Retirement and entitlement

Last tuesday I participated to a demonstration against the projected reform of the French retirement system. It was nearly mandatory for me to be seen there, on strike (but still paid, that is one of the advantages of being a politician) and holding a party banner. Yet, all moderates present felt the whole thing was an act, a mere baroud d'honneur before an unavoidable defeat. Even the very peak energy unaware Socialist Party recognizes, privately, that the current French retirement system cannot stand unchanged and anybody even vaguely peak oil aware will agree that retirement itself is going to become a thing of the past. Yet, here we were, clamoring in the street in defense of a system we knew is unsustainable. The truth was simply unspeakable even for those few who could think it. Any left-winger audacious, or stupid, enough to question this “to the last ditch” attitude, would quickly be ostracized as an ally of the right and lose whatever position he had acquired inside his organization. As absurd as it sounds, it is the reality anybody willing to bring out a constructive response to our predicament must face. The main obstacle is not some elite plot but a far more diffuse, and formidable, obstacle : this feeling of entitlement so pervasive in developed societies.

The French retirement system is a complex hodgepodge of individual retirement plans or institutions, so complex in fact that a same individual may have to deal with several of them as he reaches retirement age – this will (or rather would have been) probably be my case as I worked a few month in the private sector before becoming a civil servant. All, or nearly all, work the same way, however. Every month a significant part of your wages go to a retirement fund (in my case the CNRACL) which uses said money to pay the pensions of the retirees affiliated to it.

This system works fine as long as working people are significantly more numerous than the retirees they support, which is unfortunately less and less the case. As birth rate decreased during the seventies and high unemployment became a permanent feature of the economy (8% is an absolute minimum here), a growing number of retirees has to be supported by a stagnating or even decreasing number of workers. Moreover, those retirees began their careers during the years of rapid growth, when there still were still a lot of highly paid jobs up for the taking, so the standard of life of most of them is actually superior to the one of most of the workers supporting them.

This would not be an unsolvable problem, should the resources available to society continue to grow. We know, however, it won't be the case. Our civilization is reaching the limits pointed out by the Meadows Report thirty years ago where continued real growth is made more and more difficult due to the depletion of key resources. Add in the limits of social complexity as a problem-solving strategy pointed out by Tainter in his seminal work The Collapse of Complex Societies and it becomes obvious that there only two possible fates for the French retirement system, both equally unpleasant.

First we can choose to go the deflation way. As the economy contracts in real terms and less and less resource are available to society, unemployment will skyrocket and an increasing number of people will turn to the domestic or underground economy for survival. As a consequence, the amount of money retirement management agencies will be able to collect will decrease and it will be only a matter of time before one goes bankrupt. The most sensible solution would be to let it crash and burn, but the political cost would be staggering. What will happen instead is that the state will step in, assume the debts and impose lower benefits for higher payments. This is basically what happens today, except that the government does not seem too eager to assume any debt but its own (and even that...)

Since the available net energy is bound to decline to near pre-industrial levels, there are no reason for this process not to repeat itself again and again until the whole French retirement system is down to a purely symbolic level. Of course, by this point, something really nasty would surely have already happened, making the whole issue quite irrelevant anyway.

We could also choose the inflation way, create a lot of money to fuel a fake growth and pay our debt with it. Of course inflation will quickly rise its ugly head – not necessarily Zimbabwe level inflation, but high enough to make any rise in nominal pensions illusory. All we'll have to do then is let pensions – and wages – stagnate and inflation will quickly make retirement history. That is what happened in Russia after the collapse of the Soviet Union, when pensions kept their nominal value while the ruble plummeted.

Were I to say that in the speech I am commissioned to write for the forthcoming departmental rally of the left, I would probably have to find myself another job, and certainly not because I would have uncovered some sinister elite plot to deprive workers of their birthright. The problem is that pensions have been so thoroughly cut from work that most people – including politicians – have come to consider it not as the result of one's labor but as an inalienable right.

At the beginning, pensions were supposed to be socialized wages and a number of unions and political groups still cling to this idea and repeat it like a mantra. They may have been perceived as such during the early fifties, but now they are just subsidies raining down from distant bureaucracies. The result has been a contradictory feeling of helplessness and entitlement. Unless what might have happened within the local chapter of an old style fraternal order, the individual worker has no say in the pension policy. It is decided either directly by the government or by the unholy alliance of workers' and corporations' unions which manages most French retirement organisms. All citizens can do is accept or protest.

Even if the ideology of progress had not been so pervasive in our society, this disempowerment would have been sure to generate a deep sense of entitlement. Retirement is no longer something you work for but something you wait for and, as always, when your expectations are not met, the result is frustration and anger.

And it does not help that Frenchmen – like Americans – live in what would have seemed unimaginable luxury to a medieval baron.

Of course, it could be possible to imagine sustainable retirement solutions without reverting to pure family solidarity – which supposes you do have a family and it has the means to support you – or charity – which basically puts your survival in the hands of whatever church happens to rule the area. The Islamic zaqat system might be a way, provided it is organized at a community level and not taken over by the state or some large private organization, as it is too often the case in the Islamic world. The fraternal orders of the English and American nineteenth century might be another. Neither fits very well within the framework of today's French – or American for that matter – society and both would be stiffly resisted by Unions and political parties alike, as would be the suggestion that there are ideas to be found among the Amish, the Hutterites or the other groups born from the radical Reformation.

The necessary shift from bureaucracy and entitlement toward community empowerment, local resilience and personal responsibility will have to grow locally, through our own efforts, and that may mean accepting the hardships which come with it. That is exactly what most people – and the political elite represents them well in that matter – don't want to hear. That is exactly why they will cling to unsustainable structures until they collapse... while we'll grow alternatives in the cracks