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The Pension Problem (February 13, 1996)

The author, a regional social court judge, reflects upon the generational contract that was forged in the 1950s and criticizes its political implementation. Forty years later, he says, the privileged treatment of the elderly can no longer continue; a generational war is imminent but politicians do not want to deal with the problem openly.

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Train young people instead of sending the elderly to sunbathe in Mallorca. After forty years the idea of intergenerational solidarity has been turned upside down: The pension system favors the rich and the elderly.

A welfare state that raises more expectations than it can fulfill provokes mass disappointment, bitterness, radical protest – and ultimately delegitimizes the entire political system, according to Munich social historian Hans-Günther Hockerts, speaking on the failure of the welfare state of the Weimar Republic.

And today? In April 1995 politicians were still promising secure pensions until the year 2040. By now, the government and the opposition are accusing each other of stealing and selling pensions. Pension policy is on the verge of declaring bankruptcy. Not all too long ago BfA* president [Herbert] Rische wrote in his agency’s bulletin that the mere discussion of pensions is more dangerous for the system than the catastrophic demographic development itself. And what are they doing in Bonn while the economic and demographic foundations of the pension structure are falling apart? They are preoccupied with moving furniture and interior design! Early retirement, non-insurance-related benefits, disability criteria – some shunting yards here, some cosmetics there. But, please, no fundamental debate! And don’t get any closer to the underlying causes, namely, that the fabulous idea of intergenerational solidarity was thoroughly blighted from the outset by politics and that now we have a system programmed for self-destruction. And it seems completely unlikely that this system will be able to withstand the growing burdens of globalization, the changing age structure, the national debt, and the social costs of environmental destruction.

It all began almost forty years ago. On January 1, 1957, the “dynamic pension” was introduced. Literally overnight, pensions increased from pocket-money benefits amounting to about 25 percent of the average earned income, to a wage-replacement, standard-of-living-ensuring level of almost 70 percent. Contributions for such pensions had never been paid by the lucky pensioners back then; at most they had paid minimal amounts for the mini-pensions that had existed since Bismarck. The pensioners owed their sudden affluence to mathematician and economist Wilfrid Schreiber and his slender but epochal 46-page paper on guaranteeing financial security in industrial society (1955). According to Schreiber, the middle-class nuclear family was no longer in a position to offer security to its members; therefore the collective of a “familial society” had to assume this responsibility; moreover the aim was to replicate familial assistance channels on the level of the social welfare system. Just as every family member receives benefits twice over the course of his or her lifetime, that is, as a child and again as an elderly person, and just as every adult makes contributions in both directions, the social welfare system, Schreiber explained, needed to be set up symmetrically: through two solidarity contracts, one with the older and one with the younger generation. Schreiber argued that if providing for the elderly became a social responsibility, then something comparable had to be done to support the generation of children. Therefore, the new old-age pension system that was to be established had to be mirrored by a youth pension system. Distributing the national product between the three participating generations would then be a purely mathematical exercise and would allow pensioners and children alike to participate in the dynamic increases in production. This transparency, he continued, was by no means to be clouded by mixed financing such as the federal subsidy. According to Schreiber, that would simply lead the state, in the nimbus of benefactor, to make the people believe in its omnipotence. In his view, the whole thing was a creation of public solidarity and had nothing to do with insurance, which triggers totally false associations in the minds of the people.

* Bundesversicherungsanstalt für Angestellte (BfA), German Federal Insurance Agency for Salaried Employees – trans.

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