Chances are higher that France is the future of America than the converse. Hence, even an American should not disregard this post. The featured image shows a big pile of uncollected garbage on boulevard Saint-Michel, in Paris, on Thursday. Many garbage collectors, already assured of a generous state-paid pension at 62, are on strike to protest the increase of the retirement age to 64. Unknown to them is that they may have to retire even later if the bankrupt state pension system is not mended by even deeper reforms.
The author of the attempted reform is the centrist president Emmanuel Macron. The political center in France is about where Joe Biden stands on the standard political spectrum in America. The center moves where the most politically powerful extreme pulls. I will grant that Macron, a former banker, does not match either Biden’s or Trump’s economic ignorance. (As the French Civil Code maxim goes, “À l’impossible nul n’est tenu,” from the Latin Impossibilium nulla obligatio est, which translates into “the impossible is no legal obligation.”) Macron knows that assets below liabilities necessarily implies that the remainder, the owners’ net value (the future retirees’ pension value, in this case), is negative.
Two-thirds of French voters are opposed to the reform, that is, they want more of their pensions to be paid by the other third; or they don’t have a clue. Macron realizes this but argues, quite sensibly, that the majority would not want any of the alternatives either, such as higher current or future taxes, lower economic growth, or a more dramatic crash of the pension system along perhaps with general prosperity (see “Macron Government Bypasses France’s National Assembly to Pass Pension Overhaul,” Wall Street Journal, March 16, 2023—especially the accompanying video for Macron’s words).
The problem of Social Security in America is only less massive than in the French system. In both countries, the inability of “democratic” choices to deal with the problem is the same.
Such is the failure of “democracy” as we know it. Instead of a procedure for changing the rulers without violence or civil war and thus hopefully constraining their self-interest and folly, democracy is viewed as a system in which the majority can “legitimately” decide anything it wants and impose its desires and greed on the minority. (See my forthcoming Econlib review of Friedrich Hayek’s The Political Order of a Free People.) This sort of political philosophy ignores the discoveries of the Public Choice school of economics which has studied phenomena such as the incoherence of unconstrained majoritarian choices, the rational ignorance of the individual voter, and the triumph of organized interests which manipulate puppet politicians and voters. A mob is seldom, if ever, libertarian.
Boulevard Saint-Michel in Paris, March 16, 2023
Photo credit: Charlotte Lemieux
READER COMMENTS
Richard W Fulmer
Mar 18 2023 at 11:47am
Societies fail when predators and parasites outnumber producers.
Grand Rapids Mike
Mar 18 2023 at 7:34pm
A few comments. 1. What is the purpose of trashing of Donald Trump on Social Security (SS)? Right now it is Biden who is trying to scare everyone into thinking the Republicans want to destroy SS. Assume this is a standard intellectual method for gaining street cred. It is rather interesting that this is done in an article pointing out other elements of society using standard demagogue language to prevent meaningful retirement changes.
2. Under Ronald Reagan presidency, another Republican President, you probably consider illiterate, was able to increase the US retirement age from 65 to 67 in order to be illegible for full benefits.
3. George Bush at the start of his second term tried to initiate additional changes to shore up SS. However Pro Dem organizations like the Press and AARP quickly demonized the issue to put a halt to such plans.
4. Any SS changes to have a chance requires honest press reporting and an honest AARP on the issue, which will never happen.
5. I might point out that I was involved on a rather large project involving a French Company and they were informed they could not have the month of August off. Not sure what the reaction was to this requirement but the project was completed on time. so maybe the French can solve their retirement issues by working in August.
Pierre Lemieux
Mar 18 2023 at 8:45pm
Mike: I fear it is a tragic mistake, both intellectual (for sure) and strategic (I think, and the last few years have alas proven me right), to think in terms of the standard left-right axis, and to believe that the populist right can do any better than the populist left. Look at the left and the right (Marine Le Pen) in France–or for that matter, in America. The difference between these two sides is that each wants to impose its own preferences and values on the other side. As you know, Trump is on the record for advocating the maintenance of the current Social Security regime, which is not surprising; the contrary would have been astonishing. Many of these points are discussed in my article on “The Impossibility of Populism.” There is only one way to be president of all Syldavians.
Grand Rapids Mike
Mar 18 2023 at 11:54pm
Trump didn’t push the issue on changing SS since he likely realized it was a no go to begin with. As one can see Biden is all in on demagoguery on the issue and AARP followed up with their own brand of demagoguery in recent publications.
SS and many state pension programs are on a disastrous path that will cripple the country in not to many years. The weird thing is that most sane economist and maybe a few more sane people know it, like accountants, but just cannot say it.
In many ways it is the ultimate fraud, and in sense the ultimate market failure.
Pierre Lemieux
Mar 19 2023 at 9:58pm
Mike: If public pension plans are “the ultimate fraud,” they are “the ultimate government failure.”
Jose Pablo
Mar 18 2023 at 9:55pm
Many garbage collectors, already assured of a generous state-paid pension at 62, are on strike to protest the increase of the retirement age to 64
Why shouldn’t they be protesting this?
