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Pension reform

An age old problem

Forget ageing – capital’s class war against labour is behind the crisis in pensions and welfare worldwide, says Vincent Navarro

Thomas Malthus was an economist who believed that the resources of the planet were limited, fixed and constant. Hence he believed that the growth of the population would reach a level that there would not be enough resources to feed them, leading to disaster.

The historical evidence clearly shows that this assumption was, and remains wrong. As Barry Commoner, the founder of the progressive environmental movement, showed, this argument underestimates the ability of humanity to redefine what are called resources. Food production is a clear example. Today the highly developed countries pay farmers to produce less, as there is a extreme over abundance of food worldwide. The problem is not production, but the distribution of food.

But the wealth of evidence against the Malthusian thesis does not seem to stop its promotion, even in the conservative environmental movement, which believes that economic growth is of itself negative, as it is consuming resources that it continues to perceive as limited, ignoring, again, the ability of humanity to redefine the categories of “resource” and “economic growth”.

An economy can grow from military investments, for example, or it may grow from providing services to people with disabilities. And there is a huge need to grow those sectors that are targeted to meet human needs. Scientific evidence clearly shows that the problem is not economic growth (which supposedly absorbs large amounts of resources), but the rate of growth. Economic growth can destroy or create resources, depending on the political and economic context that shapes such growth.

But Malthusianism continues all the same, as it serves interests, regardless of the motivation of those who, with good intentions, support it. The latest version now is now actually the opposite of the Malthusian idea, as it focuses not on the problem of the lack of resources, but the problem of low population growth.

Let me explain. The decline in fertility, a phenomenon that is spreading, especially in the Western world, as a result, in part, of the increase in living standards worldwide, is seen as an alarming phenomenon. Now we are told that the ageing of the population is leading to a disaster, without much clarity on what disaster. The most you will get in this catastrophic prediction is that welfare cannot be sustained.

There will be too many pensioners per contributor, and this will lead to an untenable situation, unless pensions are dramatically reduced or privatized (an argument that is clearly promoted by financial interests that want to get their hands on public pensions, the most important cash flow in the developed world).

This argument ignores many facts that negate the catastrophic thesis. And one of them is productivity growth, which explains why, in those contributory public pension systems, as a workers’ production increases, he creates greater wealth, and thus more resources to fund welfare.

Dean Baker, one of America’s most knowledgeable economists on pension systems, indicates that in the event that U.S. productivity grew at 1.5% per year (a very conservative estimate), worker productivity in 2035 would be 40 % above the current level, enough to fund the growing number of pensioners. Interestingly, those who saw a doomsday catastrophe coming in China, as a result of high population growth (which they considered excessive), are now alarmed that, conversely, the fertility rate has dropped so much in China that the country will have a huge problem sustaining so many pensioners, not having enough young people to support them.

The problem of China (and Spain) is not having too few young or elderly. The problem is that there are not enough jobs, and those who work have too low an income, due to low wages. But what worries many of these forecasters of catastrophe is not that there will be too many old people, but a shortage of young people which will create a labor shortage that conditions and determines the need to increase wages. There’s your concern.

During all these years of neoliberal policies worldwide labour income has declined, and this despite a continued increase in labour productivity, which has increased the economic wealth of the country, without the workers, however, benefiting from it. Increasing wealth has concentrated on much higher incomes that derive their income from capital ownership. And therein lies the problem.

It is the daily class struggle being won worldwide by capital that is creating the problem of the sustainability of pensions. It is neither the demographic transition nor the lack of resources. It is the enormous concentration of wealth derived from a super-exploitation of working people, which is creating the huge crisis of welfare states, including social security. If wages were higher, if the tax burden was more progressive, if public resources were more extensive and if capital were in public hands (such as cooperatives) rather than driven by a private profit motive, such a social, ecological, economic and financial crisis would not exist. That much is clear.

Vincent Navarro Blog

Translation/edit by Revolting Europe

About revoltingeurope

Writer on Europe's Left, trade union and social movements @tomgilltweets or @revoltingeurope

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