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"What has posterity ever done for me?" - By Kitty Miv, Editor

Kitty Miv, Editor
01 December, 2011

"What has posterity ever done for me?" asked W C Fields. It has paid your pension, might be the answer nowadays, since almost all state pension schemes are 'pay-as-you-go', meaning that the government has spent the money you paid towards your pension on building dysfunctional schools and will now have to steal from future generations to pay you your retirement pittance.

Politicians aren't big on the future, normally speaking, but they do seem to have grasped the idea that you are actually very healthy and are going to live for an uncomfortably long time. Even in France, where people only have to work 35 hours a week, and can retire at 55, the government is trying (against stiff resistance) to increase the retirement age to - wait for it! - 62 by 2017.

Obviously British trade unionists, who were striking yesterday against an increase in their retirement age to 67, should take evening classes in French and cross the Channel as soon as possible. By boat, of course; no one can afford to fly out of England any more because of Air Passenger Duty, going up again despite howls of protest.

Even Hong Kong, one of the richest places on the planet, and with a partially-funded pension scheme, is getting worried about its booming elderly population.

I don't want to believe that our sainted rulers have deliberately adopted this kind of compulsory Ponzi scheme to screw more taxes out of us; no, surely they are the intellectual inheritors of Sidney and Beatrice Webb and they genuinely want to provide us with a comfortable retirement after we have slaved for them for most of our lives.

The trouble is, it isn't 'most' of our lives any more. After 35 years of work, at 60, I can look forward to another 35 years of idleness at someone else's expense. Take a bow, Posterity!

If 'they' really wanted the best for us oldsters, they would have privatized pension provision long ago. In fact, they never would have nationalized it in the first place, let alone on a PAYG basis, which any idiot can see is suicidally improvident.

It's not too late. It's never too late with pensions, because people do still die, and there is always another cohort of young suckers entering the work-place. So how would it work?

Ask this question: how much would an insurance company pay the government for the right to take 14% of a 20-year-old's lifetime income, in return for paying them an old age pension in 45 years' time? It's a complicated piece of arithmetic, but, believe me, the answer would frighten you, because it's about three times as much as the present cost of that future pension: that's the measure of how inefficient government is as an investor.

In other words, the government could make an enormous profit by selling the right to tax you to a commercial enterprise, which would also make an attractive profit out of the deal. For you, it makes no difference, except that part of the government's profit could be parlayed into tax reductions.

So why doesn't it happen?

Oh, because hardly anyone understands the arithmetic, even if they understand the idea; because it's not fashionable to allow private companies to make money out of social welfare (why ever not?); because it would put millions of public employees out of work across Europe (so that they could do something useful instead); because no-one is brave enough. Because, because.

You read it here first. But you'll never read it anywhere else. Because!

Ciao, Kitty


About the Author

Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net


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