Monday, December 22, 2008

Lament for a Generation

History will remember Bernard Madoff as the incarnation of the financial folly of the late 20th and the early 21st centuries. But it will not place the blame for that folly at his feet. Instead, it will tell the story of a generation who fervently believed they could get something for nothing -- or next to nothing.

That story will begin in the late 1950's, when -- as Jeffrey Simpson wrote in The Globe and Mail -- there occurred "the intellectual revolution of Barry Goldwater's rage against the state, social conservatism, Arthur Laffer's curve, and the idea that ever lower taxes would bring ever higher revenues, so that budgets could and would be balanced by some miracle that had previously escaped economists and, indeed, previous generations of sound money, balanced budget Republicans."

Given a patina of respectability by academics like Leo Strauss and Milton Friedman, the revolution was carried forward by Margaret Thatcher in Britain and Ronald Reagan in the United States. Always about a decade behind their democratic forebears, Canadians heard the same gospel from the mouths of Preston Manning and Mike Harris. The revolution reached its apex --and was asphxiated -- under George W. Bush in the United States and Stephen Harper in this country.

But it would be disingenuous to conveniently pin the tails on these donkeys. For, truth be told, the revolution and the destruction it has spawned was powered by a generation of donkeys -- my generation. As Jim Hoagland wrote in last Sunday's Washington Post, we are the generation who have "taken the greatest financial, technological and political opportunities the world has ever offered and abused them for our own pleasures, greed and egos."

Public schools and universities were built to educate us; the post World War II economy coddled and pampered us; and the health care and pension systems were constructed to lead us gently into the night. But, not content with our lot, we insisted on our right to have much, much more. Mr. Madoff's ponzi scheme was the prefect realization of that wish. He gave those of us, who are or soon will be retired, splendid returns. However, he achieved those returns by taking money from new investors -- the young -- and playing Robin Hood to those of us who took the proceeds and never asked how they were generated. As Mr. Hoagland rightly points out, we have left those new investors -- our children -- "fetid stables of debt, scandal and corruption."

The result is a rising tide of youthful anger. At the moment, it finds expression more in Europe than in North America. Students riots in Greece have left 70 dead and a trail of vandalism and destruction. That fire is spreading: "The same dry kindling of the Greek uprising is scattered around Europe," Hoagland writes," where youth unemployment rates are double or triple those of the population over 24, according to the Organization for Economic Cooperation and Development, and retirement benefits are politically untouchable. Similar tensions are rising in China, as the global recession deepens, in oil producing countries such as Russia and Iran that are caught in the whiplash of rising and falling prices, and most of all in developing countries with broken governments and economies that punish the educated young disproportionately."

It is not enough to lament the mess we have left our children. The clock is ticking and we must make things right. We must run monumental deficits to invest in their futures; and, when we have primed the pump and created jobs for them, we will have to follow Keynes' advice and pay for those investments in the good times. We have done just the opposite for nearly forty years -- and we are surrounded by the carnage we have created.

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