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THE AGEING EUROPE: FISCAL SUSTAINABILITY OF PENSION SYSTEMS AFFECTED BY DEMOGRAPHIC CHANGES
Abstract
In the 1970s negative demographic and economic trends became a burden for fiscal systems of the “Golden age” welfare states. The neoliberal theory responded by cutting social rights, diminishing the scope of services provided by the state and strengthening the market. Values of uniformity and solidarity were replaced with efficiency and profit. Consequently, the sustainability of “pay-as-you-go” pension systems came into question. The measures towards capitalization and privatization differed. This arises both from diverse traditions of welfare state models as well as from different social policies` acceptance level as the basis of public authority legitimacy. Following the fall of the Socialist bloc, triumph of democracy was confused with triumph of neoliberal capitalism as reflected in the reforms of post-socialist countries while the World bank, inter alia, became a promoter towards capitalization and privatization of transition-states’ pension systems. Republic of Croatia eventually accepted multi-pillar system as the combination of public (pay-as-you-go – first pillar) and private (mandatory – second pillar, and optional – third pillar) system. However, the changes made since 1970s did not guarantee pension system sustainability. On the contrary, the importance of this question grows with demographic trends of the western democracies becoming more negative. These trends are caused by population ageing (as cumulation of low fertility rates and increase in life expectancy), migrations (both external and internal) and through the changes in family role and structure. From the perspective of expected retirement of the numerous “baby-boomer” generation, the adequacy of pension systems becomes the prime issue for contemporary welfare states. Fiscal stress caused by that development could be answered in several ways: by cutting social spending (including pensions), increasing contributions and/or taxes, or running a higher public debt. The selected fiscal policies will determine the nature and character of the contemporary welfare state concept.
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References15
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