I have argued that the current crisis we are in now is the product of at least three decades of a bankrupt economic system. Now, looking forward, the same system has set the stages, according to a report just out, for a massive worldwide crisis in retirement security that will last decades. The reason we face this crisis is because of the foolishness of the "free market" ideology and the greed of the wealthiest people in society.
Let's start with this news, which was largely ignored, but did make The Financial Times yesterday:
Strains in pensions systems, in both private and public provision, threaten to turn the financial crisis of the past two years into a social crisis lasting for decades, the Organisation for Economic Co-operation and Development warned yesterday.[emphasis added]
And...
Pensioners hit hardest include those heavily dependent on defined contributions, where people save to build up a personal fund, those near retirement and those heavily invested in equities. This applies to many US citizens who have large pension pots, known as 401(k) retirement plans.[emphasis]
So, what is going on here? It's pretty simple to boil down to two trends, and I'll focus on our country, though the pattern can be seen around the globe.
First, the "free market" ideology, which has imprisoned us for the past three decades, effectively shattered the notion of a secure retirement. The corporate philosophy over the past 30 years basically went something like this: once we've sucked everything we can out of you on the job, trust the stock market because it's not our responsibility anymore.
In practice, this meant the end of defined-benefit pensions--meaning, pensions where a person could count on a specific, very modest, amount of money each month. It's worth pointing out that the decline of real pensions mirrored the decline of the labor movement: unions negotiated real pensions, though, these days, even unions are being forced into the defined-benefit-less world.
Instead, we were fed the line--by political leaders of both parties--that we should rely on 401(k)s. That's worked real well, huh? All we needed was the bursting of one or two market bubbles--which are historical certainties, no matter what level of regulation you impose--to wipe out trillions of dollars of wealth.
The second thing that happened was greed, specifically by the richest one percent. In the private sector, if a CEO wanted to make millions of dollars in pay, benefits and pensions (CEO pensions is where they really clean), the money had to come from somewhere. So, in a conspiracy of immorality with compliant board members (who were always paid quite handsomely to show up a few times a year to act as "yes" men and women), CEO compensation was underwritten, in part, by emptying out the value of pensions of the rest of the workers by eliminating a future bottom line cost for companies. Namely, taking care of workers in their retirement years.
By the way, defined-benefit pensions were never a GIFT to workers. Pensions were, and are, DEFERRED WAGES. Meaning, workers, trying to act responsibly, agreed to put off getting a few bucks in their paychecks in order to bank some money down the road for their retirement years.
The other part of the greed comes via our perverted tax system. It is a moral obscenity that the press, the "free marketeers" and a whole bunch of elected politicians are attacking the retirement benefits of firefighters, transit workers and other public workers--who make our cities run--rather than address the real problem: we have fiscal holes around the nation not because regular people try to make a decent living working in the public sector but because the wealthiest people in our society have slowly but surely stopped paying a fair share of the dues that should be part of what we owe to have a decent, functioning society.
In New York alone, if we had a more progressive taxation system, we could effectively eliminate the budget crisis by asking the highest earner to pay a fairer share of their wealth back to society (and, under my proposal, 95 percent of the people would get a TAX CUT). But, our leaders--even before the spectacle of the current dysfunction in the state legislature--do not have the moral vision or backbone to simply ask the wealthiest people to pay a bit more.
And if you think change is in the air, let's underscore that the dominant view still prevailing in the policy/business world is that the solution is to scale back pensions and put more onus on the workers.
So, there it is: a social upheaval that will last for decades because of a bankrupt ideology, greed and the lack of backbone of our elected leaders to do what's right.
Of course, it doesn't have to be that way. If we rise up.
[A small plug. I document all this in a forthcoming book, "The Audacity of Greed: Free Markets, Corporate Thieves and The Looting of America", which you can pre-order here. End of plug.]