but internationally, as students from around the globe gathered to support their Mexican counterparts.

The movement is being called “The Mexican Spring”—and it is just the tip of the iceberg of what this Millennial generation is likely to accomplish. They see their movement as an outgrowth of the financial crisis, of Mexico’s dead and abducted political activists, and of the poverty in the nation’s rural areas. They want a fair country in which the masses and not the elite elect the government. They are against Enrique Peña Nieto and protest the support he receives from the main TV stations in Mexico, Televisa and TV Azteca.

The TV Stations eventually surrendered and accepted some of the student demands, but that is just the beginning. Student protestors from 54 private and public universities recently held their first congress in the Mexican National Autonomous University. They want peace, prosperity, democracy, dignity, justice, and a Mexico free of corruption. They don’t want to live with the injustice of the past and don’t want to go back to the totalitarian regime of the 70 years of the PRI. They are committed to monitoring the elections to ensure that they are fair. After the elections, they will push an agenda to supervise the elected President and peacefully enact change.

This movement represents the political baptism of the Mexican Millennial Generation. Mexico, like the United States, is going through a Fourth Turning, which will present new challenges and opportunities for broad structural changes. This rising Millennial generation will shape 20th century politics, and help determine the country’s new direction. Thanks to Neil Howe and William Strauss, we can understand these fundamental generational shifts, understand what they mean, and look ahead to what is likely to come next.

Jun 012012
 

People often ask me about generations in non-U.S. societies. As someone who travels and speaks often outside America—and who does plenty of international research for clients—I have thought a lot about this question. I believe I offered a short answer to this question in an earlier post (on Spain). I have spent most of my time trying to figure out Europe and East Asia, whose generational line-up roughly matches out own, and the Muslim world, whose line-up is very different in certain important ways.

What about Central and South America?  Ten years ago, I was very unsure.  But after travelling in these areas and speaking to many residents there, I am growing more convinced that here too the generational line-up is similar in certain respects to our own.

Last summer, I flew down to Sao Paulo to speak to business leaders and the media in Brazil about emerging generational differences in one of the hottest of the BRIC economies.  Before going, I wasn’t sure what to expect.  But once there, I was hugely struck by how similar the questions asked of me were to questions asked here in the United States.  (Admittedly, they were talking mostly about Brazil’s emerging middle class families, who are stampeding to all the new malls they are building.)  Everyone who interviewed me told about how protected, special, group-oriented the new generation of youth is.  The people asking  the questions, in their 30s and 40s, all felt they had a much rougher childhood.  As for those in their 60s now in power (I’m thinking of the peers of Lula da Silva and Dilma Rousseff), many came of age with showy, left-wing, Che Guevera radicalism just like Boomers in the US.  (Though I know this radicalism resulted in a great deal more violence and death in Brazil and throughout much of Latin America.)  I saw one photo of Dilma Rousseff in the newspapers showing her as a 20-year-old with a bullet bandolier across her chest.  Made me think of Patty Hearst.

Anyway, with this introduction, let me introduce a Brazilian correspondent of mine who will deliver her own testimony on generational differences there.  She lives in Porto Alegre, RS, in the south of Brazil.

I’m 32 years old–so I remember, as a child/teen, the time we had a big inflation, till it changes with “Plano Real” (1994).  Also, I’m talking from a middle class perspective, with all the limits and subjectivity that it implies in my perceptions.

What do I see in Brazilians of different ages today? Well, personally, as a last wave Gen-Xer, I do not feel that my childhood has been so unprotected as the childhood of my friends a little older, in their 40s; I believe that, at least in my family, the concept of childhood already was more for “Three men and a baby” than for “Rosemary’s Baby”; but also was not as protected as the children who were born after, especially those in their 20s today.

I believe that we knew how to have fun.  The Millennials seem better behaved and more conventional, in general. Indeed, only in the last year was smoking prohibited in nightclubs here in my city, which was surprising for me, and it is a clear sign of protective behavior towards young people. Also I see a tendency to protect more children; on the other hand, I see a certain movement back to a childhood a little more relaxed, back to nature, and a search of a less stressing style of parenting.

Yes, there is a lot in common, but there are some things that are widely different, and maybe it gives to a certain “national flavor” that is unique. For example, the Puritan influence is very strong in the history of the USA.  Here, we don’t have this influence, so our Idealist type will be a little different. And, of course, historical facts affected us in different ways. The effects of the  World War II had more impact over the G.I.s in the USA, empowering them, than over the same generation in Brazil–or, at least, produced a diverse impact, considering the political context and our participation on the war.  In fact, the Civic type is the most difficult to identify, to me.  Oscar Niemeyer and Juscelino Kubitschek are good examples of G.I.s, maybe?

