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GePap
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of the Big Apple
Nov 2001
time: 23:32
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Krugman continues his deluge of info against the lies of the privatization camp:
quote:
The British Evasion
By PAUL KRUGMAN
Published: January 14, 2005
We must end Social Security as we know it, the Bush administration says, to meet the fiscal burden of paying benefits to the baby boomers. But the most likely privatization scheme would actually increase the budget deficit until 2050. By then the youngest surviving baby boomer will be 86 years old.
Even then, would we have a sustainable retirement system? Not bloody likely.
Pardon my Britishism, but Britain's 20-year experience with privatization is a cautionary tale Americans should know about.
The U.S. news media have provided readers and viewers with little information about how privatization has worked in other countries. Now my colleagues have even fewer excuses: there's an illuminating article on the British experience in The American Prospect , www.prospect.org, by Norma Cohen, a senior corporate reporter at The Financial Times who covers pension issues.
Her verdict is summed up in her title: "A Bloody Mess." Strong words, but her conclusions match those expressed more discreetly in a recent report by Britain's Pensions Commission, which warns that at least 75 percent of those with private investment accounts will not have enough savings to provide "adequate pensions."
The details of British privatization differ from the likely Bush administration plan because the starting point was different. But there are basic similarities. Guaranteed benefits were cut; workers were expected to make up for these benefit cuts by earning high returns on their private accounts.
The selling of privatization also bore a striking resemblance to President Bush's crisis-mongering. Britain had a retirement system that was working quite well, but conservative politicians issued grim warnings about the distant future, insisting that privatization was the only answer.
The main difference from the current U.S. situation was that Britain was better prepared for the transition. Britain's system was backed by extensive assets, so the government didn't have to engage in a four-decade borrowing spree to finance the creation of private accounts. And the Thatcher government hadn't already driven the budget deep into deficit before privatization even began.
Even so, it all went wrong. "Britain's experiment with substituting private savings accounts for a portion of state benefits has been a failure," Ms. Cohen writes. "A shorthand explanation for what has gone wrong is that the costs and risks of running private investment accounts outweigh the value of the returns they are likely to earn."
Many Britons were sold badly designed retirement plans on false pretenses. Companies guilty of "mis-selling" were eventually forced to pay about $20 billion in compensation. Fraud aside, the fees paid to financial managers have been a major problem: "Reductions in yield resulting from providers' charges," the Pensions Commission says, "can absorb 20-30 percent of an individual's pension savings."
American privatizers extol the virtues of personal choice, and often accuse skeptics of being elitists who believe that the government makes better choices than individuals. Yet when one brings up Britain's experience, their story suddenly changes: they promise to hold costs down by tightly restricting the investments individuals can make, and by carefully regulating the money managers. So much for trusting the people.
Never mind; their promises aren't credible. Even if the initial legislation tightly regulated investments by private accounts, it would immediately be followed by intense lobbying to loosen the rules. This lobbying would come both from the usual ideologues and from financial companies eager for fees. In fact, the lobbying has already started: the financial services industry has contributed lavishly to next week's inaugural celebrations.
Meanwhile, there is a growing consensus in Britain that privatization must be partly reversed. The Confederation of British Industry - the equivalent of the U.S. Chamber of Commerce - has called for an increase in guaranteed benefits to retirees, even if taxes have to be raised to pay for that increase. And the chief executive of Britain's National Association of Pension Funds speaks with admiration about a foreign system that "delivers efficiencies of scale that most companies would die for."
The foreign country that, in the view of well-informed Britons, does it right is the United States. The system that delivers efficiencies to die for is Social Security. |
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GePap
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of the Big Apple
Nov 2001
time: 23:32
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quote:
Originally posted by DinoDoc
Look at how well Chile did. |
Of Course:
http://www.larouchepub.com/other/20...a_chile_ss.html
just a sneak peek:
quote:
In Chile today there is a wide consensus among experts that the Chilean private pension system will provide pensions on its own only to the upper income minority of the affiliates to the system. Even for them, it seems highly unsatisfactory, mainly because of the high fees charged by private pension administrators. These, in turn, are six companies that have become the most profitable Chilean industry, one that is immune to recessions, with average return on equity of over 50% a year since 1997. |
and
quote:
Meanwhile, a sizable majority of the workforce will not receive minimum pensions out of their savings in the system, and are not entitled either to the complementary public social security "safety net." Recent studies by the State regulator of the private pension administrators, Superintendencia de Administradoras de Fondos de Pensiones (AFP) have concluded that over half of the affiliates to the new system will never be able to save enough in their pension accounts at retirement, to fund even the "minimum pension," which is set presently in the order of 100 US dollars a month. A parallel study by the AFP Association—that is, the private pension administration industry—came to exactly the same conclusions. In the latter case, though, those who will never save enough funds are divided in two groups, one of which comprises fully one-third of affiliates and is simply left out of the calculation, on the grounds that they will never contribute more than ten years into the system. Two different studies by the State administrator of the public pension system, Instituto de Normalización Previsional, concluded that those who would be unable to save enough for the minimum pension, amount to about two-thirds of affiliates. |
Note, of course, that this paper is less than a year old.
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GePap
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of the Big Apple
Nov 2001
time: 23:32
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quote:
Originally posted by Ogie Oglethorpe
What, I seem to have heard those same commments from every person who ever posted a Newsmax, Townhall, or conservative blog site.
Good for the liberal goose good for the conservative gander and all that jazz. |
My bet, you did not even read the paper, which explains your pretty silly comments afterwards.
Oh, and bloggs? Yes, I do object to bloggs, because they are personal opinions News max reports (those writen by Newsmax) are laughable. And I am sure something writen by LaRouche would also be absurd.
This was writen by academics, as part of an academic discussion. That is different.
Its sort of sad to see, beyond your inability to read, that you would denigrate serious pieces with so much flippancy.
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14-01-2005 22:30
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