excerpted from Social Dimension Online:
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The last and possibly most damaging case against Western-style social welfare is that it is financially unsustainable and will eventually bankrupt the state. At a seminar on Singapore’s Central Provident Fund (CPF) last year, a senior politician likened European pay-as-you-go pensions to political Ponzi schemes that were never going to pay up on their promises. This view is misinformed. It is true that pensions constitute the heaviest fiscal burden among all sources of social spending in Europe and have come under pressure from population ageing and economic stagnation. But this area is complex and dynamic. Research done at the London School of Economics has found that reforms in recent years have addressed policy constraints to different extents across Europe and in some cases have put pension systems back on a more sustainable path. The reference to Ponzi schemes is also disingenuous because it fails to recognise how these pensions have helped many generations of older persons in Europe avoid poverty and retire with a sense of financial independence and personal dignity. Sociological studies have shown that these pensions often enable older adults to contribute to their adult children as they look to establish their own families and careers. In contrast, the majority of elderly Singaporeans are compelled to rely on their adult children for financial security, even though retirees are likely to have fewer children in future. Can we say that either system is more sustainable?
The weakest argument against the fiscal sustainability of Western welfare is probably that it led to the current economic crisis. It did not. The current economic crisis gripping Europe may be due to many things, such as negligent regulation of banking practices or even inherent flaws in modern capitalism, but it was not due to the welfare state. The misperception may have arisen from the sweeping cuts to welfare spending that countries have made. But in this case, the site of treatment does not indicate the source of ailment.
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Read the rest of the article HERE.
