GENERATIONAL EQUITY
A broken economy.
When we talk about generational equity, the first themes that come to mind are: environment, society, and economy; we’ll discuss the first two in the future, today we’ll address the economical and financial situation of new generations.
We live in the shadow of the economic boom, which, in the mid-20th century, led an entire generation to believe that economic growth was consequence-free and limitless. An unprecedented increase in productivity and technological innovation, the third industrial revolution, a mix of innovation, political and social turmoil. We’re talking about the birth of the first welfare systems and the first movements for individual freedoms. Thanks to economic growth, citizens finally started to claim their rights, think of national healthcare and the pension system, or the protests of ‘68, in which social and civil liberties were demanded both by young students and workers.
But unfortunately, the boom, like anything else, must end, so in 1973 a raw material crisis led to what is called «stagflation,» a period in which a nation’s productive growth remains stagnant around 0%, combined with an excessive cash flow in the market, which, without constant growth, causes high inflation.
This period therefore required governments to adopt austerity measures, to make it short, it essentially involves less state spending and fewer services (e.g Margaret Thatcher in UK); some nations were able to overcome this crisis period, thanks to the right measures and the foresight of leaders, others, like Italy, continued to live in the dream of the economic boom, indebting themselves and squandering at the expense of future generations.
The effects of untaken measures are still visible today and have had a huge impact on the economic prospects of millennials and Gen Z, just look at the difference between the real wages of under 30 today compared to 30–40 years ago. We see how not only the cost of living has significantly increased, but also salaries have remained essentially unchanged compared to inflation, in Italy for exemple, the decrease in wages over the last thirty years has been 2%, meaning that the expenses to support an acceptable lifestyle have increased and salaries have decreased.
But why?
The factors are many, starting from the Italian entrepreneurial culture, based on the belief that a prevalence of craftsmanship and small shops can represent a strength in a healthy economic system, this leads to the birth of an excessive presence of many micro-businesses (under 10 employees) with very low competitiveness and low added value, consequently these businesses do not grow and do not create jobs, if not of very low qualification, consequently all young people trained and with high-value skills and therefore with a higher average salary, are forced either to emigrate or to adjust to lower standards.
But it’s not just the wage issue that weighs on the pockets of young people, another major obstacle is the economic uncertainty of the last 20 years, which has led the financial sector to be extremely cautious in granting mortgages and loans, in particular, the financial crisis of 2008 originated precisely following the burst of the mortgage bubble. This financial system dates back to the previous period when banks began to grant mortgages to subjects with low financial reliability, subjects who found themselves unable to repay their debts, causing the bankruptcy of numerous high-end banks, such as Lehman Brothers.
This led to a brake on the real estate market, making it extremely difficult to obtain mortgages for those who precisely lack effective collateral, such as a house and a fixed salary, and consequently making it harder to start businesses and investments.
So we have: Increased expenses due to higher inflation, stagnation in salaries, harder mortgage obtainment and a huge public debt due to the expenditures of previous generations.
This economic situation does not only reflect the financial capabilities of the younger generations, but also their social influence, having less leadership positions, less political influence and generally less decision-making possibilities in our society, but this will be a topic that I’ll cover in the next article of “General Equity”.
