The 17th century was a struggle for religious freedom, the 18th brought us the Enlightenment and political revolution, the 19th launched industrialization, and the 20th century was a violent struggle for democracy and human rights.
Each epoch had its deeply entrenched establishment, and in each case that establishment was deferred to, then tolerated and finally tossed over – sometimes violently.
The 21st century is just starting and already it appears that we’re in for more excitement — another establishment is about to bite the dust.
This time it’s the aging boomer establishment that will face the wrath of history. Born in the aftermath of the Second World War, the baby boomers enjoyed the spoils of that war and the peace that followed. Almost unprecedented opportunity awaited this privileged generation: a strong growing economy, relatively cheap commodities, including housing, and almost free education. These advantages set the boomer generation on their way.
But the millennials are about to lower the boom. Compare their situation with their parents. Unlike the perfect storm of opportunity the boomers inherited, the millennials face a stagnating economy and they are riddled with debt. The prospects for personal advancement are stacked against them.
The boomers enjoyed an economy where wage growth and productivity moved in lockstep. Today, globalization and other changes have created an economy where productivity (the value of labour) continues to expand, while wages (the price of labour) have basically flat-lined. For millennials, there is no chance of working hard at a wage-paying job and getting ahead – the game is fixed and labour loses every time.
The present generation has been told that if they get an education it will set them on the road to success. That advice turns out to be somewhat dated; yes, a post-secondary degree is valuable but opportunities to apply these skills are few. Moreover, university is shockingly expensive today and many students end up carrying mortgage-sized debt.
If a millennial decides to settle down and have a family, they’ll want to buy a house. By the time they’re in the housing market, they’ll have so much debt that when (not if) interest rates return to normal they can expect to lose everything in a giant default and foreclosure panic.
But the biggest betrayal is much more subtle: boomer parents encouraged this generation to “be all that you can be.” So millennials rejected the idea of becoming cogs in the machine and became the most creative generation in history. There are now vast numbers of designers, musicians, dancers, authors, playwrights and other wondrously creative talent. Regrettably, after decades of support and encouragement from their families, they’ll enter an economy that has limited ability to accommodate their talents and desires.
Will the millennials collectively shrug their shoulders and lower their expectations as they come to maturity, awaiting their pitiful fate humbly?
Not if history is any guide. This generation will soon tire of tolerating the establishment – they will toss aside that establishment and reinvent their own much better future.
This moment will come when the debt crisis blows up. Facing ruin, they’ll launch one of the most profound revolutions in the history of humanity.
It’s not exactly murdering your father, but it amounts to slaying the mindset, institutions and structure of financial power that father built.
Step one will be a market-induced collapse in asset prices (including housing), which must be followed by a giant cancellation of debt. From that point onward, the millennial knife will start to carve up primary institutions.
How do you finance a new economy so that individual creativity has a chance to breathe? You blow up the existing capital markets and alter the flow of capital in an economy. That means dismantling the financial service industry and reforming the central bank-dominated monetary system, replacing it with a system that doesn’t place a debt burden on each dollar created in the economy.
It will not be difficult to accomplish. Today’s rules are largely arbitrary – it would be simple to change them and radically alter the future.
We won’t have to wait long for this revolutionary moment and the emergence of the new world economic order, and I can’t wait to see what a new generation can do.
Robert McGarvey is an economic historian and former managing director of Merlin Consulting, a London, U.K.-based consulting firm. Robert’s most recent book is Futuromics: A Guide to Thriving in Capitalism’s Third Wave.