Last week’s rivalry between eminent economists on the issue of the rate at which the deficit should be reduced, seemed like the moment when political parties’ policies were on trial. Picking up on the comment columns in newspapers over the weekend, I am not so sure.
In the first letter to the Sunday Times, organised by Tim Besley, 20 economists urged the Government to accelerate the rate of reducing the budget deficit by increasing the size of cuts. By this reckoning, the Conservatives were said to be following the right course.
This was followed a few days later by two letters by a total of 67 economists in the Financial Times urging caution for fear that cutting the deficit too quickly could provoke a double dip recession. This time, the Labour Government’s policies were by implication endorsed.
How utterly confusing! If weight of numbers could determine the correct answer to the policy dilemma, the Government’s view would be the clear winner. But as everyone knows, it isn’t that simple.
Who is to say that, given time, Tim Besley could not have garnered a few more co-signatories than Lord Skidelsky, Danny Blanchflower, Joseph Stiglitz and the others who sent in their letter to the FT?
Perhaps this is what they mean when they say that economics is “not an exact science”?
Yet the labour market depends on the macro-economy. Job prospects hang on the ability of politicians to call it right. And who are politicians supposed to consult at times like this, other than economists?
A recently retired taxi driver friend would ask a rhetorical question at this point; “Who’s wrong and who’s right?” More of him later, but in the same vernacular, “You pay your money and you take your choice.”
Barak Obama has put his money on an 82 year old former Federal Reserve boss, Paul Volcker to lead the epoch making reforms of the Wall Street banks. The list of septuagenarians and octogenarians being called up to rescue parts of the financial system is impressive.
The times we live in! Lazard Brothers send for 81 year-old Felix Rohatyn to return as special adviser. Virgin Money puts out feelers for 78 year old Brian Pitman to chair their operation and 79 year old Warren Buffett, the Sage of Omaha, gets calls respectively from General Electric and Goldman Sachs in their hours of need. The list goes on…
Such votes for older economic wisdom contrast oddly with the naming and blaming of baby boomers as the supposed millstone dragging down the economy. They are indicted along with the bankers as the real cause of the financial crisis in David Willetts’s new book The Pinch, which carries the subtitle, “How the baby boomers took their children’s future and why they should give it back.”
The essential point which David Willetts makes is that the disproportionate size of the baby boomer cohort has exaggerated national growth measures and led politicians to under-tax them.
On the other hand, with baby boomers now approaching retirement, the cost of their pensions and in due course, their social and geriatric health care are unaffordable burdens on the rest of society.
The unremarkable conclusion is that the age of retirement must be raised more quickly than has previously been anticipated.
The more objectionable reasoning of one reviewer, Anatole Kaletsky, writing in yesterday’s The Times is that, “The selfish demographic politics of baby-boomers, far more than the greed of bankers, is the true fiscal nightmare now facing Britain.”
“Selfish demographic politics,” eh? This is an odd way to put it; as though somehow the baby boomers chose when they were born and controlled the fiscal policies of governments throughout their life times.
I will sacrifice my litany of hardships and relative deprivations of the early 1950s compared with the lot of later generations, and content myself with the comment: “We did nothing of the sort!”
But more disturbing inferences can be drawn from Kaletsky’s comment that, “The only way to avoid long term fiscal insolvency in Britain will be for governments to reduce drastically the pension and health costs implied by present legislation.”
Extending the working lives of people who want and are able to work longer is one thing, but I spy a more sinister agenda in the bracketing of health and pension costs in this way.
The public services cutting season will soon be upon us and one guess where Kaletsky and his ilk will be hoping the axe will fall?
Pushing up “retirement age,” as he so blandly puts it, is of course a cipher for putting up state pension age. George Osborne has already said that a Conservative Government would raise state pension age for men to 66 from 2016, ten years earlier than previously planned. Kaletsky means faster and higher.
Accelerating the change however, would raise difficult issues for older people themselves and for employers. Change has to come, sure enough. But change without preparation would spell disaster.
This is why TAEN has been arguing for some time for a paradigm shift to an age management model, taking on board all aspects of personal, state and organisational preparedness to extend working lives and maintain work ability. If people are to work longer by choice, they must be able to exercise that choice and they need employers who can make choices possible by the policies and practices they pursue.
I promised to return to my friend the taxi driver – a burly man with a grip to crush any would be fare dodger in the depths of night. He has regaled me for years with opinions lifted direct from red-neck territory.
How society’s problems come down to the fact of “Too many people!” and how all the immigrants are coming over here, “Taking the jobs we don’t want!” At the end of his peroration he rests his case with a forceful and rhetorical, “Who’s wrong and who’s right?
A few months ago my taxi driver retired. One day he was working a 60 hour week. The next he had sold his licence plate to the highest bidder and began watching 16 hours a day of television. Retirement, he insisted, was his “well earned rest”.
He initially put on a stone in weight, plunged into depression and then started losing weight as he experienced digestive problems. The doctor diagnosed boredom and has suggested he do voluntary work. Shortly, he will be starting a volunteering job, ferrying people around by car to and from the local hospital.
He won’t be paid this time but he’s convinced it’s the right solution, and I agree.
But it didn’t have to be like this. He could have scaled down slowly, reduced his hours if he had wanted a bit more time. But retirement was his right and he was having it!
I am waiting for his exuberant rhetoric to awaken once more. I won’t answer but you can imagine my thoughts when he next puts the question, “Who’s wrong and who’s right?” Only I will be thinking of economists and political arguments when he says it.