November 07, 2013

Society is not a Ponzi scheme

The Times Higher have published my letter commenting on their article last week about the 'black hole' in the USS. When considered as an ongoing SOCIAL institution rather than in purely financial terms the black hole disappears and the picture looks different. My comments are about pension schemes in general not only the USS.

The original title of my letter was 'Society is not a Ponzi scheme' referring to the comments of a so-called pensions expert John Ralfe, who is someone who believes that pensions should be administered according to the purest maxims of neoliberal economics - as if all markets functioned perfectly at all times and all human beings were omniscient. Ralfe is an active campaigner who rejects the actuarial principles on which pension schemes are normally run, whereby it is normal to count contributions coming in from members to help towards paying pensions, as a 'Ponzi scheme'. This is convoluted logic with so many flaws there is not space or time here to cover them all. (The market cannot know how long human beings might live in the future, once they have retired, for example.) Market based solutions like this are so unrealistic they can never replace the role of society.

Ralfe is a self-style expert and an zealous campaigner for this neoliberal world view. See this report in the Financial Times.

There are many people pushing neoliberal politics. It is an ongoing legacy of Thatcherism. What is frightening is that they are not just being debated in the political space but actually being implemented in the field of pensions under our noses. We are sleepwalking into a tragedy where - because an impractical ideology has been allowed to go unchallenged - many millions will end up with an inadequate income in retirement or not be able to retire.

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