Once you make people believe that the retirement age is whatever the government decide it to be, it makes sense for “The People” to push the government into “decreeing” an ever younger age for “The People” to be paid for not working.
State-paid pension funds are gigantic Ponzi schemes in which the investors (pensioners) elect the manager of the fund (President) base on the “returns” this manager promise. Since the returns are arbitrary and not bounded by any restriction, the managers will always be forced into promising bigger returns until the scheme is broken beyond any imaginable (even if unreasonable) doubt.
The dynamics of the French state-paid pension system are exactly what you should expect from a Ponzi scheme of this kind. So much so, that even some brilliant minds argue that the problem of the pension-Ponzi scheme is that they are running out of new fools (that’s, basically, what you mean when you point out the demographic problem of state-paid pension funds)
Following this “model”, you can rest assure that Macron is doomed as an elected manager of the French Ponzi scheme. And that will serve as a warning to future “wanted-to-be managers” of these state-sponsored gigantic Ponzi schemes.
Pierre Lemieux
Mar 18 2023 at 10:40pm
Jose: The unlimited-democracy dynamic you describe is a central part of Anthony de Jasay’s The State. In such a regime, de Jasay argues, political competition drives politicians to give more and more to their political clients, including those who are short on privileges compared to what the clients of the preceding “tenant of the state” (government) gave to its clients. The state becomes a drudge trying to satisfy more and more dissatisfied clients (“Why do they force us to work after 50?”) and holding less and less discretionary power. So there is no other solution than to abolish electoral competition. By that time, everything has been nationalized and everybody is a state employee. We will have reached the the plantation state.
Mactoul
Mar 18 2023 at 10:39pm
Ironically, in India, the government employees would be unhappy if their retirement age is lowered (currently it is 60).
As for Paris affecting future of America, I have been reading about uncollected garbage in Paris all my life.
Pierre Lemieux
Mar 19 2023 at 11:52am
Mactoul: Could we say that this proves that “India” (apologies for the touch of collectivism in this term) is one of the beacons of the Enlightenment?
Mactoul
Mar 19 2023 at 9:36pm
Not at all. It simply reflects the fact that government jobs are regarded as very cushy sinecures with much better salary (at lower levels), high job security and relaxed working conditions.
Plus, since 2004 India has moved to defined-contribution pension plan replacing the previous defined-benefit pension.
Thomas Lee Hutcheson
Mar 19 2023 at 11:55am
I think this is a vast overinterpretation of a political conjuncture that makes is difficult to smoothly adjust revenue generation to benefits in social safety net programs.
The basic difficulty of course is that these programs are financed with taxes on wages which are rightly difficult to increase. [FDR can be forgiven for not using a VAT, but Regan and Tip O’Neal, less so.]
Nor was it inevitable that a party that sensibly did not want to harm growth with high DWL taxes should pivot to wishing to reduce revenue collections from high-income people, even if the result is increased growth-harming deficits.
Daniel Lemire
Mar 20 2023 at 10:37am
I think this is a vast overinterpretation of a political conjuncture that makes is difficult to smoothly adjust revenue generation to benefits in social safety net programs. The basic difficulty of course is that these programs are financed with taxes on wages which are rightly difficult to increase.
But that’s not the real problem, is it? The real problem is that the state funds the retirees by taxing the workers. How it taxes the workers is of little relevance.
Craig
Mar 19 2023 at 12:06pm
Just some perspective here. My great grandmother was born in 1900 at a time when life expectancy was about 40. People worry now about COVID but back then it was basically everything, tuberculosis was still a big killer. The flu would come along. When Social Security initially enacted the number of contributors for every beneficiary was about 12:1 and that is very sustainable if people pass on without collecting very much.
But you know what? Things have gotten not just a little bit better, but alot better. My great grandmother would pass on in 1980 at the age of 80, doubling the length of life she was expected to live at her birth and which is now actually below the female life expectancy (I think).
My step father in law recently passed at 92, essentially his body outlived his mind.
For sure, Americans now suffer from obesity and the health impacts obesity has on people.
The point is of course is that Americans, and this is also true of the French though their obesity rate is far lower, is that we’re grappling with the consequences of relative prosperity.
Time, time, time, the ultimate resource and yes, these pension systems have issues, but ultimately its because we get to spend more time with our loved ones.
Pierre Lemieux
Mar 19 2023 at 1:54pm
Craig: Yours are good points. I would add two things. First, when Social Security was created in 1935, life expectancy at birth in the U.S. was already 62 years, much above the estimated 47 in 1900. Granted that it continued increasing up to nearly 80 years today. Second, Americans, like other people in the developed word, must have had a lot of trust in unlimited democracy to accept a system–this system–in which the state would “democratically” decide the age at which it would start giving out retirement money (José make this point above); and in which Social Security contributions would be invested in government’s special bonds which are only a public promise, or wish, to pay.
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