A global pension plan

New Left Review

Volumn , Issue 47, 2007, Pages 71-92

  Blackburn, Robin ^a  

^a NONE

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EID: 36349007558     PISSN: 00286060     EISSN: None     Source Type: Journal    
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References (50)

1. UN Department of Economic and Social Affairs, World Economic and Social Survey 2007. Development in an Ageing World, New York June 2007, p. 89. (Hereafter Development in an Ageing World.) This paper develops a proposal first presented to a panel organized by Global Action on Aging at the UN in New York on 14 February 2007, for the participants in the concurrent meeting of the UN Social and Economic Council. I would like to thank Jay Ginn, Diane Elson, Susanne Paul, Manuel Riesco and Matthieu Leimgruber for comments and suggestions.
2. These figures are taken from World Population Prospects: the 2006 Revision, available on the website of the UN Population Division.
3. Development in an Ageing World, p. 89.
4. UNDP, Development Report 2006. Such outrageous disparities lead Thomas Pogge to make a powerful case for sweeping and radical redistribution in World Poverty and Human Rights, Cambridge 2002. The proposals I outline here would be a modest contribution to the measures needed to accomplish this, complementary to those that he suggests.
5. The yawning gaps in pension provision are well documented in Larry Willmore, 'Universal Pensions in Developing Countries', World Development, vol. 35, no. 1 (2007), pp. 24-51.
6. For India see Rajeev Ahuja, 'Old-Age Income Security for the Poor', Economic and Political Weekly, 13 September 2003.
7. The disproportionate domestic burden on women is a theme of the successive reports of UNIFEM. See, for example, UNIFEM, The Progress of the World's Women, New York 2000.
8. Development in an Ageing World, p. 95.
9. A strain described in Jeremy Seabrook, A World Growing Old, London 2003.
10. Development in an Ageing World, pp. 93-5. These co-residence patterns mean there are fewer 'elderly households' in the developing world, and help to explain why the data on old-age poverty in the developing world are less clear-cut than for the developed world. The large, multi-generational family often gives tangible reality to the phrase 'generational solidarity'. But rising numbers of older people in poor households will aggravate their problems, while availability of the pension would ease them.
11. 'Greying Japan', The Economist, 6 January 2006.
12. These trends are well discussed in Goran Therborn, Between Sex and Power, London 2004, pp. 229-59.
13. Robin Blackburn, Age Shock: How Finance Is Failing Us, London and New York 2006, pp. 61-74.
14. In this book I draw on recent forecasts made by the UK Pensions Commission, the Economic Policy Committee of the European Commission, the us Congressional Budget Office and by contributors to OECD Economic Studies to identify the size of this shortfall. While overas are set to double in absolute size within a generation, and become between a fifth and a quarter of the total population, their share of income will-under current public and private arrangements-be stuck at around a tenth of GDP. Simply to maintain pensioners' relative incomes at their present level would require an extra 4 per cent of GDP. There is still significant pensioner poverty today, but matters will become much worse by 2030 and 2040 as already enacted reductions in entitlement come into effect. If the UK government succeeds in its plans for a National Pension Savings Scheme, it will reduce the projected shortfall of over 4 per cent of GDP by only 0.7 per cent by 2050 [Age Shock, p. 266).
15. Development in an Ageing World notes some of the weaknesses of private provision but does not register the structural problem of heavy charges, stemming from exorbitant salaries, profit-gouging and marketing costs. In a section of Age Shock entitled 'High Finance and Distressed Debf I also argue that credit derivatives based on subprime mortgages and private equity deals would not be good for pension funds.
16. John Van D. Lewis, 'Domestic Labor Intensity and the Incorporation of Malian Peasant Farmers into Localized Descent Groups', American Ethnologist, vol. 8, no.1 (February 1981), pp. 53-73;
17. and Richard Sennett, Respect, London 2003.
18. The case for non-means-tested pensions is powerfully advanced in Larry Willmore, 'Universal Pensions for Developing Countries', World Development, vol. 35, no. 1 (2007).
