Rishi Sunak’s war on the young The Tories are plagued by zero-sum thinking

A recent study from Harvard examines the principle of the limited good in granular detail and it suggests that the zero-sum thinking associated with it is becoming commonplace across modern capitalist economies, seeping into our collective psychology. As the authors themselves make clear, this is not a political mindset per se — both Democrats and Republicans can tend in this direction — although overall it is more common among those who categorise themselves as “strong Democrat” or Left-wing. Interestingly, one of the most zero-sum thinking groups the authors found were Democrats who voted for Donald Trump.

This type of thinking does not generate typical Left-Right opinions either, with constituents of both parties favouring both redistributive policies and immigration restriction. Zero-sum thinking is above all else a mindset, a way that people frame the world. If you think that someone else’s slice of the pie comes at the expense of yours then you will favour both fewer people to take slices and policies that give you more in the first place. But though this study shows how this thinking manifests, it fails to answer the question of why it does. The authors seem to want to impose a Left-liberal framing on the data, seeking to prove, for example, that zero-sum thinking is associated with having family that were slaves or slavers. The Confederate flag gets a look-in too, as the authors argue that people with ancestors in the Confederate South have higher rates of this attitude.

These findings arise from a flaw in their methodology. The authors use a questionnaire to ask people about their family backgrounds and then base their findings on this. They find, for example, that “among Black respondents, those who have ancestors who were enslaved have a more zero-sum worldview”. It seems far more likely that people who have this worldview will be more likely to view their own past as a competitive struggle than those who do not. Ditto for those who wave the rebel flag. This is an obvious point, and it feels like it was lost on the authors because they wanted to impose their own worldview onto the findings.

Their two most interesting findings, however, are that young people tend to be more zero-sum in their thinking than older people and that their zero-sum thinking is increasing over time. In fact, the trend is accelerating as young people go on to replace previous generations, shifting society at large in this direction. And this raises an extremely interesting question that the authors do not explore: demographic change, arguably the greatest economic division of the modern West. The authors think primarily in terms of income groups and groups that may have been oppressed in other ways, either now or in the past. Yet it is obvious to the neutral reader that, given their results, the most obvious arena for conflict is between the young and the old.

Our societies are ageing rapidly due to low birth rates. The median age in the United States has risen from 28 in 1970 to 38.9 today. In Britain it has risen from 33.2 to 40.7 in the same period. As a society ages, more old people emerge relative to young people. Since older people tend not to work, this means that the remaining young people must work to feed and clothe both themselves and the retirees. This is the most bitter zero-sum economic relationship in any society, and it is the one that is the most obvious and visible. It is also the one that is most often discussed politically. Rarely a year goes by when the newspapers are not filled with talk of a pension crisis and the need for reform and yet this is rarely tied back to the bigger picture: a society with low birth rates that is rapidly ageing.

Fertility rates in both Britain and the United States are now far below replacement. This means that the ageing of the population will accelerate as time goes by, a vicious cycle which in turn means that the economic relationship between the young and the old will become increasingly antagonistic. We have seen that the young tend to be more zero-sum in their thinking and that this group is becoming more so as time goes on. Filling the gap with immigration, which is only a stopgap, will become more difficult as zero-sum thinking makes the society less and less accepting of mass migration – this is already happening amid sluggish economic growth. The confluence of these demographic trajectories appears to be putting us on a path to a society dominated by the “principle of the limited good”.

The dynamics of an ageing society will greatly favour this sort of thinking. Consider the case of precious assets, such as housing. Savings accumulate throughout the life cycle, meaning that older people tend to have more than young people. This also means that older people own more assets than younger people as the savings are typically parked in assets. But as the pool of older people grows, so does the need for assets. Eventually stock and bond markets become too small, and the greying savers need new places to park their savings. One option is property which can then be rented out to earn a yield.

Who rents the property? The asset-poor young, of course. More and more, the older generation will end up owning all the property and renting it to the younger people, who will be doing all the work. Even the most charitable of us would feel economic resentment in such a society. We are already seeing its stirrings in our heavily financialised housing markets, and the concomitant and largely youth led “Yimby” movement — although they misunderstand the problem, thinking that the solution is to build more housing when the reality is that the property prices are being bid up by the asset-rich.

In his speech to Conference on Wednesday, Rishi Sunak is widely expected to discuss cutting inheritance tax as well as the thorny issue of the triple-lock pension. Reports suggest that his advisors believe it would be “political suicide” to get rid of the latter. And they are right. Older people, and pensioners especially, tend to vote in much larger proportions than younger people. The triple-lock ensures that pensioners will see no decline in their income relative to the inflation by government guarantee. Meanwhile, the pay for workers is barely higher than it was in 2008 when adjusted for inflation and has fallen around 9% since the start of 2022. What is the triple-lock debacle if not a zero-sum debate turned inter-generational ruck?

The inheritance tax issue is similarly an implicit demographic debate. Sunak wants to at least reduce the tax if not abolish it. While some may portray this as a straightforward grab by a notoriously wealthy Prime Minister, Sunak’s advisers rightly point out that polling shows that the tax is the “most hated in Britain”. Why is it so hated? Once again because people accumulate assets as they age. When parents see that their own children have not been able to do so and are stuck as tenants, they want to be able to pass their assets down. This is the founding principle of that mythic financial institution, “The Bank of Mum and Dad”. Parents see all too clearly that the ageing society is no good for their children, and if they can afford to do so they want to do their best to set this right.

Tear back the veil and we see that the Tory Party conference is already shot through with zero-sum thinking related to an ageing population. As the population gets older, this will get more and more acute. The only way out of this is to convince people to have more children. And that will require a new type of zero-sum politics, one in which the government recognises two groups fighting over resources: those with children, who produce the people needed to look after them in their old age; and those without children, who must rely on everyone else. To the former the spoils must go, if we want to escape from the dreaded society of the limited good.

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Philip Pilkington is a macroeconomist and investment professional, and the author of The Reformation in Economics

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