The Global Economy Has a Boomer Problem

France is in a constant state of revolt. In 2018, the “yellow jackets” blocked the country to protest fuel taxes. Millions took to the streets in 2022 and 2023 to fight a pension reform raising the retirement age from 62 to 64. This year, angry crowds gather again to ask ever shorter-lived governments to renounce planned measures to decrease national debt that stands at 114% of GDP. Even polite England is experiencing massive strikes and angry marches. Government approval rates are plummeting everywhere on the Continent. Europe is rich, yet no one can explain why German trains are not on time anymore, or why there is no way to avoid feces floating in Britain’s rivers. America, after years of leading on tech and economic growth, is cutting itself off from global trade to protect manufacturing jobs few actually want to do. Restrictive zoning laws mean young workers are priced out of the housing market. People are upset and hunting for culprits—incompetent governments, the E.U., the U.S. federal government, billionaires, migrants—fuelling the very populism that makes rational discussions impossible. But few dare to mention the elephant in the room: an unfair Gerontopia. France is almost a caricature. French pensions consume about a quarter of the state budget. Current retirees worked when many contributors supported few beneficiaries. Then they lowered the pension age by five years as life expectancy rose by 10. Today, a shrinking workforce struggles to sustain a generation that granted itself guaranteed retirement incomes close to working people’s wages. French pensioners are so rich that those over 70 save a quarter of their income, while workers under 50 save barely half that rate. As boomers die, many will pass massive inheritances to their children, locking in decades of unfairness. In Western Europe, the size of your house says more about your parents’ wealth than your own job. French governments fill the holes in pension deficits by taxing their own workers. As the country sinks in the OECD’s PISA rankings (international tests of 15-year-olds’ skills), voters blame the youth, smart-phones, Islam, or a political class wasting public money. But the two Prime Ministers who dared to suggest freezing the highest public pensions were immediately voted out of office by both the Left and Marine Le Pen’s far-right. Britain got there differently. The (much smaller) state pension is guaranteed by the “triple lock,” which ensures it rises faster than the economy. In the 1980s, the U.K. sold off Jaguar, Rolls-Royce, British Airways, and national telecom, gas, oil, utilities and train companies to fund everyday government spending. Now, taxpayers scramble to rescue failing private water companies, build high-speed rail, or improve the electricity grid. When former Prime Minister Theresa May suggested that wealthier pensioners might pay for their own care by selling assets, she faced a backlash, and ultimately lost an election. Keir Starmer’s popularity started to nosedive when he tried to stop sending £200 checks every winter to the wealthiest pensioners. Child poverty rates are twice as high as pensioners’, but there is no comparable outrage. The West is not alone in struggling with ageing societies. The median Chinese is 40 years old, only two years below France. As China’s population declines, young workers face a mountain of public sector debt, youth unemployment, and low salaries. All over the world, fertility rates are falling below the 2.1 replacement rate. Women in Latin America and the Caribbean currently have 1.8 children each, compared to almost six in the early 1960s. Even Africa, still with a rate slightly above four, is following the same downward trajectory. The U.N. regularly updates their population projections downward: Peak Humanity is getting nearer with every iteration (currently mid-2080s). The rest of the world should learn from Europe’s failures, and not burden its relatively younger and poorer citizens with funding benefits for its relatively wealthy and retired elderly ones. But even Europe can have a second chance. The working population needs to move through the stages of grief to acceptance of the massive benefits boomers gave themselves. Younger generations will not get this money back. Europe needs a new social contract, at least for future pensions. Instead of being linked to inflation, they could be tied to an index of workers’ purchasing power, housing affordability, and public investment—the opposite of Britain’s triple lock. Reward with lower local taxes those who dare to say yes to housing and infrastructure. This can help better interwine all our economic fortunes. Shift more taxes away from labour to income. Taxing the value of the land instead of what sits on it encourages development, and land cannot be moved offshore for tax avoidance. Taxing the highest inheritances does the same redistributive job as capital taxation but without hindering innovation. Once people understand “death taxes” apply only to a minority of households, they are not so unpopular. The entire world must build something other than a Gerontopia. We will be fewer and older, but there is no reason to be miserable. We could live on a sustainable and comfortable planet, where automation compensates for a dwindling share of working arms and brains. Free trade will be less scary once we stop worrying about factory jobs. We have learned how to make food, water, and electricity, without destroying the planet, but these efforts must be scaled up. And medicine is progressing at astonishing speed. What if fewer people simply meant more affordable cities, more abundant nature, and an aging society where all of us are better off?