2011 Recap: Death Throes of the Baby Boomer Society
The societal tumult that began this year will not end until the Millennial generation has captured a meaningful share of political and economic power.
Thus begins the essay that best captures the zeitgeist of 2011. Thomas Day, a 31-year-old Iraq war veteran, writes in the aftermath of the Penn State scandal about how he's tired of waiting for his parents' generation to lead. They've had their chance and it's time “to politely tell them, 'Out of my way.'”
It might be hard to fathom that a generation whose median age is only 55 could be on the cusp of losing power. However, looking back at key moments of 2011 one sees a distinct pattern of the younger generation challenging institutions of power, and the institutions of power too weak to quell the dissent.
- Mohamed Bouazizi, died age 26, the Tunisian street vendor who lit himself on fire to protest his treatment at the hand of government officials, sparking the Arab Spring that toppled several dictators. He should be Time magazine's Person of the Year.
- Wael Ghonim, age 30, who left the comforts of his job at Google to be a part of the pro-democracy demonstrations in Egypt.
- Protesters in Europe led by the unemployed youth. Youth (age 15 to 24) unemployment by PIIGS nation: Portugal 27%, Ireland 27%, Italy 28%, Greece 39%, Spain 46%.
- Occupy Wall Street protesters, reportedly with an average age of 33, who took to the streets in September to declare their dissatisfaction with the status quo.
- NBA players, average age 27, who threatened to cancel the NBA season rather than submit to the demands of a quintessential leader of the baby boomer glory days, NBA Commissioner David Stern.
This post-crisis intergenerational tug-of-war is nothing new. Look back at the 1974 crisis. At that point the Greatest Generation, the core of which was born between 1914 and 1924, was 50 to 60 years old. The world it had built had run its course, exhausted itself, and collapsed. That generation didn't lead us out of that crisis, though ironically one of its members (Ronald Reagan) was president when it happened. Instead, it was the baby boomers, now known for their fondness for debt-fueled consumption and investment risk-seeking, that kick-started the long boom that began in the early 1980s.
Similarly, in 2008, baby boomers, born between the years of 1946 and 1964, were between the ages of 44 and 62. Like their parents' generation, the world they built has run its course, exhausted itself, and collapsed. That doesn't mean the world is coming to an end. Just, perhaps, their world.
If this comes across as confrontational, it's only to serve the point. Yes, the debt situation is scary. I'm sure the energy situation in the late '70s was scary. This photo series from The Atlantic conveys the impact that natural resource consumption had on the environment. But the secular boom that followed was achieved without any increase in world oil consumption per capita.
Similarly, it's likely the forthcoming “Millennial boom” will occur without any increase in “real debt per capita.” In fact, that's been the case since the recovery began in 2009, with private sector GDP (blue line) increasing while private sector debt (red line) decreases. Whatever you think of the new batch of growth companies – Facebook, LinkedIn (LNKD), Groupon (GRPN), Zillow (Z), Zynga, Pandora (P), Yelp, Twitter – they are not dependent upon credit growth.
The fear and uncertainty we all feel has led the generation with power and wealth to retrench, to avoid risk and plow into safe haven assets, and to give political platforms to those who use past-focused words like “restore” and “return to” instead of forward-looking ones like “build” or “invest.” As a result, we have 10-year Treasury rates at around 2% and an earnings yield for US equity indices of around 8%, a disparity of 6% that hasn't been seen since 1974.
This is not to say that things will be great tomorrow. As we saw most brutally in the Arab Spring, entrenched power fights to hold onto it. But change is inevitable. In 2008 baby boomers cast 38% of the votes in the US presidential election versus 14% for Millennials. In 2012 it's likely to be 36% and 20%, respectively. By 2016, something like 33% and 27%. Given the increased civic awareness of the Millennial generation and a bit of a “hive mind” due to growing up with social networking and mobile communication, it's likely that 2012 will be the last baby boomer presidential election.
For those frustrated about the likelihood of another five years of political gridlock, look at it this way. We've got an aging, formerly championship-caliber team whose best days are behind it. But we've got a loaded farm system on the way. Pay a little more attention to what the minor league squad is doing. Root for the protesters in Tahrir, Greece, and Zuccotti to get their way. Sooner or later they'll get it anyway, and if history is any guide, once this power transfer occurs we can begin a sustained move forward. As my favorite picture of 2011 says, the beginning is near.
Coming next week, some specifics on what to look for in 2012.
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