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populations are an international phenomenon these agendas
tend to be national in orientation, advisers making recommen-
dations about what national governments should do in financial
78 global crises and old age
terms about the supposed consequences of population change.
Dominant in the economic literature on old age has been the
so-called intergenerational equity debate. This involves issues
about citizenship and community on the one hand, and pensions,
health and social welfare of older people on the other. These issues
have profound but poorly understood consequences for global
society and will be discussed in Chapter 4. However, the import
of this chapter is that globalisation as a social trend, while
generating greater economic, social and environmental integra-
tion of all the people in the world has specific and in some cases
adverse effects on ways people can live their old age.
running head recto
79
4
OLD AGE, EQUITY AND
INTERGENERATIONAL
CONFLICT?
Working-Class Heroes: Peterlee was a New Town in Co. Durham, built
to provide better housing for former miners. When I worked there in the
1970s I organised a voluntary visiting scheme for older people. I visited Tom
regularly in his one-bedroomed old people s bungalow. He always sat in
the same chair, wheezing with miner s lung a big man but one who
didn t move around much these days. He told many good stories. I asked
him one day if he had known Peter Lee, the miners leader after whom the
town was named. I didn t get the reply I expected. Yes , he had met the
bugger . He was the magistrate that turned down Tom s request for
compassionate leave when he came home from the army during the First
World War to find his mother unwell.
THE DEMOGRAPHIC CRISIS AND NATIONAL PENSION
SCHEMES
How best to secure a decent old age and well-funded retirement
in the modern world? Does demographic change make this
impossible for everyone? What role should the state or the private
market play to ensure a good old age? What are the contending
80 old age and intergenerational conflict
interests in the welfare provision for older people and what part
do old people play? Can we expect generations to be in conflict?
This chapter seeks to advance our understanding of old age by
placing its dilemmas in the context of international pension fund
capitalism. Population ageing has macro-economic implications
for society as a whole alongside implications for individuals. It
affects both public and private sector activities and goes beyond
the formal economy to informal and domestic economic activity,
and is fundamental to the way in which societies run and sustain
themselves across generations.
Throughout the 1990s there has been considerable debate
about the so-called issue of generational equity . This debate
appears at first sight to be about how governments will be able
to sustain pension schemes in the face of ageing populations.
It is suggested that individual savings rather than state-run
pension schemes are the only way to survive the burden of age-
ing populations. Further it is suggested that it is unfair to future
generations to expect them to pay for the pensions of the large
and affluent baby-boom generation. However, these arguments
turn out not to be demographic or even strictly economic but
rather ideological. They have embedded in them fundamental
debates about the nature of society, what holds society together
and what constitutes the values and lifestyle of the good society.
The outcome of current debates and political conflicts over
securing well-funded retirement turns out to be unexpectedly
critical for the future of global capitalism.
Pensions can be provided by many types of institution for
many types of people; states for their citizens, corporations
for their employees, commercial enterprises for their customers.
These institutions, be they private or public, voluntary or
compulsory, for profit or not for profit, may choose either Pay
As You Go (PAYG) or funded schemes. The major actors who
identify the problem of population ageing for the provision
of financial security in old age (for example the World Bank)
advocate some movement towards pensions schemes based on
privately owned and managed investment funds. The crisis is
old age and intergenerational conflict 81
presented as a particularly urgent problem for those countries
with state-sponsored PAYG pensions schemes. Thus the first
step in an examination of ways to secure financial security in old
age is to contrast the social and economic effects of different
approaches to providing pensions. Countries, or other institutions
such as firms, which establish pension schemes have a number
of choices. Each has benefits and drawbacks. If a PAYG system
is established, each generation of citizens or employees has its
pensions paid by the subsequent generation s contributions. The
first generation thus gets its pension free without having to
contribute. Similarly if the system is suddenly stopped, the
last generation paying loses its contributions but gets nothing
back in the form of a pension. However, such PAYG systems
are quickly established, and as prosperity grows it is possible
for the older generation to benefit from the increasing wealth
of the economy as a whole. For similar reasons they deal reason-
ably well with inflation, since both contributions and pensions
can be changed in line with the changing value of money. If there
is continuity and equal size of the generations then there is
no problem of equity with PAYG schemes. However, if one
generation is larger than the one before and/or the one after there
are potential problems. A large working generation will find it
relatively easy to pay good pensions for a smaller preceding one,
but individuals within it will not unreasonably expect a similar
standard of pension. If the subsequent generation is smaller than
the retiring one, then they will, as individuals, have to pay a
higher proportion of their income as contributions to sustain the
pensions of the larger retired generation.
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