19. Timothy Smeeding and Susanna Sandstrom, 'Poverty and Income Maintenance in Old Age', Center for Retirement Research Working Paper 29, 2004.
20. The website of Global Action on Aging contains links to most of the literature produced by international organizations on this subject. Since 2002 there have been few signs of growing attention to the situation of the elderly. The hitherto marginal position of the old in international anti-poverty discourse admits of an exception which really does prove the rule. In 1994 the World Bank issued a famous report entitled Averting the Old Age Crisis: Policies to Protect the Old and Promote Growth. The report advanced a critique of public pension schemes and urged their replacement by new provisions which would force every citizen to enrol with a commercial pension provider. It claimed that this would foster growth by deepening capital markets. I discuss the counter-productive effects of this advice, and its repudiation by a later World Bank Chief Economist, in Banking on Death or Investing in Life: the History and Future of Pensions, London 2002, pp. 225-78, 402-8.
21. For the shaping of international development priorities see Paul Cammack, 'Attacking the Poor", NLR 13, January-February 2002, pp. 125-34.
22. Development in an Ageing World, p. xv.
23. The pension would not only be easier to finance, it would also proceed from an argument that is easier to make-appealing to the widely accepted view that the elderly are deserving of support. No such consensus yet exists concerning support for able-bodied adults. Likewise, while the claims of infants are certainly very strong, offering young mothers financial incentives to have children does not promote their best interests. In note 33 below I do address the predicament of another often-excluded cohort, that of those aged 14-20.
24. In stressing the moral legitimacy of arguments for a Global Pension, I do not mean to imply that narrower arguments will not also be made. In the early 20th century the advocates of public pensions in a range of 'old rich' countries from Denmark to New Zealand sometimes urged that allowing the over-7os to retire from the workforce would boost productivity. Today, chiming in with the development paradigm, the argument is also sometimes heard-not least in Development in an Ageing World: see p. 57-that a pension will allow older farmers to retire, handing over the land to sons or daughters who will work it more productively.
25. Development in an Ageing World, p. xvi. The report's 'experiment' of costing a pension of $1 a day was surely not prompted by my advocacy of the measure at the hearings in February 2007. The explanation is rather that extreme poverty has long been defined as $1 a day. Moreover the report conceives the pension as paid by each state, not as a global programme.
26. Development in an Ageing World, p. 57.
27. For the Tobin Tax see James Tobin, The New Economics, Princeton 1974, p. 88;
28. Jeffrey Frankel, 'How Well Do Foreign Exchange Markets Function: Might a Tobin Tax Help?', NBER Working Paper W5422, Cambridge, MA1996;
29. Heikki Patomäki, "The Tobin Tax: How to Make It Real', Finnish Institute of International Affairs 1999;
30. Joseph Stiglitz, Globalization and its Discontents, New York 2002.
31. The use of a general share levy to establish reserve social funds is associated with the work of Rudolf Meidner, chief economist of the Swedish trade union federation, the LO, and architect of the Swedish welfare state.
32. I give examples of this court-mandated share issuance in Age Shock, pp. 134-5, 142.
33. Assessing the share levy at 2 per cent of profits is simply a convenient way of measuring a company's operations; it might need to be supplemented by other metrics (gross profit, capitalization) to avoid distortions and evasion.
34. See Geoff Dyer and Jamil Anderlini, 'Beijing Could Reap $4obn Share Tax Bonanza', Financial Times, 4 June 2007.
35. James Tobin, FuIi Employment and Growth, Cheltenham 1996, p. 254. Note that by this time share dealings were taking place in many countries, small and large, which did not have stock exchanges in 1974 when he made his original proposal.
36. The GPF might maintain offices in such important financial centres as Zurich, Cyprus, Mauritius, Singapore and so forth, chosen with a view to strengthening compliance.
37. I am assuming that profits rise at 2.5 per cent a year and that returns of 5 per cent a year are ploughed back into the fund for an 'accumulation period' of 27 years. The reserve fund proposed here, based on a 2 per cent profits levy, is of the same size as the us Federal Reserve fund proposed in Age Shock, based on a 10 per cent levy on us corporate profits alone.
