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25 Oct, 2014 10:50

For solution to economic malaise of today's youth, look to 1944

For solution to economic malaise of today's youth, look to 1944

Hope is a strange beast. Without it life becomes devoid of meaning. Without meaning, existence becomes a chore. Europe’s youth lack hope, as an entire generation become victims of political ineptitude and older leaders who simply don’t seem to care.

Generational struggles have always existed, and angry kids decorated them. From James Dean’s red-jacketed firebrand in ‘Rebel Without a Cause’ to the punk rockers of the 1970s. Historically, they've been about youngsters rejecting their parents’ values before, eventually, copying their folks and settling down. This time, it’s rather different. The older generation has grabbed everything and their kids can’t manage. The 'Boomers', through greed and selfishness, have pulled the trap-door up behind them.

European under-35s are now priced out of owning their own homes, paid much lower wages and, largely, have very little job security - if they are lucky enough to actually have a job. Some blame it on technological progress, others on competition from emerging markets. Both views are nonsense: it's a failure of leadership and, especially, neo-liberal economic policies. The pattern is general all over Europe. Certainly, it’s more pronounced in some countries than others but, without exception, it exists. This is going to have profound consequences, on every societal metric.

What avarice and a large dose of collective stupidity have created is a situation where the bulk of a generation will have to wait for their parents to die in order to inherit a suitable home. Yet, people are living longer and fertility still has limits. With many now set to reach 100, some of today's 20-somethings may be in their 70s before that inheritance actually arrives - if nursing home costs haven't eradicated it first.

Reuters / Neil Hall

The root cause of this bind is the neo-liberal belief that ridiculous housing costs are a good thing. If you don’t believe me, pick up any British newspaper. The London press is obsessed with property prices and use them as a measure of wealth. Yes, they are reassuring to those who own them, but the vast majority of them are beyond child-bearing age. The truth is that rising prices and rents are a calamity for economies - horrible future consequences await.

Take London for example, to rent a two-bedroom flat in Kilburn, long a solidly working-class area, costs £391 (US$630) a week on average. Head out to West Ham, a generally deprived place and it’s £333. Fancy having another child? A three-bed in Hammersmith will set you back £629. These are not salubrious areas, by any means. In a real posh neighborhood, a three-bed in Chelsea lets at £1,755 weekly. So why not move out to the far suburbs? Even in Chorleywood, 43km from Oxford Street, the three-roomed property is £462. Remember, these are weekly - not monthly. British custom is to charge per seven days.

Why not buy? You’ll need £560,290 ($900,000) for a three-bed in Chorleywood and £1,044.920 in Hammersmith - in Kilburn the two-bed is £553,641. This is insanity.

Let’s look at the classic married couple of a policeman and a nurse, beloved of newspapers for post-budget comparisons. With several years’ experience, a sergeant will earn £36,519 ($58,762) annually and the nurse £30,764. These numbers are before taxes. Do the math - how will this typical pairing ever afford a house in London, or anywhere near it? Couldn’t they move to another region? The problem with this suggestion is that London needs essential workers, without them the city will fall apart. That moment mightn't be far off if something radical isn't done.

Supposing our cop and nurse did move, to Bristol, on the other side of England, they’d still be looking at £367,923 for a simple home - and their wages would be lower. I have chosen England as an example, though the situation doesn't differ much in Italy or Ireland or elsewhere. A three-room flat in Milan is around €1,938 ($2,455) monthly and in Dublin €1,775. Relative to local wages, it's repeated all over the continent. North America is no better and Australia is completely ludicrous. Even in some developing countries, it's crazily out of sync.

Put plainly, there’s a huge divide opening up around Europe and much of the world: those with wealthy parents on one side and those without on the other. Only a small percentage of young people can now afford to buy property using their own incomes alone. This has been caused by the prevailing idea that a roof over your head is a commodity, not a right. We are sleepwalking back to the 19th century.

If wages were rising it wouldn't be so bad, but the youth are also being bashed in the workforce. In 1996, in the UK, the youth-to-adult unemployment rate was two to one - now it’s three to one. The median pay of a 22- to 29-year-old is £9.73 an hour - it was 10 percent higher in 2006. In that time, prices, especially for shelter, have risen sharply. Amid all this, the neoliberal elites wonder why UKIP is on the rise - an extreme nationalist party that has come from nowhere to garner about 20 percent of popular support. It’s probably not because the British suddenly hate foreigners - it’s the absence of hope. "Beware how you take away hope from any human being," as Oliver Wendell Homes, brilliantly, put it.

A picture from the US National Archives released by the International Monetary Fund show U.S. Secretary of the Treasury Henry Morgenthau addressing the opening meeting of the Bretton Woods Conference — sitting at the table where Morgenthau is speaking (from L): Rene Ballivian (Bolivia); Leslie G. Melville (Australia); two unidentified individuals; Morgenthau; Frank Coe (United States); and Camille Gutt (Belgium). (AFP Photo)

Meanwhile, the business community is silent. The wealthy elite thrive on division because it creates cheap labor. Plus, business owners are likely to have (probably multiple) over-valued homes and sufficient funds to supply their own children with a spare. The same goes for Westminster MP's - most of whom are landlords.

There are other reasons too. Outsourcing to the likes of China is definitely one. In a global market, the mass purchase of cheap imported products means that local employers have to slash wage bills to have any hope of competing. In the collective race to the bottom, the general public wants low prices for goods, then wonders why their jobs are threatened as local producers flounder. The media, nor the body politic, rarely explain this to people.

The giant global tax-dodging game is another factor. When the mega corporations don’t pay their fair share, workers have to make up the shortfall through their taxes. They are basically subsidizing the super-rich.

In 1944, at Bretton Woods, the Western world adopted the economic policy of embedded liberalism, a combination of free trade and state regulation. The primary goal was to keep unemployment low and the middle class immediately grew and prospered. In the 1950s and ’60s the global economy experienced higher growth than any time before or since.

Sometime around 1980, neoliberalism took hold, primarily driven by Margaret Thatcher and Ronald Reagan. The system doesn't work and is destroying Europe, while accelerating the decline of the West. For the solutions to today's problems, the answers can be found in 1944. The world needs a Bretton Woods redux.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.