CLOSING TIME IN THE WEST

Europe's ageing population revolts at longer work and lower pensions: Governments of right and left try to impose change (Ian Traynor and Jon Henley, June 11, 2003, The Guardian)

Marching in Paris yesterday, Martine, a 49-year-old post office worker, could see her retirement plans slipping away before her eyes. She had no intention, she said, of working longer than her allotted 37.5 years.

"My husband's a teacher, he feels exactly the same. All our working lives we've been planning around that [retirement] date, and now suddenly we're not going to be able to stop. What do they expect us to do? Die on the job?"

Martine is not alone in her anger. The hot summer of Europe's discontent is being brought to the boil by the issue of state pensions as employees are ordered to work longer for less and to dig deeper into their pockets for the privilege of getting less back from the welfare kitty. [...]

At issue is the sustainability of pay-as-you-go state pension systems in which those in work pay the pensions of the retired rather than, as many fondly
imagine, putting a nest-egg away for their own retirement.

"You can either increase contributions, reduce pensions, or work longer, given the demographic developments in these pay-as-you-go systems," said Martine Durand, deputy director for labour and social affairs of the Organisation for Economic Cooperation and Development.

"Increasing contributions is counter-productive in high-tax countries, reducing pensions is also politically unpopular. That just leaves raising
retirement ages."

But in France and Austria such a suggestion is politically risky, and in Germany the measure is not enough to sustain the system.

From Denmark to Italy the national pension system varies, but demographers, economists, and analysts are pretty much agreed that all face similar crises, a convergence encouraged by the single currency and the constraints on public spending enforced by the European Central Bank.

The issue is political dynamite.

This is the reason that democracy may ultimately be unsustainable in much of the West. In fact it may be unsuistainable here unless we privatize retirement rather quickly. Once a people realizes it can simply use the apparatus of the democratic state to transfer the property of others to themselves it will do so. It appears that it will continue to do so until the system inevitably goes bung. Combine this propensity with the fact that once you can make the state "care" for you there is no need to have children and you end up with a society where power lies in the hands of a rapidly aging population which is become dependent on these transfer payments and there's little prospect of making this politically powerful majority think of anything beyond themselves. In effect you've created the conditions for a Perfect Storm--witness Europe.

We'd like to believe that this is merely a fiscal crisis, but it is actually a function of our political philosophy. Democracy gives people power and people with power do things with it. Those things are seldom selfless. Posted by Orrin Judd at June 20, 2003 1:12 PM