I’m lucky. Pandemic lockdowns and restrictions don’t actually make much difference to my daily life. My needs are modest. I’m retired, 70+ and spend much of my time at home. I’m physically active, walk or cycle most days, read widely, listen to podcasts and music, “work” on my laptop on volunteer and/or personal projects, communicate with family and friends and write occasional blogs.
All of the above keeps me surprisingly busy.
Of course, I miss seeing people – family and friends overseas, them coming to stay with us or us travelling to see them, especially our daughters, one in the UK, one in Australia and one on the North Island. We had planned a family get-together this Christmas, the first in many years, but only two daughters could make it. That made me sad, but I am philosophical, accepting that we just have to adapt, be resilient and find ways to get through a tough time.
And that’s where I think having grown up in a very different time does in some ways equip me better to accept hardship and cope with restrictions.
Managing with less is not such a challenge. I feel I can adjust. I grew up in a world where expectations weren’t as high as they are now.
As our youngest daughter observed, it’s tough for them (twenty-somethings), they’re in the early stages of adult life and want to travel, have adventures, try out different cultures and experiences. And thanks to the world they have grown up in, they expect to have what they want, when they want it.
For them, doing without is a much bigger deal.
For me life was very different at their age.
There were no credit cards, no debit cards, there was little or no debt – and that of course includes student debt. Cash was king. No ATMs. If you forgot to get cash out from the bank by 4pm on a Friday, you had no money for the weekend. You just had to manage.
Living within your means was what we did. If you couldn’t afford it, you didn’t have it.
Eating out was an occasional Friday night special, takeaway was fish and chips, coffee was instant or made in a percolator.
There were no computers before the 1980s. There was no internet. No email. You communicated by post. Portable phones didn’t exist, long phone calls were expensive and overseas calls were hideously expensive, you only made them in an emergency. You saved for holidays, usually modest and in your own country, flew rarely and if you wanted to buy a house, you had to come up with 30% of the price and you had to prove to the bank you could afford to pay off the rest. The bank would only lend you what they calculated you could repay and still live within your means.
My wife and I bought our first home in our thirties, 36 years old in my case.
I read recently with some amusement (although not at the expense of the frustrated customers) how in New Zealand recent changes to the Credit Contracts and Consumer Finance Act now require banks to “break down applicants’ spending habits before approving loans”. Apparently, this is causing consternation. Applicants claim the bank loan questions are “invasive”. Questions about applicants’ medical conditions certainly sound invasive of personal privacy. However, questions about income, the requirement to show evidence of your employment and weekly/fortnightly take-home pay, your monthly outgoings, financial commitments (rent, electricity, gas, phone, car, hire purchase payments etc) as well as factoring in food and entertainment – all those we had to provide to the bank before they would agree to a loan – at 17.5% interest. That was 35 years ago in 1987.
Before I go any further, let me forestall a couple of obvious criticisms.
Firstly, I know this sounds like a Baby Boomer rant harking back to a simpler life, the good old days etc. I am aware that some argue (incorrectly in my view) that we are the “future eaters” whose self-indulgence has made life tough for successive generations. It wasn’t exclusively baby boomers that established globalisation, deregulated the banks and created a debt-fuelled, consumption driven global economy. We are all complicit in the current global economic system that promises instant gratification and doesn’t encourage us to save for a rainy day, or plan for our retirement.
Secondly, I’m mindful that for most people life today is much better than it was 50-60 years ago. Access to higher education, health care and social service benefits, increased life expectancy, a range of food, goods and services we could only dream about a few decades ago, and ubiquitous digital technology have all given most of us a vastly improved standard of living.
But that has come at a cost.
Since 1991, New Zealanders’ average household debt (that includes mortgages, personal loans, credit card debt and student loans) has risen from 56% of gross income to 164% in 2020[i]. New Zealand has one of the highest household debt levels in the world.
That makes us particularly susceptible to a global disaster like the Covid-19 pandemic, a disruptive force that has threatened to bring our entire economy to its knees with loss of jobs, businesses, industries, and income. The pandemic has spelled disaster on a terrifying scale to everyone with a mortgage, business or personal debt, loans, credit card or student debt. That’s why governments world-wide have stepped in and spent billions to keep businesses and entire economies afloat.
For the past twenty years, we’ve been encouraged to spend what we earn and to buy that property, furniture, car, boat or holiday now and pay for it later – because it’s cheap and easy. Encouraged by governments and business, banks have been ready to lend us money for everything and anything, few questions asked, and interest rates have been extremely low. We’ve been able to borrow up to 90% or 100% of a house price, banking on capital gain to buffer our debt levels. But all that only works if the global economy keeps turning like a giant wheel and we have a guaranteed income.
The pandemic is a deal-breaker, disrupting the merry-go-round of money and exposing us to the naked fact which we’ve all ignored – we are living beyond our means with no back-up plan.
That’s why I feel for the generations that have known nothing else. For people my age, especially those of us fortunate enough to be debt free and living in New Zealand with a guaranteed state superannuation, it’s not so hard to make do with less. We can call upon our life experience from earlier times, tighten our belts and be pragmatic and philosophical about our needs and expectations.
Am I smug about this? Not at all. I am deeply worried for the future for my daughters, their friends, many people we know and care for. I worry about whether our world under Covid – and climate change – can deliver what people have been led to believe is ‘normal’, their ‘right’. There’s talk of ‘de-growth’, of ‘post-capitalism’, of regenerative and sustainable ways of living. But can we truly embrace these ideas in our actual lives? We are a highly adaptable species – it may even be the single most defining characteristic of Homo sapiens – but are we able to adapt by lowering the bar significantly for our wants and expectations, managing with less, going without?
I don’t know. Consumption is both literally and figuratively a drug. “Retail therapy” is an all too real phenomenon, a prop that supports many people’s lives.
I remain positive, though. My hope is that post Covid-19, we come out of all this learning to consume less, to live within our means and to put more time and energy into our relationships and communities. That way, we’ll be stronger, more resilient, better prepared for another pandemic and for the inevitable effects of climate change.
Without the stress of a massive household debt burden, we might even be happier.
[i] Household debt as a share of disposable income has been stable at around 160% since mid-2016, but crept up recently to 163% in 3Q20
New Zealand households hold relatively high levels of debt compared with other OECD countries. The country is in the bottom half of the OECD in regards to household debt as a proportion of household disposable income. Household debt in New Zealand is equivalent to 164 percent of household disposable income (including debt for rental property investments). The current level of debt has surpassed the previous peak reached during the global financial crisis of 159 percent of household disposable income in the June 2009 quarter. Like the Crown, households have benefited from lower interest rates, with the current weighted average interest rate of 4.2 percent being the lowest recorded since the current series commenced in 1998. (27 October 2020)
Households Debt in New Zealand decreased to 97.60 percent of GDP in the second quarter of 2021 from 99.40 percent of GDP in the first quarter of 2021