Selfish, blind or both ?

I linked the other day to leftie blogger Dave Osler's remarkable post-budget post, in which he opined :

I’m not as gloomy as he appears to be about issues of demographics, if only because further mass immigration obviously has the potential to rejuvenate the population of this island once the politicians can get their head round the idea.

He was referring to Hamish McRae's Indie piece :

A second way of looking at these deficits is to see them in terms of intergenerational equity. To what extent should people now load the cost of our pensions and public services on to the next generation of taxpayers, our children? Demographic arithmetic makes this choice much starker. There will of course be fewer children relative to the number of workers and the workforce is already starting to shrink. Meanwhile the number of pensioners is correspondingly rising. The combination of fewer workers, more pensioners and a bigger national debt is a toxic one, all the more so since it is known and predictable, unlike the toxic debts accumulated by our banking system.

Whatever we do now, it is inevitable that our children will pay much more in tax than they receive in social benefits. For the present generation of retirees, thanks to favourable demography, the position is reversed. In the past, when governments ran up huge deficits it was to fight wars and I think most of us would accept that defending the country in the Second World War was worth the price. But now the deficits are to spend more on social benefits than people are prepared to pay in taxes and our children will have a right to feel cheated.

Hamish will keep going on about "our" children, and whether they will feel cheated or not. As I've been pointing out for what feels like forever, there just aren't enough of 'our' children to go round - thanks in no small way to the cultural revolution of which Dave would no doubt heartily approve. But Osler's hope is in 'their' children - the children of those who have yet to come here. In a couple of comments aimed at sceptical posters he says :

"they better embrace it (further mass immigration - LT) if they want to have anybody to wipe their ****s for them by the time they end up in the nursing home. Or if they want an economy that supports pension payments."

"Either immigrants keep this country going, or it folds."

He's presumably actually read the McRae piece, as he's posting on it. McRae says that those supporting geriatric baby-boomers are likely (en masse) to pay more in tax than they receive. Even supposing they're 'our' children, that's a big ask which would raise questions of intergenerational solidarity - questions McRae passes by. What if the youth don't want to be taxed to pay for their parents and grandparents - indeed, given the coming numbers of childless geriatrics, to pay for people who are nobody's parents or grandparents ? Another leftie (and presumably childless) blogger says, when asked what he worries about :

"Loneliness in old age"

But the poor chap doesn't seem to realise that there's more to being old than 'just' having your friends die off or becoming too immobile to see you. There is, as Mr Osler so delicately puts it, the potential question of wiping the bottom.

Do I digress ? I think not, but - intergenerational solidarity is a phrase being bandied about quite a bit in the economic press at present. Here's a little excerpt from Sam Jones' FT Alphaville post on the UK's triple-A rating - or why financial markets are willing to lend money to the UK more than they are to many other countries.

Pierre Cailleteau, Team MD of Moody’s sovereign risk group, and Mares’ boss, says, safe havens’ triple-A status, “depends on two potentially unstable notions: continued public trust in government institutions, including the currency, and sustained inter-generational solidarity mechanisms.” It is the latter of these that gives the US, Germany, Japan and the UK such huge room for manoeuvre (my emboldening - LT). Sovereign credit risks are predicated on a whole series of qualitative as well as quantitative judgements about the strength, age, and “institutionalisation” of a country’s financial practices. That we have an age-old central banking system, a set of (mostly) sound checks and balances and a very secure financial infrastructure means that, in the top rating agencies’ views, the UK, like Germany or Japan, is well positioned relative to more politically and economically fragile peers. As Moody’s says in its overview of sovereign ratings:

"The probability of default for a government depends on both the ability and willingness to pay".

What they're talking about in the end is a stable political culture plus intergenerational solidarity, which means the UK can run up debts now and be confident that future taxpayers will pay them off.

But think about it. "Continued public trust in government institutions". How's that going, eh ? While I don't want to get too apocalyptic, I think it's reasonable to say that trust is falling, and indeed I'd be hard put to think of when it was lower - Peterloo ? 1926 ?

