Thursday, January 13, 2011

Breaching the social contract

The inter-generational compact within families is that the adults will take care of the children through years of dependency, and when the youngsters become adults in their turn, they will take care of those who formerly took care of them.

Beginning with Chancellor Bismarck in 1884, the State took one of its periodic Great Leaps Forward and inserted itself into this social contract, and proposed to underwrite, through taxation, the care of the elderly. But every government action crowds out private action: if the government says you can just pay part of your income into the social security fund rather than saving it yourself for the future needs of your and other older family members, most people will take it at its word. What could go wrong?

Of course, from the perspective of 2011 we see: practically all the welfare states' social security funds are permanently bankrupt, as the taxation and anti-family culture of the welfare state takes its awful toll.

The British state has responded by repealing the 65-years "default retirement age," that is, the age at which an employer could fire a worker without penalty. The government despite its earlier promise must now renege: the State simply cannot afford so many pensioners and must apply the policy levers to keep the elderly in the work force. But having put itself and us all into this jam, we are not so easily got out, as the inter-generational and inter-familial ties that bound older and younger family members have been displaced.

Alex Kurtagic at AltRight observes,

[T]he phrase 'ageing population', because it is refers to a generalised phenomenon driven by several causes, conceals the unwillingness of the government to make the economy more family friendly: indigenous Europeans are delaying starting a family, having smaller ones, or not having them altogether, partly because of the cost relative to their incomes—resulting from, on the one hand, pressure from the consumer culture, and on the other, inflation, predatory taxation, and labyrinthine regulation—is seen as too high. (Another factor is Marxist feminism.)

Also concealed is the implicit realisation that the levels of immigration that would be required to close the fiscal gap is high enough to risk serious social disturbance and a significant rise in support for anti-immigration parties: one way of increasing the workforce without importing or creating new citizens is to allow existing citizens to work for longer.

By painting this legislative development as an act of government generosity, the report also misrepresents the facts. The desired implication is that the government is now 'allowing' those eager to work to do so for longer, and 'forcing' employers not to retire and not to deny employment to workers above a certain age. It fits in with the equality discourse that permeates modern culture. But the reality is that working past 65 is not a choice for many (because many hate their jobs), but a necessity. As we well know, Western governments have incurred unpayable debts and, as predicted by Kotlikoff years ago, they have decided money printing is the only way out: they cannot raise taxes nor cut welfare programmes enough without causing a revolution. The consequence is, of course, inflation, and neither incomes nor pensions being able to keep up with the devaluation of the currency. Most workers will increasingly have to work until they drop, occupying progressively more menial positions as age takes its toll.

I suspect other Western countries with default retirement ages still in place will be forced to follow. They may at first extend the retirement age, but they will eventually 'liberalise' or 'relax' employment legislation and it will be sold to the public as a way to keep active and boost the economy, just as it has been done here.

Westerners were sold a lie: that the secular State could eliminate the vagaries of family ties and provide a dignified retirement for the elderly. And having had the rug yanked out from under them, and their children laboring under their own tax burdens, the elderly must now go to work.

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