Montag, Dezember 14, 2009

Population Growth, 4-2-1 and Pensions...

There are those now who claim that we must surpress population growth in order to avoid the ecological cataclysm.

That idea is, shall we say, difficult to implement at best and would require drastic police powers (and you can imagine that thrill that policemen (and women) world-wide would have when they are called up to go baby-hunting...) to actively slow population growth.

Let us, however, propose that the idea would actually become popular and work.

Those proposing it have not things through.


Because of the way that demographics and retirement work.

Simply put, if the trend became 1 child per family, this means that the way pensions and retirement plans work no longer functions. First and foremost, virtually all pension schemes, unless they are capital-based, use transfer payments. Workers pay for the retirees, and the promise for the current working cohort is that their pensions will be paid for by the next generation, just as they have paid the pensions of the previous generation.

Reducing population drastically creates .. a few problems. This is best illustrated by that number combination, 4-2-1.

Four grandparents, two parents, one child. That is the ratio after 60 years of any rigorously enforced 1-child policy. That means that as long as the grandparents are alive and the parents have reached retirement age, then the single child of those 6 people has to support all six. Given the increasing longevity of plain ordinary folks, this means that that one person will be paying for these pensioners for at least 10 years, if not significantly longer. The problem doesn't go away, Unless, of course, you increase the number of workers in a given country, either by immigration - difficult at best - or by ... allowing people to have more children.

That either means that the child will either have virtually no income or, alternatively, pensions will be extremely low.

The alternative, right now, is that retirement systems - call them social security, state pensions, whatever - must switch from transfer systems (as are virtually all of them, currently) to capital-based systems.

Given the fact that such pay-as-you-go systems are invariably heading into financial problems as population growth declines (and many are effectively broke, kept solvent by appropriation of funds earmarked for other purposes and general tax incomes), this is in and of itself a good idea.

But under a strict plan to reduce population, it becomes an absolute necessity.

So, add to the horrendous (and absurd) costs being bandied about in Copenhagen at Copi15 the costs for a complete redo of the pension schemes world-wide to avoid either taxing work to the point of absurdity (to pay for the seniors) or condemning seniors to a life of poverty because they're the ones holding the short end of the stick.

Of course, in a democracy, that's impossible: seniors will become one of the most powerful political groups, as they have not only the political power - their theoretical voting block is growing and will continue to do so - but also the time (being retired, after all).

Hence the sort of police state powers that must necessarily exist for the one-child policy to be achieved can also be used to suppress the seniors. Perhaps simply removing the right to vote when you reach 65?

In any case, it's a bad idea that can only make things worse...

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