Pensions: Let's put an end to the confusion
Jean-Marie Harribey

First publication: L'Humanité, 22 avril 2002, with the title : «Retraites : qui paiera ? »

The debates around pensions and savings on salaries are floating in a tremendous confusion. Considering that this debate masks a fundamental manipulation of society, it would be desirable to put an end all errors and untruths. Elementary scientific rigour should make it possible to evaluate the following points with serenity.

1. This first point is decisive since the coherence of the others depends on it. The difference between a pension scheme working on redistribution and another based on capitalization does not depend on the origin of the resources that finance it. Employed people are always sustaining the unemployed by their productive activity ; in both cases, they are the ones who "pay". This seems obvious when pensions are paid immediately after collecting the social contributions but it is concealed in the pension funds. The pensions paid by the funds to their pensioners, however, are deducted from the global income flow generated by workers and not from a stock. A social consensus between generations is necessary in a redistributive system. A different "consensus" is necessary in a system of capitalization in order to induce the workers to accept, whether they like it or not, that capital holders take a supplementary cut of produced resources.

2. To avoid incorrect reasoning, one needs to compare the rising number of unemployed (young and old) in relation to employed people with the evolution of work productivity when the total population remains approximately the same and only the age structure changes. So according to an official forecast, the increase in the relation unemployed / employed will be 25% in 40 years, this means an average of 0.56% a year. The increase in the number of pensioners in relation to employed people will be 75% in 40 years, this means 1.41% a year. Productivity has never grown less rapidly than 1.41% and certainly never less than 0.56% a year. Hence we will not suffer from insufficient resources. Even the Charpin report recognized this.

3. The aim of all the fuss about pensions is to camouflage the bet of the wealthy classes and that of their spokesmen : future productivity gains will slip through the fingers of the majority of wage earners and pensioners. The bet is that as capital income has monopolised productivity gains over the last twenty years, it will continue to do so for the next forty years. We would then suffer from an unjust distribution of resources.

4. Whichever pension scheme is chosen, it can only be subject to the same demographic evolution : the amount paid for pensions in the year 2040 will be three times the actual amount (the equivalent of 540 billions euros for France). Capitalization will never be a collective solution. On the other hand, it could be a collective problem, in two ways. By increasing social inequalities if the financial market does not crash. By bringing the pensioners to ruin in the case of a financial market crash.

5. The increase in social contributions aiming for a collected sum of 540 billions in 2040 is presented as impossible. How could the same sum be possible if collected as pension-inurance premiums or by the sales of stock certificates ? This contradiction of liberal reasoning is a mystification.

6. Schemes using either redistribution or capitalization are not compatible in the long term because the maximum profitability of the second can only be reached by lowering salaries and employment which are the basis for the first. Except if according to the logical thought within the financialization of global capitalism, we intend to take advantage of placements made in underdeveloped countries where the population is younger and very poorly paid. This would then increase the eating away of salaries and employment in other yet poorer countries. Unfortunately it is the choice made by certain left wingers who do not hesitate to say we should have our pensions paid by the Chinese, or, to put it more diplomatically, we should invest in the third world. It is a call for imperialist plundering.

7. The project to increase the time of contribution to 40, then to 42.5 and 45 years (the equivalent to lengthening a person’s working life) is irresponsible as long as unemployment has not been eradicated. It shuts its eyes to the increasingly late entrance into professional life, aggravated by the ever important problem of unemployment. It forgets company methods of prematurely discarding workers over 55 years of age. It goes against the historical evolution of the last two centuries which has consisted of using a part of productivity gains to reduce working time. In short, this project aims at loading the total wage bill considered as intangible, in spite of productivity gains, with the supplemantary charge due to demographic evolution.

8. Although the judicial measures adopted may delay somewhat the convergence of the pension funds and salary savings funds, the working logic is identical. Indeed, when a part of the salaries is paid as deposits in savings funds or as stock options, two perverse effects arise. Social protection organisms are deprived of a fraction of social contributions. And the rupture between the evolution of salaries and that of productivity is confirmed. We know how much this rupture, engaged by the austerity of liberal politics over the last twenty years, has deteriorated the part pertaining to the total wage bill in the added value (in France, 10 points of the GDP, or 140 billion euros a year, nearly equivilant to the amount given for pensioners today).

9. The alternative presented to the left is not between a redistribution system (condemned if we do not work 45 years) and an organization mixing redistribution and capitalization. The real alternative facing the left is either to increase society’s financialization by sharing the added value detrimental to workers but favorable to capitalists, accentuating the inequalities in the world and submitting social protection to the rules of profitability, or to improve social protection by distributing equitably the future productivity gains so that salaries can progress at the same rhythm as productivity. A rise in contributions will then not cause any problems, especially if the profits are directed to contribute and if unemployment shrinks. Likewise, the reduction of unemployment and the financing of retirement are both dependant on a judicious distribution of the productivity gains.

10. We arrive at the last point which is closely akin to the first. Without any doubt, this one is the most difficult to understand for all those who believe in financial market miracles, and more generally, in the prolific virtues of capital. Capital would generate added value and its owners would have a right to a part of it. This is the fundamental concept of liberal theory. It is a myth as capital increases its value only through ever more productive human work. The absurd proof : if capital is capable of self-generation, why do financial bubbles explode?

What a dilemma for the left! Which is better ? Capital or labour ? Given the present social climate this choice leaves no space for “modernity”. It is nevertheless realistic.