38. The scope for tightening up regulation of tax havens is explored by IMF official Vito Tanzi in Policies, Institutions and the Dark Side of Economics, Cheltenham 2000. All tax havens are dependent on exchanges with the OECD countries and could easily be brought into compliance with international reporting standards if the will was there. In order to flourish as a tax haven, an Off-Shore Financial Centre must now have minimum legal and accounting compliance staff; investors themselves shun some would-be 'havens' such as Liberia or Nauru in favour of locales that can inspire confidence, such as Bermuda, the Cayman Islands, the Channel Islands, the British Virgin Islands, Mauritius and Cyprus (all current or former UK dependencies).
39. See 'Places in the Sun', The Economist, 24 February 2007. A greater problem in applying a global currency-transaction tax and profits tax would come from states like Switzerland and Singapore, but this could be overcome if the EU, the US, Japan and China were agreed and if the public authorities in these financial centres were given some role in implementing the scheme.
40. Gordon Clark, Pension Fund Capitalism, Oxford 2000, pp. 21-34;
41. see also Archon Fong, Tessa Hebb and Joel Rogers, eds, Working Capital: the Power of Labor's Pensions, Ithaca, NY and London 2000.
42. The experience of the Mondragón Cooperative Corporation is also relevant. I discuss such questions further in Robin Blackburn, 'Economic Democracy: Meaningful, Desirable, Feasible?', in Daedalus, Summer 2007, pp. 36-45.
43. See Thomas Pogge, World Poverty and Human Rights;
44. and Nancy Fraser, 'Reframing Justice in a Globalized World', NLR 36, November-December 2005, pp. 69-88.
45. If the insecurity of the ageing has been neglected, so has the misery of another vulnerable cohort: the young. In a future essay I hope to explore the possibility of using the network established to administer the Global Pension Fund to oversee distribution of a Youth Grant, which would supply every younger person with $1,500 for educational and training purposes on reaching the age of 15 or 17. The cost would be very similar to that of paying the Global Pension of a dollar a day, and I would therefore suggest that the taxes already proposed could be increased so as to allow an extra $150 billion to be raised annually to be dedicated to young adults in this way. A Youth Grant might go some way to alleviating the damage done to young people's prospects by high drop-out rates from school, unavailability of training and apprenticeship, unemployment, high incarceration rates, and inappropriate or harmful work. As noted in the World Bank's 2007 Development Report, Development and the Next Generation, half of those aged 14 to 20 are neither employed nor in education; yet in Bangladesh, school drop-out rates for girls were greatly reduced when they were paid a modest sum for completing an extra year-the money compensated for lost earnings. In Kenya, provision of free school uniforms has lowered drop-out rates among both boys and girls; it is also said to have reduced young girls' unwanted pregnancies. The Youth Grant could also help to fund 'second chance' programmes for former child soldiers, 'gang mites' and teen prison inmates. It is interesting to note that in 1795, when Thomas Paine elaborated a costed, universal old-age pension proposal, he also argued for young people to receive a lump sum of £15 at 21, both to be paid for by a 10 per cent inheritance tax. See Thomas Paine, 'Agrarian Justice' [1795], in Michael Foot and Isaac Kramnick, eds, The Thomas Paine Reader, Harmondsworth 1987, pp. 471-90. The special claims of youth are also urged by Bruce Ackerman and Anne Alstott;
46. see 'Why Stakeholding' and 'Macro-Freedom' in Bruce Ackerman, Anne Alstott and Philippe Van Parijs, eds, Redesigning Distribution, London 2006, pp. 43-68, 209-16.
47. For youth exclusion data, see World Bank Annual Development Report 2007, Development and the Next Generation, pp. 99-100, 18, 70.
48. The approach here strives to register the reality of wildly divergent economic spaces in order to break it down, rather than simply to revel in diversity.
49. Manuel Castells, The Network Society, Oxford 1997.
50. Branko Milanovic, 'Global Income Inequality: What It Is and Why It Matters', World Bank, Policy Research Working Paper Series 3865, March 2006, pp. 29-30.