by Marcello Malavasi (Venezie Institute)
- [translated by Giampietro Lea] -
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Pensions are a way of ensuring an income when one is too
old to continue working. Retiring from work is like jumping
from a height and to soften the impact with the ground a worker
puts aside some money to be used as a mattress to fall onto.
When there are many people working a lot of money is being
put aside, and if the pensioners are few the mattress will
work even if the money is being thrown at random. A random
throwing is being counter-balanced by the large number of
"money-throwers" and those who jump will always
have the certainty of ending up on a mattress of banknotes.
But when the people throwing money are less than those jumping,
then you start having problems: there is an increasing risk
of ending up on a pile of loose change or even without a mattress
at all. In these conditions if the money is being thrown randomly,
retirement becomes a suicide.
In all developed countries, this is becoming the issue,
but in Italy the situation is dramatic to say the least: less-than-healthy
public finances and an aging society exacerbate the faults
of a pension system which was born already badly structured.
This is not an opinion but a fact recognized by everybody:
one can argue on the details, but from whatever perspective
you look at the italian pension system, be it from the right
or the left, everybody agrees on the moral of the story. Pensions,
as they are currently structured, have become a suicide.
There is no hope then? Fortunately there is. There are models
on how to throw one's money methodically and there exists
also a method for moving from suicide-pensions to mattress-pensions.
The bad news is that the fact recognized by everybody is being
left aside and people argue on the details, while the situation
gets worse and worse and in a few years time there will be
mass jumps into a void. The good news is that, not only have
theories been developed, but in one country it has actually
been put into practice. And with success.
The economist Jose Pinera, as labour minister of Chile, led
his country from suicide to mattress. The fundamental concept
consists in a carefully aimed and efficient throwing of one's
own money. Instead of throwing money on to the pile, hoping
then to jump mainly on money being thrown by others, the Chilean
system requires an orderly throwing from each worker, and
the protection provided by the common pile will be guaranteed
only to those who are less wealthy. The difference is significant.
In the suicide model one is throwing money to cushion other
people's fall, and one hopes that when the time comes to jump
someone else will be doing the same for him. Old people's
pensions are being paid by young people, but when there are
fewer young people than old people the latter will jump without
being there anyone to throw money for them.
In Pinera's model, a young person will be throwing money
for himself, in a way structured on his personal profile and
needs. Specially created agencies undertake a methodical throwing
on his behalf. The most interesting aspect of this model is
that in order to avoid conflicts of interest, the agency and
the worker's pile of money are two separate entities: the
worker can move his pile from one agency to another (or from
one country to another once the model is fully integrated
globally). This implies that the worker's money will always
belong to him, even if he changes job.
The comparison between the two systems is merciless: the
suicide-pension system is a fraud, workers' money is being
stolen with the promise that money will be stolen also from
future generations, but truth has come to the surface and
now one can see clearly what politicians had kept hidden.
Money deducted from one's salary does not in fact constitute
a deposit towards one's pension but is effectively a withdrawal.
And if I withdraw your money, then I am stealing it. The fact
that I am promising you I will return this money later obscures
the issue, but if I never give it back to you then quite clearly
I am a thief.
In Chile, you are really depositing your money on your future
account, and indeed a Chilean worker can at any time check
how much his pension will be. Those are real deposits! And
one's pension really is a mattress and represents a reward
for one's working life.
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