What the cat dragged in

Modern Boomer-nomics 101

This is a post that I’ve been meaning to write for a while; since Ronald Reagan’s death teased out a few articles scathing of Reagan-nomics. Not being economically-trained (in both senses), I hope that I don’t come across as too crack-potty in this post – I stress here that, unlike Mark Latham, the following ideas are almost entirely my own work.

As is now well-understood, 80s-style Reagan-nomics (and so Thatcher-nomics, Hawke/Keating-nomics, etc) boiled down to two things: a credit binge in the domestic and speculative (= non-productive) parts of the private sector, and big spending by government (which is not, of course, the same as a credit binge if it is used to build/fund infrastructure).

The credit binge led to an acute risk of inflationary paralysis, hence the high-interest rates of the late 1980s. By this stage, Reagan-nomics (or neo-liberalism, as it was by then termed) could fairly be called a failure, or at best, a nil-all draw. What happened next was the real stroke of genius, though.

Historically, credit bingeing was closely correlated with employment growth – as people spent up, unemployment naturally went down. The triumph of post-80s neo-liberalism was to de-couple this connection: henceforth, the relationship would be an inverted one.

To achieve this, first the labour market needed wholesale rescaling. Privatisation, as we know now, is a synonym for de-efficiency, but for at least a decade it was an ideal cloak for the disruption of the job market for disruption’s own sake. Several factors helped to disguise the savage cuts that privatisation was making in the labour market, numerically and psychologically. Those born between about 1964 and 1978 (GenX) were told to shape up – by going to university, largely at their own expense – and then ship out – either by emigrating, or by entering the job-underground as un- or marginally-employed. For those born prior to 1964, the expected accomodation was quite different: house price-inflation provided almost all of the older displacees with a financial cushion, which they could use to muddle-along until actual, formal retirement.

Finally, house price-inflation acted as a pincer on GenX. The plain fact – that they would have been much better off financially by wholly forgoing tertiary education, and just speculating and credit bingeing like their elders – was never admitted. Compounding this, and from the other direction, GenX emerged from university into a scarified labour market. House price-inflation created a booming economy in some sectors, like waiting on tables, selling $10k TVs, and the building sector. If they were lucky, and could eat sufficient humble pie, the tertiary educated members of GenX might hope to get a job in the first two of these. As for the third boom sector – the only one that paid/pays above $13/hr – its “who you know” nature precluded entry into it for those who had spent their crucial post-school years poring over books, so “networking” only with those who would be joining them in the dole queues and cafes of the land.