The New Old Generation Gap

ROME – A willingness to embrace change represents one of the main differences between affluent but aging societies and poor, younger ones. The former increasingly tend toward both social and policy immobility; the latter are more inclined to sudden reversals. If this sounds audacious, compare what has happened in Europe and North Africa over the last several months.

In the Middle East, a generation of near-hopeless youth took to the streets in order to transform their societies. In many European countries, by contrast, marginalized young people protest to preserve a crumbling social order threatened by fiscal austerity. Last autumn, for example, many French students joined protests against President Nicolas Sarkozy’s proposal to raise the retirement age ever so slightly. The paradox here is that their actions actually ran counter to their own interests, for, in aging societies, high pension benefits today will invariably mean lower benefits tomorrow.

Young people in rich countries fight to protect a social order that benefits their elders at their expense for two reasons. First, they dream of enjoying the same systemic generosity now bestowed on the old. Second, and more importantly, today’s social contract in Europe and many other rich countries incorporates a Machiavellian financial device that keeps young people loyal to the system.

This intergenerational altruism is an essential pillar of modern societies. In the past, adult children were obliged to care for old and sick parents. After the creation of the welfare state, government-funded pensions and medical assistance replaced this obligation, even if younger workers’ taxes financed such schemes. But, in most rich industrial countries nowadays, the role of family in the transmission of economic resources is reviving, with huge flows of wealth from old to young, primarily in the form of high-priced houses.