Part 1- Lifecycle for the Median Person in West is Damaged Beyond Repair

When I first thought about writing this post, it became obvious that the problem being described does not have a common or popular name. While it is possible to describe it as the negative consequences of disrupting the normal ‘life cycle’ of median person in western countries during the past four decades, its true extent and depth are much larger than that longish and awkward description would suggest. But before we tackle that, it is necessary to talk about how we got there- specifically, the conditions and circumstances which created the current status quo. So let us begin by acknowledging that societies and nations have changed a lot over the past 100-120 years. While there were many factors behind this large shift such as technological progress, effects of large-scale wars etc, the net result is that societies prior to early 1900s were arranged and functioned differently from those since then. These changes have had some major consequences which are behind the current status quo.

As is well known, the period between 1910-1945 was especially unstable in the West and saw two world wars along with massive changes in how nations and societies were organized and functioned. After the end of WW2, things stabilized and there was lot of real economic growth and social change, at least for the first 3 to 4 decades after 1945. By the mid-1980s, systemic stagnation at multiple levels (income and living standards to technology) began in the West and this negative trend has accelerated over past two decades. However, this very brief overview of the general path taken by western countries over past century glosses over its effect on one of their most important and relevant structural characteristic of any society. Simply put, the accompanying societal and economic changes greatly altered the ‘life cycle’ for the median person living in them. This becomes especially relevant since the current status quo was built on a multitude of assumptions which were true in the 1945-1985 timespan but are no longer so. To better understand what I am getting it, let us start by talking about the normal life cycle for the median resident (of working age) in western countries as it existed between 1945 and the mid-1980s, upon which the current status quo was built.

When we talk about life in the 1945-1985 timespan, it is important to understand that we are talking about a portion of the working life of 3 generations. Also, the 1985 cutoff is USA-centric since the good times continued in many other western countries into the mid and even late-1990s. There is also the issue of system inertia whereby someone who entered the work force in.. say.. 1980 has a different life trajectory from somebody who did that in 1990 or 2000. With that in mind, let us go over the common features of the life cycle for three generations who constitute the bulk of those who entered the workforce between 1945-1985. The first group was born between 1910-1929 and were old enough to fight in WW2 and benefit from the economic expansion in West after that war. The second group, born between 1930 and 1945 were not old enough to fight in WW2, also benefitted greatly from the post-war economic boom. The third group, born between 1946 to early-1960s, often referred to as baby boomers, also benefitted from postwar economic boom. While lifestyles and social conventions changed a lot over this period, there are many social and economic commonalities between these three groups.

Let us start this list of commonalities by talking about education and careers. While there was a massive expansion of universities and colleges during this period, the majority of people in this group did not obtain any post-secondary education as it was not necessary. The period between 1945-1985 (and into the 90s) also had no shortage of jobs which paid enough to live a modest but comfortable existence. Regardless of your education and area of work, long-term employment and steady careers were the norm. Many in these three age-groups, even those with only high-school education, had jobs with defined-benefit pensions. Indeed, most employers larger than small family-run businesses offered decent benefits. Furthermore, post-secondary education was of good quality and inexpensive, while student loans were uncommon or small. It was still possible for families to get by on a single income. To summarize this part, the median person without post-secondary education could still to have a decent and stable livelihood, usually in a well-paying job or career that also offered decent benefits. Getting post-secondary education just made things better.

So how did this state of affairs affect the current status quo? Well.. for starters, the system, specifically its stability, is still built on the assumption that most people will be be to afford and pay down the mortgage on their house by the time they are in their mid-50s. That is clearly not the case any longer and hasn’t been so for the past two decades. It also assumes that the student loans taken by most people will be modest and paid off completely within a few years without affecting their ability to obtain and pay a mortgage- again, that is not the case. The current status quo also assumes that employer pensions and savings will provide the majority of retirement income- once again, that is no longer the case for most people who entered the workforce after mid-1980s. It also assumes that women who want children will be able to take enough time off from their work to have them, something which is no longer true for the majority. It is therefore not surprising that people who entered the workforce after the mid-1980s have little to no savings, no real plan for retirement, constant worries about paying their mortgage (if they can afford one) and usually no more than 1 or 2 kids-who they can barely afford. These are not the characteristics of a society with any worthwhile future. And this is just the beginning.

Another feature of adulthood in the West after the mid-1980s is the decay or collapse of anything resembling a stable family. While some might point to a few ethnic groups or educated professionals still having somewhat “normal” families, the reality is quite different. Let me explain that point in a bit more detail. In the past, most people (regardless of class and income) got married in the 20s and had children. We can certainly debate if these marriages were happy or even desirable, but in retrospective even the barely functional ones provided a noticeably better environment for children when compared to the single-parent families. They also provided a much better way for most people to accumulate what little wealth they could through paying their mortgage and saving money, while providing some degree of extra security through dual incomes when necessary. My point is that a somewhat functional, if imperfect system, was supplanted by something which is clearly inferior. But how does this affect the status quo assumptions? Well.. many assumptions about future revenue and liabilities made by multiple levels of government are still based on the assumption that the majority of people are married or in something functionally similar. These range from future funding for school and universities, revenue from residential real-estate taxes, ability to maintain a stable demographic profile for revenue to less obvious stuff such as spending on stuff such as home improvement, family vacations etc.

Since we are already gone past a thousand words, I will stop this post here. In the next part, I want to go into some detail about how the sum of problems can be greater than their arithmetic sum- aka synergy and how adverse demography plus the growth of the PMC class in West is making a bad situation so much worse.

What do you think? Comments?