What might the term “generation bubble” mean? I’d argue for this conception: It refers to those who have come of age in a society in which increased access to debt replaced wage growth as the key to an improved standard of living. To this cohort, the game of life is mainly a matter of making oneself appear creditworthy
Members of Generation Bubble understand intuitively that consumption (shopping and spending and collecting) has replaced production (completing meaningful and self-fulfilling work) as the key aspect of one’s identity, and that producing a self to which a good credit score can be attached now constitutes our lives’ great work. That’s where we’ll reap our rewards, that’s how the final judgment will be passed on our existence. We’ll cut capers in celebration of a jumbo-mortgage re-fi like those looped booty shakers populating various pop-up ads.
Consider this editorial by asset manager Ben Funnell that ran in the Financial Times last week: “Debt is capitalism’s dirty little secret.” The secret, as he elaborates it, is this: “Excessive lending was the only way to maintain the living standards of the vast bulk of the population at a time when wealth was being concentrated in the hands of an elite.” The debt bubble worked hand-in-hand with the consumption bubble, both of which reinforced the ways our self-conception changed after World War II, quickened by the need to accommodate the consumer revolution. It was then that economic recovery began to rely solely on increased consumer spending (as opposed to, say, an expansion in business investment), an idea that has since become an article of faith. This trope can be found in countless reports from financial analysts today: Unless consumers spend more and save less, the economy’s green shoots will fail to blossom.
Debt, Funnell suggests, masked the ways in which real consumer spending power stagnated, a point Ezra Klein reiterates here with some illustrative charts. Klein points out that “the acceleration in inequality and the acceleration in debt mirror each other pretty closely,” which he takes to mean that consumers borrowed more to try to close the consumption gap that income inequality otherwise threatened to open.
So the ability to go into debt protected consumerism — and consumers, as capitalism worked steadily to impoverish more of them. “The benefits of economic growth have gone into the pockets of plutocrats rather than the bulk of the population,” Funnell notes, but the population was too awash in consumer goods bought with credit to realize it. What he doesn’t add is that debt is, in some ways, the means by which wealth was transferred up the chain. At Rortybomb, Mike Rorty has several good posts about what is in essence sanctioned debt serfdom. He writes that regardless of how you think of yourselves, your creditors (usually big banks and credit-card companies)
think of you less as an individual to have a dynamic risk factor dynamically assigned to you, and instead as part of a portfolio to have a specific rate of return extracted from. So they have statisticians and psychologists not to create a credit risk, but instead to figure out who is likely to pay what when, and use that to keep their returns very high. Quants to study how much they can squeeze from someone – not too much, but not too little. So it is less about the awesome part of markets, the price information and the convergence and feedback, and something more feudal.
That is to say, the banks own you, and you toil to generate equity for them. This isn’t just true of paycheck lending and revolving credit-card debt. In Rorty’s convincing account, the housing bubble, too, grew out of banks’ desire to bet on the housing market, and make us work for their balance sheets:
Instead of providing consumers with loans so they can buy homes, they are instead taking bets on house prices, using consumers as people who sit in and look after the homes they are betting on. The purpose is less to get consumers to build good equity but rather find ways to transfer equity from the home to the bank itself.
Funnell’s solution to this whole debt-culture problem? Education and austerity: “We need a new political consensus, one aimed at reducing overall debt levels while reducing inequality by encouraging education, entrepreneurship and investment in innovation.” But what would such a consensus look like. What are its aims in practical terms? What specific kinds of ideological work will need to be undertaken in order to shift a population away from consumerism and toward the creative, entrepreneurial ideals Funnell champions here? That is what the people of Generation Bubble must figure out, and that’s the guiding idea behind what I will be writing about here.