PRINCETON – Throughout the industrialized world, governments are rushing to hand out money to the elderly. Germany’s government has not only reversed an increase in the retirement age intended to make pensions more affordable; it has recently announced a 5% increase in benefits, the largest such rise since 1993 (when, unlike today, Germany was actually experiencing inflation). Poland’s Law and Justice government, in one of its first moves after taking power last year, decreased the pension age and increased payments.
At a time when public budgets are strained, this trend may seem counter-intuitive. And, in fact, the United Kingdom’s government has moved in the opposite direction, cutting disability benefits (though a cabinet minister resigned in protest). But the overarching trend toward increased benefits for the elderly has a simple explanation: politics.
As populations in Europe and Japan age, the demographic pyramid is rapidly inverting – and a war of generations, rather than of classes, is emerging. The war is fought primarily at the ballot box – old people win elections, while young people stay home – and the spoils lie in the national budget, in the balance among education, pension, health-care, and tax regimes. With this clash, the intergenerational pact that long underpinned social and political stability has been broken.
The conservative philosopher Edmund Burke famously saw society as a contract not just among “those who are living,” but also with “those who are dead” and “those who are to be born.” Burke was suspicious of popular politics that would favor the current generation over future cohorts. The father of welfare economics, Arthur Pigou, thought that the state would somehow protect the social contract’s absent partners, but that view was hopelessly idealistic. What motive would the government have to be a trustee for unknown people at the expense of real and present voters?