Dangerous Generations?

Unforgiving Critic: At the core of Shamubeel Eaqub’s proposals is a puritanical belief that citizens have no entitlement, morally, to an income they haven’t saved for. And that NZ Superannuation – currently paid for out of the steady growth of the New Zealand economy – is a violation of intergenerational equity. OnTV3’s The Nation, he railed against the fact that “very wealthy people” continue to receive NZ Superannuation. 

ON SATURDAY (1/4/23) SHAMUBEEL EAQUB came out swinging against the Baby Boom Generation on TV3’s The Nation. The Gen-X economist was adamant that the New Zealanders born between 1946 and 1965 had guaranteed themselves a universal retirement income, which they were now enjoying, regardless of the economic impact on subsequent generations. Outraged that the Boomers, not having saved for their retirement, continue to live on “welfare”, Eaqub made it clear that he regarded NZ Superannuation as a form of intergenerational theft. It was unaffordable, unsustainable, and it had to stop.

Asked what he would recommend by way of addressing the vexed issue of retirement income, Eaqub proposed raising the age of eligibility for NZ Superannuation to 70 years-of-age, and subjecting every applicant to a means test. Writing on the same subject for Stuff back in 2018, Eaqub further suggested making Kiwisaver compulsory and dramatically increasing the contributions from employers and employees. He was also of the view that his proposed means-testing regime would need to: “test assets and would be a natural complement to a tax regime that taxes capital as well as income and spending.”

As the National Party were quick to point out in relation to Grant Robertson’s proposed social insurance scheme (now on hold by order of Chris Hipkins) the sharp increase in deductions from workers’ pay packets required to make Kiwisaver a viable alternative for NZ Superannuation will be experienced by most employees as just another tax. It is unclear from his Stuff article whether Eaqub’s proposed Capital Gains Tax will be applied to the family home. If that is the plan, however, then the impact on asset-rich/cash-poor retirees could be catastrophic.

At the core of Eaqub’s proposals is a puritanical belief that citizens have no entitlement, morally, to an income they haven’t saved for. And that NZ Superannuation – currently paid for out of the steady growth of the New Zealand economy – is a violation of intergenerational equity. On The Nation, he railed against the fact that “very wealthy people” continue to receive NZ Superannuation. In a world run by Shamubeel Eaqub, this outrage would, presumably, cease. “Very wealthy” people’s entitlement to “Super” would be means-tested into nothingness.

Radical stuff! But also a plan guaranteed to provoke an extreme political backlash if implemented. Indeed, so vociferous would the reaction to Eaqub’s proposals be that it is difficult to see them being introduced in any other circumstances than those arising out of a full-scale intergenerational war.

If that is what Eaqub wants, if his plan really amounts to nothing more than the meting out of what he and his generation consider a well-deserved generational punishment, then they will have singled themselves out as a very dangerous generation.

When, however, Eaqub’s argument is pulled apart, older New Zealanders may feel entirely justified in arriving at such a grim judgement. Take, for example, Eaqub’s claim that the universality of NZ Superannuation “makes the system simple to administer, but expensive.”

Expensive compared to what? The cost, of New Zealand’s universal basic income for the over-65s, measured as a percentage of GDP, is predicted to top-out at between 7-8 percent. But, that is the cost of the German pension scheme right now! What’s more, as New Zealand moves beyond its Peak-Boomer moment, and the generation dies out (as all generations do) then the cost of NZ Superannuation will fall.

It is at this point that the reckless quality of Eaqub’s argument becomes most apparent. As the Baby Boomers disappear into the historical shadows, the Generation Xers will start to view their retirement with a mixture of trepidation and horror. In their determination to punish the privileged and selfish Boomers, Gen-X politicians, inspired by the likes of Eaqub, will have replaced the generous universal pension of yesteryear with a means-tested grant that kicks-in only after they reach their seventieth birthday. Moreover, the Kiwisaver “nest-egg”, for which they have been required to defer so much personal and familial gratification throughout their working lives, will offer them a weekly payment barely equivalent to the purchasing power of their parents’ and grandparents’ Super!

To make matters worse, it turns out that Eaqub’s fingering of the Baby Boom Generation as the villains of his puritanical economic narrative for The Nation is just plain wrong.

More than 30 years ago, an academic by the name of David Thomson, wrote a book called Selfish Generations?: The Ageing Of New Zealand’s Welfare State. Born in 1953, Thomson is a fully-paid-up member of the Baby Boom Generation. Did that mean that his book was a sinister blueprint for the dispossession of the Boomers’ own children? Did it heck as like! In a fashion echoed uncannily by Eaqub, Thomson railed against his parents’ generation:

In New Zealand the big winners in this have been the ‘welfare generation’ – those born between about 1920 and 1945. Throughout their lives they will make contributions which cover only a fraction of their benefits. For their successors the reverse is true.

Eaqub’s fatal weakness is that, like so many economists, he is not particularly well-versed in his country’s recent history. Clearly, he has no idea that it was Baby Boomer politicians who did their best to rein-in the cost of retirement income support. Between 1990 and 2000, these efforts transformed the Super issue into an electorally devastating political football which ended up scoring own-goals against both major parties. It was, Eaqub seems not to grasp, Boomer politicians who made sure the retirement age rose from 60 to 65. Boomers, too, who set up the Superannuation Fund to ease the nation through its Peak Boomer period.

Eaqub is not, of course, alone in his generational ferocity. There are plenty of other Gen-X commentators who are happy to join in the Oedipal dance. If these characters spent as much time blaming the neoliberal order (put in place by individuals born far too early to be branded Baby Boomers) as they do to bad-mouthing their parent’s generation, then something considerably more positive than gratuitous age-baiting might ensue.

A more fruitful place to seek for inspiration than Eaqub’s arid blame-game is on the streets of Paris and many other French cities and towns. It is there that young Frenchmen and women are fighting running battles with riot police to protect the French retirement age of 62, and the state pensions that come with it. They do not begrudge their parents’ good fortune. On the contrary, they are fighting tooth-and-nail to ensure that it remains their good fortune as well.

Those Gen-Xers who thrilled to The Nation’s intergenerational blame-fest, should turn their attention, instead, to just how much Shamubeel Eaqub’s ruthless prescription on pensions, and that of France’s technocratic and neoliberal president, Emmanuel Macron (b.1977) have in common.

This essay was originally posted on the Interest.co.nz website on Monday, 3 April 2023.