What bothers me is that we don’t have a good study on generations here in Brazil.  Every time the newspapers and magazines say something about Generation Y, it’s something very superficial, with no real basis, talking about the internet and the work force (only), and saying that this generation doesn’t like hierarchy and wants to go to the top quickly.

This is a very nice letter.  I was especially struck by her mention of Niemeyer (the great modernist architect-designer of Brasilia) and Kubitschek (the president who built Brasilia).  Brasilia, that vast utopian tabula-rasa New-World Constantinople built smack in the middle of the jungle back in 1960 as Brazil’s new capital.  Can’t get much more “G.I.” than that!  Niemeyer, in fact, was a huge modernist sensation even in the U.S. during 1950s, where he taught at Harvard and joined with Corbusier in designing the UN headquarters in New York City. His main problem in the U.S. was his communist party membership, which kept getting him deported.

Here is the stunning Niemeyer-designed Roman Catholic cathedral in Brasilia.  (Communist architect for a Catholic Church? I guess in Brazil it doesn’t matter!)

I’m going to report regularly in this blog on generational differences in other countries, using as much as possible reports from residents.

Jun 012012
 

OK, prepare for a totally derivative post.  To understand it, you need to go to mentalfloss.com and take this quiz.

It all revolves around the following question: Do you know the difference between managing Millennials and raising puppies? Are you sure?  Most of the people I know who have taken this test get at least a couple of the questions wrong.

I had to laugh when I took the quiz myself.  When I talk to audiences about Millennials in the workplace–these are often audiences full of Xers and Boomers–I admit to them straight up: This is a high-maintenance generation.  They like to think of themselves as VIPs, no question.  They demand lots of structure, feedback, moral support, mentoring, and some sort of deep connection with the organization they work for.  You need to offer all of the above if you want the best of them to stick around.

It’s work–a great deal more work than the “low-swet” Xers who came along before them.  In many ways I really miss young Xers.  Their day-one attitude toward their employers was simple: You don’t ask much of us and we won’t ask much of you: Let’s just all get what needs to get done quickly and efficiently, so we can all go home.  I don’t think young Xers were ever puppies.  They seemed pretty “broken in” before they ever showed up at their first career job.

 

Yet here’s what’s really interesting: The puppiness we see in these first-wave employed Millennials is going to become a lot more exaggerated by the time we meet the Xers’ own late-wave Millennial children when they show up en masse in the workplace starting around five years from now.  Why?  Because these Xers are raising their own kids with behavioral handbooks that actually do resemble puppy-care guides.  Many Xer parents look at Cesar Milan’s “Dog Whisperers” for tips on how to be the alpha-dog in their family.  I first started writing about the new behavioralism in Xer parenting on this site a couple of years ago.  Here is an excerpt from that post:

…A lot of Boomers really wanted to change society with the way they raised their kids. And in trying to do that, they believed all that mattered was the intensity and quality of their relationship with their child and the correctness of the values they taught them.

With Xer guides, everything has changed. Xer guides are much more prescriptive, full of do’s and don’t’s, and much less attitudinal. Many of the Boomer guides looked a bit like the Whole Earth Catalogue: It showed how raising children was part of a whole world view. To Xers, hey, child rearing is just like any other technique or business–there must be a good way and a bad way to get the job done. I want to do it the good way.

Xer guides are much more scientific in the sense that the authors need to show that there’s empirical evidence favoring one way over another. Skeptical Xers don’t take advice on pure faith. Amazingly, Boomer guides rarely talked about evidence: We just “knew” e.g. that Lamaze just *must* be a vastly superior way to give birth. Just look at those Hopi designs on the book cover! (btw, I’m a big supporter of Lamaze; I just acknowledge that it was never sold to us as an evidence-based practice.)

As I’ve mentioned, Xer guides are putting a lot more stress on behavioral techniques. Dog whispering is, admittedly, an extreme example. But apt. As in so many other things, Gen-Xers know how to take their own ego out of the equation, which is what behavioral parenting requires. The whole behavioral point of view is very Xer in that it looks at the human condition as a matter of external conditioning and adaptation–a useful antidote to the endless Boomer fixation on interior motives and values.

Here is a story I hear all the time from Boomer and Silent Generation grandparents who have Xer children.  When the Xers drop off their grandkids with their grandparents–en route, perhaps, to a rare vacation alone–they typically include a list of “do’s and dont’s” and a strict schedule regarding their kids.  The grandparents express surprise, “A list?  Why do we need a list?  After all, we raised you.”  To which the Xers rejoin, “Yeah, mom/dad, that’s why we’re including the list.”