As for "sustained inter-generational solidarity mechanisms" - well that phrase tends to imply that we're talking different generations of the same group of people. This will be less and less the case. On the one hand, you'll have a rapidly rising number of oldies who won't have any descendants, and a rapidly rising number of ethnic minority youngies who'll be heavily taxed to pay for a load of hideous old whities, who they'll have been taught at school are responsible for all the ills of the world.

Right now 23% of the children in primary schools (England and Wales figures) are 'ethnic minority' and the proportion rises every year, with natives forecast to be a minority by 2073. How will these 'sustained mechanisms' pan out in such a scenario ?

Isn't there a possibility that the overtaxed young, even those whose parents he so kindly invited in, will decide that they'd rather kick Old Father Osler's butt than wipe it ?

Or a possibility that they should mete out a bit of righteous justice for the sins of Mr Osler's racist forebears, obtaining reparation by beatings, racist abuse or force-feeding talcum powder ?

These are only a couple of many competing possibilities, of course. It may be that Dave will live out his declining years tended by happy rainbow people, in a lovely building with pretty garden views - something rather like the images of God's kingdom you see on the cover of the Watchtower. But it is rational to look at and evaluate all the possible outcomes of any course of action. Not at all sure he's done this.

Mr Osler's big mistake IMHO is that he doesn't see these incomers as rational actors on their own account, but as tax-generating units on his account. He doesn't seem so very distant from the capitalists he affects to despise - where they see profits and cheap labour, he sees taxes and cheap labour. Mass immigration also has the happy side-effect of annoying those he considers his political enemies. What's not to like ?

"Hi. Welcome to England. Your numbers give you considerable political clout. Please use that clout on my behalf, not yours. Pay your taxes - to pay people to wipe my backside".

Let's hope he doesn't have to get too much talc up his nose before he discovers that immigrants are people like him, with good and bad, a culture and their own ideas of right, wrong, and what should be done. Which may not be what Mr Osler wants or expects.



(a much shortened version of this post was dropped in Mr Osler's comments, which he hastily switched to moderation having received traffic from here. He hasn't published it. I brand him poltroon. UPDATE - see below. He's not a poltroon after all. )

UPDATE - to be fair to him, Dave Osler looks like a hard-headed realist compared to one Edmund Conway, Telegraph scribbler. I do hope he's no relation to David Conway of Civitas. His solution to the crisis ? We need more people like Karen Matthews.



UPDATE 2 - Mr Osler drops in to say that he doesn't censor comments, and that the non-published and much-truncated version of this post which I dropped on his site may have been snaffled by his anti-spamming system. Fair do's. I hereby drop all charges of poltroonery against said blogger and apologise for branding him such.


UPDATE 3 - Of course, given increasingly crumbly social cohesion and the need to borrow billions for years to come, it may well be that triple-A status vanishes long before Dave Osler gets that first taste of talc. Willem Buiter :

Under the best possible scenario, taxes will have to be raised and/or public spending cut on a permanent basis by between 5 and 6 per cent of GDP to regain fiscal sustainability. The necessary permanent fiscal tightening could easily be larger. The pain will be widely felt. The ambition to bring British infrastructure back up to the level it achieved at the end of the 19th century has been postponed by another quarter-century. Education and health will suffer.

The long-term pain of higher taxes and lower public spending is not the result of public debt and deficits incurred because of a war fought by a united nation against a hated external enemy. It is the result of an economic civil war, a massive systemic peacetime economic failure, with a large domestic component. It is therefore not clear that the necessary social and political cohesion - readiness to accept joint fiscal burden-sharing - will be present. If the necessary fiscal tightening is not forthcoming because different groups and vested interests are engaged in a war of attrition aimed at shifting the fiscal burden to the other guy, markets could easily panic and Britain could face an emerging market-style “sudden stop”, with the rest of the world withholding financing from its public and private sectors.