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Social Expenditure, Pension Systems, and Neoliberalism

Social Expenditure, Pension Systems, and Neoliberalism

While decreasing the role of the State as such is part and parcel of neoliberal ideology, another aspect does not seem to have received appropriate attention. The welfare state has created high levels of relatively wide-spread wealth. This could profitably be tapped by private business, similar to state property such as railways whose privatisation offers golden business opportunities. The necessity to provide and outright fear of misery during one’s retirement period are powerful incentives, even at relatively high fees and charges. Naturally, private pension schemes are likely to remain a comparatively marginal factor as long as public schemes offer relatively good income levels. Insecurity created by pension “reforms” fuel a huge and profitable market for private business. Re-channelling parts of mandatory contributions into private funds strikes a riskless bonanza. Funds administer money for a fee, pensioners carry all risks of huge losses, e.g., when stock prices fall. Further research on whether and to what extent the profit motive is an engine of “reform” would be interesting.