The credit crutch

November 27, 2008 at 5:01 pm | Posted in British Politics, U.S. Politics | Leave a comment

It’s been a good week for fans of abbreviation. A few days ago a website told me that this blog is characteristic of an INTP, and now I learn that I’m also A TIMI. Personally, I’d prefer to be refered to as a FAB, which, in addition to being a pleasant adjective, works as an abbreviation of ‘Faltering At Business’, or ‘Fumbling Along Bravely’. Both of those would be pretty accurate at present.

Anyway, there are millions of us TIMIs pottering around the country, and it turns out that we’re all doomed:

The current financial landscape is bleak for anyone. But the culture shock is biggest for the TIMIs: the increasing numbers of those in their twenties and early thirties who find themselves indebted, mortgaged and insecure about job prospects. TIMIs are the first generation to get easy loans, starting with student loans. In fact, because of booming numbers of credit providers, the average under-35 now owes more than £9,000 in credit-card debts, student loans and other borrowings. Their repayments average £206 a month, three times as much as the archetypal TIMI is investing in a pension.

Now they find themselves in the front line for redundancy.

Sarah Walker, aged 23, and one year into her career as a strategy consultant, was made redundant a week ago. Having worked hard and received positive appraisals in her City position, Sarah thought her job safe. It was not.

“They didn’t explain why they’d picked me. At the time I was too shocked to ask. Now I’m starting to feel angry. After we’d worked so hard we deserved an explanation.” About a third of Sarah’s colleagues were made redundant on the same day, but those in the early years of their career were hardest hit. This is emerging as a pattern.

These twentysomethings, graduates, often with excellent degrees, high-achieving and socially successful, did not foresee misfortune. Graduating from top universities, many achieved Firsts, presided over the Union or captained the rowing team.

Well, this certainly fits with my own experience, but at least we know there’s enough of us to start our own Facebook group.

On a more serious note, one of the most popular interpretations of the credit crunch & attendant recession (such as that advanced here by Andrew Sullivan) is that it’s all attributable to decades of living beyond our means: constantly accumulating consumer goods we don’t need, buying houses we can only afford until our luck runs out, putting everything on credit cards and believing we can get along by paying the bare minimum each month.

There’s undoubtedly some truth to that, but I think it’s also important to recognise that whilst we’ve all leaned on the credit crutch to enhance our convenience or comfort, debt has also been the only means for most of us to achieve our aspirations.

For most people of my age who saw university as the path to a prosperous career, the only way we could afford the tuition fees was by taking out a student loan. Sure, the repayments are manageable and only kick in once you’re earning a certain amount, but that still saddled us with thousands of pounds worth of debt before we’d even found employment. Add in the overdraft and credit cards which a great number of us needed to live on, and you’ve got a generation of young people who graduated knowing they’d be incurring the costs of their education more than a decade later.

On its own this wouldn’t have been too big a problem, but at the same time the Blair government actively encouraged an increase in the student population. We could argue for hours over whether this was the right or wrong approach, but what we do know is that when the number graduates in the jobs market increases, the value of that degree to employers will decrease.

As a consequence, we have thousands upon thousands of graduates doing the kinds of mid-level office admin jobs which don’t really require a degree and which used to be filled by people who didn’t have degrees. All whilst trying to chip slowly away at a stifling debt. Oy vey.

But despite the realisation that a university education is not the guarantee of success that it once was, it can still be a ladder of opportunity, and if we’re ever to re-order our financial system so that an excess of bad debt never cripples the economy again, we need to figure out how we can do it without removing that ladder. If we can’t find a way of doing that, then the generation which follows us will find things even harder than we have.

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