Anyone who is genuinely interested in why young people are moving to the left should look at the pyramid of credit that underpins the Australian economy.
To read the Centre for Independent Studies' report on the Millennial embrace of socialism in the dying days of 2020 is to experience something of a time warp.
Published about the time Alexandria Ocasio-Cortez was beginning her run for office in 2018, the document opens with the fall of the Berlin Wall on November 9, 1989, and was clearly intended to shock.
Chock full of esoteric graphs and sweeping platitudes, the libertarian think tank attempts to boil down what 1003 people born between 1980 and 1995 told their interviewers while answering a handful of leading questions.
Participants were asked things such as, “Do you think capitalism has failed?” or “Are ordinary workers worse off today than they were 40 years ago?”; eventually the gotcha component consisted of a snap history quiz.
In an effort to measure the participants' familiarity with “socialism” – a term never clearly defined – subjects were asked what they knew about figures like Mao Zedong and Vladimir Lenin but curiously not whether they had heard of Union Carbide or Bhopal.
When the results inevitably came back showing a lack of familiarity, the authors wrote off the “youth” flirtation with socialism as little more than ignorance.
“For a variety of reasons, youth are far less aware of socialism’s role in some of the greatest catastrophes in human history and have begun to view it benignly,” the report said.
With this, the authors perhaps revealed more about themselves than they intended. Even in victory, roughly three decades after the fall of the Soviet Union, they were still penning reports about their long-vanquished foe as if they were still mourning the loss of a sparring partner. It was as if hand-wringing about “cancel culture” was not as satisfying.
Anyone who is genuinely interested in why young people are moving to the left needs to look elsewhere – and a good place to start is the pyramid of credit that underpins the Australian economy.
Australians, it may surprise many, are some of the most indebted people in the world – though the exact ranking depends on which measure is used and how the numbers are cut.
The most recent OECD figures show the ratio of Australian household debt to net disposable income stands at 217 per cent – meaning the average household owes twice what it makes in the year. Measured relative to gross domestic product, the Bank of International Settlements puts Australian household at 119 per cent – second only to the Swiss.
All that debt is beginning to weigh on the intergenerational transfer of wealth. If the social compact has been underpinned by the promise that each generation will do better than the last, a Grattan Institute report from 2019 shows that may no longer be the case.
Guaranteed wage rises meant inflation would gradually eat a person’s debt over time, today flat wages mean debts grow.
What they found is that the future young people face is bleak. On balance they are working more insecure jobs for longer, earning less at the same age than their parents were, spending most of their money just trying to survive and are more likely to hold debts than assets.
When it comes to housing, those aged 35 to 64 in 2016 took on twice as much debt as those of a similar age were doing in 2004. Meanwhile, home-ownership rates among young people aged 25 to 34 have fallen to 20 per cent, down from 60 per cent in 1981.
Things are even more bleak when read alongside two other Productivity Commission reports released in mid-2020. Together they show how those who have come of age since the 2008 global financial crisis – triggered by massive fraud in the mortgage-backed securities trade – have watched their incomes decline by 2 per cent while they are locked into more unstable, more insecure jobs over their lifetime.
When people feel as if the social compact has been run through a shredder, they start looking for alternative ideas about how to run things.
How well a person fares in this world depends largely on class.
Those whose parents own their home outright can always rely on the bank of mum and dad if they run into trouble or need help buying a house. Those left to rely on a wage have a much harder time as they work harder for longer, are paid less over time and are more likely to inherit their parents’ mortgage than the family home.
Should they run into trouble, they are forced to go into debt or rely on a social security system paid at a level below the poverty line – or both, if the Australian government’s illegal robodebt scheme is any guide. If guaranteed wage rises once meant inflation would gradually eat a person’s debt over time, today flat wages mean debts grow and there are fewer ways to escape them.
The issue with this is not about morality, but the inherent fragility that is being built into the economy. As a growing array of debts drive more people into precarity, it becomes more likely that when push comes to shove – such as a global pandemic or correction in the housing market – that everyone suffers.
If history is any guide, what happens next is best summed up with a joke told by Brown University Professor Mark Blyth while explaining the Brexit vote and the advent of Trump.
“It’s a no-win scenario until elites figure out that at the end of the day, as I like to tell my American hedge fund friends, the Hamptons is not a defensible position,” Blyth said.
“The Hamptons are a very rich area on Long Island that lies along low-lying beaches. Very hard to defend a low-lying beach. Eventually people will come for you.”
The same might be said of Point Piper, the pricey harbourside Sydney suburb – home to former prime minister Malcolm Turnbull – that sits on a peninsula surrounded by water in the 16th-most overvalued city in the world.
The important point, however, is that when people feel as if the social compact has been run through a shredder, they tend to start looking for alternative ideas about how to run things.
Given the deal they are currently being offered, if young people really are embracing “socialism” – however the term is used and abused – it should come as a shock to no one.
What exactly do they have to lose?
Royce Kurmelovs is the author of Just Money (UQP).