Sustainability and the pension problem
November 8, 2010
Holland has a pension problem. Yes, the country with nearly the highest pension reserves per capita in the world is worried. Many pension funds have started reducing benefits for current retirees. The latest pension fund to do so is the dentists’ pension fund that discovered a rather large cavity between the discounted current value of assets and future liabilities. Although this crisis is partly self inflicted (because of rather arcane prescriptions about the discount rate of future liabilities through which these appear larger than they are) the crisis is a litmus test about people’s commitment to sustainability. Wasn’t it Brundtland who defined sustainability as taking care of current generations without harming future generations’ possibilities? When current payouts are reducing the pension reserves, we indeed violate the Brundtland definition
So there we have it. Are you opposed to a reduction in your pension but at the same time you say that you care so much about the environment or are you putting the money for the grandkids in a sustainable bank account? If so you are insincere. Your actions are incongruent. And your thinking is unclear. Of course I would not like to see my income being reduced and I understand people protesting. But what the pension crisis shows is that for many people sustainability is just that: a word. No thinking involved.
Although not trivial (as illustrated by the clumsy discount rates used) pensions allow for a pretty good quantification of the trade-off between the needs of the present and the needs of the future. This does not bode well for how to deal with more intractable social and environmental issues. It does not bode well for countries without substantial pension reserves either. France comes to mind. Despite the fact that young and old found each other there in the resistance against pension reform, this solidarity may end abruptly if people started to think a little about the problem rather than to jump to the word of protest.
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