Padraic P. McGuinness, The Australian, July 31, 1992, p. 11.

How far into the next century can the welfare State last? This is a question which once might have thought to be absurd — the welfare State surely was here to stay. But it may emerge that the next generation will see the welfare State as a gigantic swindle, a confidence trick by their parents.

Indeed, the great social conflict as we enter the 21st century could well prove to have nothing to do with class, but will be a struggle between the generations. The old will be defending their claims on national income through pensions, superannuation, healthcare and so on against a generation which will see that it has been defrauded.

This is the theme developed in a fascinating new book about the welfare State in New Zealand, Selfish Generations?, by David Thomson, a lecturer in history at Massey University. While its focus is mainly on New Zealand, the argument of the book is highly relevant to Australia’s problems.

In essence, the argument is that the welfare State in New Zealand is the property of a single generation. The welfare generation, those born between about 1920 and 1945, were the beneficiaries of a system which was originally biased in favour of the young. As they grew up, they were net beneficiaries of the system, but as they have grown older, they have increasingly biased the benefits to themselves and their future, while reducing the relative position of the younger people.

The young are now being taxed and their benefits reduced, to the extent they are paying for the benefits of the old while receiving much less in relative terms than did their parents. The welfare generation, far from paying for its present pensions, health care and so on, were through much of their working lives (and especially in their younger lives) net drawers on the common pool. The cant phrase, “I’ve paid taxes all my life and now I’m entitled to the pension”, much heard on both sides of the Tasman, is the exact contrary to the truth.

The truth is that the welfare generation in New Zealand, those now in retirement or approaching it, have been in a unique position of enjoying redistribution of income from their elders, and now require redistribution from their juniors to maintain them in the style to which they have become accustomed.

In Australia, which was a bit slower down the welfare path than New Zealand, the welfare generation is a bit younger — it is mainly the baby-boom generation born between 1940 and 1960 — and the crunch is a bit slower coming. Nevertheless, as the superannuation guarantee contribution scheme starkly illustrates, the baby-boomers in Australia are acting in as ruthless a way to make youth pay for their benefits as the slightly older welfare generation in New Zealand has done.

While the benefits to the older citizens have been maintained and increased, even though they were the net beneficiaries of the welfare State as young people, they in turn have whittled away at the benefits payable to their young. Thomson writes:

By the end of the 1960s the first members of the welfare generation faced major changes. They were not entering middle age, and were in substantial deficit to society. The implicit welfare contract required them to pass on the same type of welfare State they had already enjoyed, as well as to pay now for those who had funded their previous benefits. But in the last 20 years, and at a gathering pace, these obligations have been swept aside.

The welfare contract has been broken — the first welfare generation has remained the only welfare generation. A redesigning of the welfare State in step with its own ageing interests has dominated our social, political, economic, fiscal, legal and other policies during the 1970s and 1980s …

In reforming the welfare State in this way New Zealand has created two parallel welfare States, though we are yet to admit the fact openly. These are not the welfare States of the middle classes and of the poor, as it has become fashionable to insist. They are, rather, the welfare States of the welfare generation and their successors. The first delivers much more than it charges its citizens through life.

Laws and regulations at the end of the 20th century work to protect this welfare State, so that lifetime experiences of minimal charges and large benefits, of security and growing affluence, are maintained through old age until death. Their successors face a welfare State which drains more than it intends to return, and does so in order to finance the welfare State of predecessors.

Thomson is not particularly happy about the collapse of this selfish welfare State under its own weight, but can see no alternative. Indeed, there is no alternative, since the cost of the welfare State (which he does not fully recognise) has been to destroy the economic growth upon which its maintenance would depend. Only if per capita output and the rate of growth of output in New Zealand were much higher could anything like the rewards extracted by the welfare generation be expected by their children.

As it is, the inheritors of the burden of the welfare State are beginning to realise that they are being ripped off to pay benefits to their elders which they will never be able to look forward to. For increasingly they are being discriminated against according to the dates of their birth — the retirement age is being extended in the future, and their own children will be unwilling to pay for a welfare State which delivers them less and less through their lifetimes.

New Zealand has created a nation of ageing parasites, wielding immense electoral clout, and pushing the burden of adjustment to a new and more competitive world on to the young, while still expecting them to finance the privileged position the young themselves will never enjoy.

The major political parties are both participating in the abolition of the welfare State as their generations designed it. The sacrifices their parents made for them, they are not making for their children and grandchildren. Nor will their children be willing to make them, even when the New Zealand economy emerges stripped of its inefficiencies (all created in the name of welfare).

The struggle between the generations has only just begun. All the other conflicts between classes, sexes, occupations or whatever will pale before this one.

The post-war generation and its children entering the workforce will question more the cost of paying generous retirement benefits to their parents when they know they will never receive them. They will also question the growing share of the health and medical bills of the nation being incurred by the old. As they now realise how they have been conned, they will become vengeful. They may not be willing to allow the welfare generation to continue to enjoy what it has seized.

It is not a pretty picture. New Zealand got a head start on Australia in the process, and it made a bigger mess of the economy. It is rectifying the latter, but the welfare generation is shifting all of the cost on to the young. We may yet have lessons to learn from that unhappy country.

(in order of appearance on
  1. Where Friedman is a pinko
  2. The Economic Guerrillas: A lecture in honour of Maxwell Newton
  3. The Libertarian Alternative
  4. Libel laws block insider's revelations of Australia's industrial mess
  5. But perhaps the merchants of doom have a point
  6. The Origins of Paddy McGuinness
  7. The Itch for Influence
  8. LA safe from religious poverty
  9. Aunty should hang up her boots in face of premature senility
  10. Warning: health is a budget hazard
  11. New ABC Tory chief won't rock the boat
  12. Time to sell the ABC
  13. Youth victims of the welfare con
  14. Paddy McGuinness on class sizes (1991)
  15. More teachers won't solve the problems in our schools
  16. Paddy McGuinness on Catholics and wealth distribution
  17. Paddy McGuinness proposes inheritance tax equal to handouts received by deceased
  18. Let them swim nude
  19. Time to legalise heroin
  20. State-sponsored sports rorts
  21. The blight of the baby-boomers
  22. To reduce the problems of crime and corruption, legalise heroin
  23. We should ban Olympics
  24. Evidence shows heroin policy is not working
  25. Wowsers deny society while killing children
  26. Will Australia compete?
  27. Canberra's social revolution
  28. Paddy McGuinness in 1994 on the 2012 class size debate
  29. Why not pay for the ABC?
  30. Paddy McGuinness on David Stove
  31. Sometimes the truth hurts
  32. Paddy McGuinness on compulsory, informal and donkey voting, and breaking electoral laws
  33. Thomas Sowell, McGuinness, Aborigines and other minorities
  34. Genocide with kindness
  35. Hyde, McGuinness and Sturgess on Chaining/Changing Australia
  36. Paddy McGuinness defends comparing IQ of races
  37. Do-gooders should glorify smokers
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