PrintOctober 18, 2010
The Great Pension Lie
"More than 3 million demonstrators - one in 20 of all French people - marched ... against the President's plans to raise the standard retirement age from 60 to 62," reported the U.K. Independent last week.
Strictly speaking, the protests are not really about France's retirement age. After all, Frenchmen are perfectly free to retire at any age. There is nothing that holds them from quitting their jobs at 55 or 50 or even earlier should they be so inclined.
What the protests are really about is the desire of the French to begin state-sponsored retirement at one of the lowest retirement ages in Europe. For comparison, the retirement age in Germany and Denmark is 67. Britain is planning to increase pension eligibility to 68.
But the French have a problem: The government does not have the money to indulge the wishes of its citizenry. The French state is broke. France's pension program is currently running a €32-billion deficit. With increasing life expectancy and fewer young people in the workforce, the figure is estimated to double within a couple of decades.
The fact is that the French government cannot afford to provide the kind of pensions demanded by the population. The French people, however, are apparently unimpressed by such excuses. They demand that the state provide anyway. And to get their way, they are prepared to turn their country upside-down. This is how bad things stood last week:
Rail and air services were severely disrupted ... Many schools and government offices, and even the Eiffel Tower, closed. Eleven out of the nation's 12 oil refineries were wholly or partially closed in what local union branches threaten could become an indefinite stoppage to topple the pension reform. The state railway company, the SNCF, warned last night that it expected widespread cancellations[.]
This is a truly desperate situation: The impossible is demanded, and social disorder is threatened if the impossible is not delivered. The state cannot make good on its promises and the citizens refuse to acknowledge that fact.
The coming on of this impasse was not unpredictable. It was, in fact, unavoidable. This is because no government can provide for the well-being of its citizens over the long run, be it through health care, employment, or retirement. All such efforts inevitably culminate in fiscal calamity, which then morphs into social crisis.
Experience shows that all large-scale public retirement programs sooner or later turn into Ponzi schemes whereby pensions of current retirees are drawn from taxes paid in by the working population. Due to falling demographic trends that afflict welfare countries, there inevitably comes a point when the racket runs out of money. The citizens, however, do not easily relinquish the promised goodies. The politicians in charge have to give in if they want to stay in office. The enraged populace will accept nothing less. Kicking the can down the road is pretty much the only option for politicians in modern Western democracies where people have been conditioned to be taken care of by their government. But deficits and borrowing cannot go on forever. Things must eventually come crashing down, and in a bad kind of way.
This fatal dynamic is also playing itself out in the United States, where the government has promised to provide for citizens in their old age. This is a high-sounding notion, but one that can never be fulfilled. As in France, the U.S. government is broke and in no position to deliver on its promises. Estimates of entitlement liabilities inherent in Social Security and Medicare range from $65 trillion to $200-plus trillion. Even the lower-end estimate is completely out of the realm of fiscal possibility.
Nor will anything be done about it, since it is not for nothing that entitlements are called the third rail of American politics. Politicians just keep kicking the can down the road while contracting ever greater debts. Bad though they may be, it is wrong to blame the politicians for our woes, for they ultimately only do our bidding. The idea that Social Security needs to be scrapped would not go down well with the voting public.
We set out on the road to fiscal woe when we fell for that great lie: that the state will provide for our well-being and welfare. But this is an unaccomplishable task. Despite what we have been told, the state cannot provide education, retirement, and job security over the long haul. The only way to have these things is to obtain them through our own efforts.
Self-reliance is not always be easy, but it can be done. Our ancestors showed us how. They managed to live in functioning civil society with almost no federal involvement. There was no Social Security or government health care then. It bears to keep in mind that they lived in a technologically far less advanced age, when life was much harder than it is today. And yet they did not look to the state to take care of their needs. They did what they had to do themselves.
Why can we not do the same? Why do we now instinctively turn to government the moment we encounter trouble or experience a need? It is this attitude that in the final analysis accounts for the fact that we are now broke as a country. In a mob democracy such as we have today, the state's tendency is to promise all things to all people. Unfortunately, this can never work.
The choice we face is stark: Either we summon the strength to face the truth and choose to follow the path of self-reliance trodden by our forefathers, or we will continue on the road to doom with open eyes. The former would certainly seem the more courageous and sensible way. It would also be much less painful.
