Talkin’ about their generation: how inclusive capitalism can bridge the financial gap
31 Oct 2018
“It was better in my day” is a common saying that you’ll tend to hear from the Baby Boomer generation, and to be perfectly honest, in many ways it really was. Generation X and Millennials don't have as much as those older than them, with the worrying fact being that the imbalance is getting worse.
As well-off Baby Boomers live longer, healthier lives, there’s a surplus of cash being sat on that is not being used well enough to help our children and grandchildren who are struggling to get a start in life.
Today’s difficulties of starting and building-up a business and/or moving out, tend to be misunderstood by older generations. Young people today are not necessarily becoming more wary of taking risks or less entrepreneurial, they simply don’t have access to any capital. Retirees who are concerned with living out their golden years in comfort are having to contribute towards helping their children via a financial ‘leg up’. Our ‘Bank of Mum and Dad’ report shows that parents contributed to rent payments on nearly 500,000 properties and are in the top 10 for UK mortgage lenders – further widening the inequality gap.
This topic of bridging the gap of ‘intergenerational inequality’ is an on-going concern in the UK as well as the US. Contributing factors to this is an over reliance on high-interest pay-day loans, Help to Buy schemes limiting buyers to certain properties and entrepreneurial startups not having the support they need to grow. On the subject of 'help to buy', it was great to see the Chancellor abolishing stamp duty on shared ownership in the October 2018 budget proposals.
It’s this latter category that we want to address here, as new businesses and emerging entrepreneurs assert themselves more and more into the backbone of the Western economy. Other countries may point out that the gap is a social problem, however, with inheritances taking longer to come through (due to us living longer), we need to get more creative - and more businesslike - when it comes to backing startup businesses.
The reality for many Millennials is that they live within a ‘gig economy,’ mainly self-employed and living payday-to-payday. Last year, the gig-economy made up more than a third of those working in the US, and the number is still growing. On paper, business startups are on the increase, but we can’t expect any of these new business to help boost our economy if they aren’t presented with the opportunity to expand or have the ability to employ more people. Big business (which have more money than ever before) need to get behind the most promising of these start-ups and support them with regular instalments and mentorship.
Recently, Facebook’s Mark Zuckerberg (aged just 34) recently overtook legendary investor Warren Buffett as the third richest billionaire in the US (the richest individual in the US is Jeff Bezos by the way – founder and CEO of Amazon.com). We know that technology is where the cash lies. It’s both a promise and the solution.
To borrow from a famous John F. Kennedy saying, inclusive capitalism is a way to ‘raise the tide’ of economic growth, by encouraging companies to back startups and form partnerships rather than just throw money at them. By doing this, it effectively ‘raises everyone’s boats’ – where everyone can benefit.
If properly deployed, some of the excess money that has been sitting around earning next to nothing in interest could be put to work helping and mentoring startup businesses. They need help with financial planning and running a business; while we need help with their creative and disruptive ideas to reach the next generation of consumers. However, in a world awash with small businesses struggling to get loans, and graduates from university towns such as Leeds, Newcastle and Manchester too many leaving for London in search of jobs: how can cash-rich companies help? In the UK we’re already making great progress in forming long-term partnerships and injecting regular funding into formerly great cities – reinventing them as places that young people want to live and start businesses in.
Our economy and society is undergoing massive changes and we seem to have forgotten how to grow or invest. Now’s the time for long-term thinking and leadership: we owe it to the next generation.
This blog is based upon an article by Nigel Wilson, Legal & General’s CEO, that first appeared on Forbes.
...inclusive capitalism is a way to ‘raise the tide’ of economic growth, by encouraging companies to back startups and form partnerships rather than just throw money at them. By doing this, it effectively ‘raises everyone’s boats’ – where everyone can benefit.