Friday, June 17, 2011

How we can defend pensions

There is a common thread between the upcoming strikes in defence of public sector pensions in Britain and the slow-motion car crash that is Greek political economy. In both countries, the state is saying it can’t pay, won’t pay.

In Britain, pensionable age is rising to 66 and even higher thereafter. Against a background of people living longer and tax revenues in decline, we have to work longer, perhaps until we drop. Public sector pension contributions are going to rise steeply, with retirement age being pushed back for most, treasury secretary Danny Alexander has announced.

In Greece, as state bankruptcy looms, pensions have already been slashed along with public sector salaries and just about anything else the “socialist” Pasok government can get its hands on. As a result, the government has lost its legitimacy and authority. Will the Greek generals step in as they have done before?

The state in both countries is the national voice of a global capitalist system in profound crisis. In Britain, the budget deficit produced by the banking crash and recession has spurred on the drive to cut spending on pensions, education, welfare and public sector jobs.

Deepening the problem is the fact that during the globalisation period, tax take from the corporations has declined as a share of national income (GDP). In 1985, tax on corporate incomes in the UK was about 4.75% of GDP; by the end of 2005 it had fallen to under 3.5%. The figure has fallen throughout the European Union since 2000.

The burden of funding state spending has therefore increasingly fallen on wage earners and consumers. As real wages have fallen in Britain, with increasing numbers working part-time, and people have reduced their spending, so receipts have come under further pressure.

The secret talks between Britain’s trade union leaders and the Coalition government over pension “reform” are meaningless in this situation. Either the union bureaucrats are going to fight or make a rotten deal with one of the weakest governments for a long time.

But what should be the aim of the resistance, which has driven teachers, lecturers and civil servants to a one-day strike on June 30? The state can’t compromise because there is no room for a deal. In the market capitalist state that Britain has become, the public sector is unsustainable.

It would take the creation of an entirely different set of social, economic and political conditions to reverse the attacks on pensions, services and jobs. Relying on corporations to pay more tax is unrealistic under globalisation and asking workers and consumers to share more of the burden – as the government is doing – is reactionary.

However, if the economy were socialised, owned and run not in the interests of shareholders and lenders but those determined by society as a whole, then a different basis for public spending could be established. Instead of taxation as a source of state revenue, we could use the surplus created by economic activity for social purposes.

Under capitalism, this surplus is used to fund massive bonuses and executive salaries, pay off lenders and keep dividends flowing. Tax avoidance is, of course, de rigueur. In a not-for-profit economy, the “dividend” would end up in the hands of a democratic state dedicated to providing for social need.

We should not accept, as some trade union leaders have already done, that they “understand” the pensions’ deficit and that action is required to deal with it. The fight is for a more developed society that enables people to retire young enough to enjoy their lives and fulfil personal development. As capitalism can’t and won’t do that, the battle for the alternative is on – both in Greece and Britain.

Paul Feldman

Communications editor

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