5th May 2021. Generations | Aviation
The inter-generation conflict is broken;
Welcome to Just Two Things, which I try to publish daily, five days a week. Some links may also appear on my blog from time to time. Links to the main articles are in cross-heads as well as the story.
#1: The inter-generational social contract is broken
The deepest economic division in the UK today is between the old and the young. And since it is stoked by a government that has won the last two elections on the votes of the old, and has a demographic clock ticking away underneath it, it has political consequences that are likely to get worse before they get better. (These are cohort effects, not age effects).
There are similar issues in the US, and versions of it playing out in many countries across the richer world.
The core issue is that the vast inflation in asset values at the expense of wages over the last two generations has benefited the boomers (now mid-50s plus) at the expense of everyone else.
In the UK, people who don’t work and who live off assets and pensions are much more likely to vote Conservative, and also more likely to vote, and their propensity to do this has been increased by the so-called “triple lock” that means that the traditional correlation between age and poverty no longer exists, which in-work poverty has increased dramatically.
It’s also worth noting that age is the best explainer of British politics, as Jonn Elledge noted recently in his newsletter. For example, the draining of Labour votes from the former Labour so-called ‘Red Wall’ seats matches pretty exactly the decline in their working age populations.
This is a long way of noting that the Financial Times has just spent a week arguing for ‘A New Deal for the Young’, which might be a sign that this politics of demographics is starting to reach its limits. Some of these articles are in front of the paywall.
(US household wealth by generational cohort)
Sarah O’Connor and Lucy Warwick-Ching ran a survey and got 1,700 responses from under-35s in multiple countries in a week. They are self-respondents, of course, and their assessments are largely qualitative, but in the lead article in the series Sarah O’Connor concludes that the main sentiment in the responses is a sense that “the social contract is broken”.
Most young people are quick to acknowledge the ways in which their lives are better than those of previous generations. They talk about their educational opportunities, cheaper travel, openness about sexuality and mental health, varied work and the way technology has connected them to the world.
But housing and education have grown more expensive, jobs feel more competitive and insecure, pensions less adequate and the environment imperilled (“my retirement plan is to die in the climate wars,” says one).
The spiralling value of assets also suggests that without policy intervention we are likely to see a sharpening of inequality as the boomers die, in particular as house values get ‘cashed in’.
For those born in the 1980s to parents whose wealth levels are in the lowest fifth among their peers, inheritances will increase their lifetime incomes by 5 per cent according to IFS estimates, while those born to parents in the top fifth will enjoy a 29 per cent boost. For those born in the 1960s, the disparity was smaller (2 per cent and 17 per cent, respectively).
The FT Editorial Board has also published a bunch of articles that suggest policy measures that could help to address some of these issues. Inexplicably, given that this is the voice of the FT and they are hoping to influence public policy, these are behind the paywall. They cover: the tax system; climate change; better jobs; housing; funding education; and fairer pensions.
I may come back to these next week.
#2: The uphill battle to ‘green’ aviation
The future of aviation
I spoke last week at an event on the future of the aviation industry in the wake of the pandemic. My short talk was on how aviation would get by in a carbon constrained world—and the answer is: not well. The event was organised by Manchester Metropolitan University and the University of East Lancashire.
Aviation’s core problem is not the 2.5% (or more of carbon emissions it contributes worldwide, although it’s striking that the industry always seems to treat this figure as trivial. It’s problem is that carbon emissions are baked into its business model. The activist artist Sterling Crispin calculates that aviation’s emissions per dollar of revenue are up there with the beef industry, widely acknowledged as one of the global warning bad guys.
And even when it is putting its best face on it, the industry acknowledges that there’s a lot of ‘net’ involved in getting to ‘net zero’ by 2050. The UK Sustainable Aviation Group, which represents all its major aviation players, has more than a quarter of its 2050 zero emissions coming from offsets. (It doesn’t call them this...) Given the speed at which offsetting is being critiqued as an ineffective solution, I’d say that is a significant problem.
The reason for this is that aviation needs dense energy, especially for long haul, both for reasons of thrust and for reasons of weight. (This, again, is the industry’s own view).
There are some gains to be had from improved design, and some from redesigning flight paths, especially for takeoff, but these both take time. The replacement cycle for new planes is 15 years, and many fly for 25 years. Realigning flight path is the stuff of international negotiation.
The other bets the industry is making is on biofuel and synthetic fuel. To read some reports, the industry just needs to mop up almost all of the clean biofuels available worldwide and its problems are over. But that’s not going to happen. There’s competition for biofuels and there are other industries where the emissions effect is greater. The UK Committee on Climate change reckons that about 10% of biofuels might end up in the aviation sector.
Synthetic fuels basically convert energy into liquid fuel by sucking carbon out of the air. Aviation bosses are on the record as saying that this is essential to the future of long-haul flight. It might work. Chris Goodall, the respected environmental commentator, reckons the technologies are proven and we just need to scale it. But right now we’re still at the trial stage, and it’s not clear how much (clean) energy you need to put in to get liquid fuel out, or what the eventual price point is likely to be.
(The largest battery plane to fly so far is on the left; the largest hydrogen plane is on the right. Images:MagniX and ZeroAvia)
Then there are the alternative power solutions—battery and hydrogen, as in other mobility sectors. These are currently at the demonstrator stage. The current industry view (for example from Airbus) is that hydrogen is likely to scale better than battery. We might be 20 years away from flying 100 people a 1,000 kilometres in a hydrogen powered plane. But the first generation of hydrogen planes is unlikely to come into mainstream service until the 2050s (two replacement cycles away), and the current view is that this won’t work for long-haul.
All of these things were known before the pandemic.
There’s another issue that was visible before the pandemic and has been accelerated by it. This is the proportion of business passengers in the passenger mix.In the UK this has been in steady decline for 20 years. This is likely connected to changing attitudes to work and family among businesspeople. But now, as investors put pressure on businesses to reduce emissions, business travel is in their targets, as Michael Skapinker observed in the FT (link to ungated version):
Companies are not only re-emphasising their environmental goals post-Covid: they are linking them to their travel policies. Nestlé last month said that its “net zero” goal required not just changes in the way its agricultural suppliers operated but also a reduction in business travel... Many business travellers learnt during lockdown that much of the flying they did before was not necessary anyway, and they will now concentrate on trips that matter.
The airlines reckon that they can repurpose their business class seats for ‘luxury travel’ (well, maybe), but there’s a bigger problem here. Once the business market goes, the economic argument for aviation goes as well, and with it the political cover for expanding aviation. As it was, the economic models used to justify Heathrow’s Third Airport by the Davies Commission were hanging on the thinnest of assumptions. Other privileges, like the industry’s zero-tax regime on fuel, start to look questionable.
And I haven’t even mentioned the carbon price yet, but the projected climb to circa $100 a tonne by 2030 will also hurt. Or that the richest countries, and the richest people within those countries, take most flights. All of these issues suggest increasing costs, more regulatory interest, and serious business model challenges. The industry talks about getting back to its projected numbers by 2024 or 2025. I suspect its problems are just beginning.
There is a longer version of this article at my blog. Next Wave Futures.
Update: Thanks to the reader who pointed out in response to yesterday’s post on male over-confidence that the men who had the worst qualifications were the most over-confident.
j2t#090
If you are enjoying Just Two Things, please do send it on to a friend or colleague.