In a very mundane fashion post-WW2 Western politics can be epitomized as follows: Current generations paying the retirement of older generations, waiting for the next generation to pay theirs and so on. This rolling pay-as-you-go system does however open the door for some pungent questions: What if a generation simply says “no”? or in an even more dire situation What if a generation simply can’t fulfill its “duty”?Beyond the front-page economic and political implications of the on-going economic crisis, there seems to have surfaced a very important side-effect: a brutal normative attack on the generational contract that lies at the core of the aforementioned pay-as-you-go systems. With population ageing established as fact , specific policy pathways established in the golden years of the welfare-state (70s and 80s) seem to be now ushering in an era of pro-elderly biased policies, that some have even dared to name as the start of an age of gerontocracy (Esping-Andersen&Sarasa:2002).

 The point of this article is to try and go beyond mainstream fears: are we really heading towards gerontocracy or is there a brighter sun on the welfare-state’s horizon? Throughout this short piece I will touch upon the economics involved in the debate and on some key political features of the (possible) intergenerational conflict itself. My main argument here is that a paternalistic view on politics based on rigid austerity measures and a misplaced sense of morality (i.e. an “older” generation that “knows better” than a rebellious youth cohort, mesmerized by technology and the unlimited freedom of a globalized world), seems to be the central cause of the fatalistic predictions. As classical depression-economics tools seem to fail, more nuanced and comprehensive approaches are needed.  Obviously, a full-on theoretical assessment of the generational shift is beyond the scope of this article, hence I will limit myself to the following methodology: population ageing taken as a non-normative phenomenon (i.e. I am not delving into the debates concerning transformations of the family)

What if a generation cannot pay? – Is money still showered on pensioners?

Given the lavish amount of scholarly ink that has been devoted to unemployment in a climate of economic constriction, I will not go down this trodden path, but rather look into what is actually happening with old-age benefits.

Obviously, rising levels of unemployment mean lower revenues for the welfare-state and more beneficiaries taking money out of the system (double-whammy effect, see Tepe&Vanhuysse:2010). If we factor in population ageing and the path-dependent pro-elderly bias the logical outcome would be that even in a context of economic scarcity elderly power would directly translate into lavish benefits, due to politicians making short-term calculations needed to maintain power. Quite to the contrary, empirical evidence (from an OECD samples at least) suggests that this translation might not be so direct: individual benefits are not larger despite the fact that pensioner constituencies are growing (Tepe&Vanhuysse:2008). Although one could legitimately argue that not decreasing benefits in the present economic climate is a sufficient indicator of gerontocracy, it seems safer to nuance by stating that path-dependent evolutions are generally tricky to modify (see the groundbreaking Pierson:2004), hence making it more prudent to stick to the label of “pro-eldery-biased welfare-states”.

A further important question to be raised in the context of this more economy-centered discussion is the following- Does pension-size matter? The point here is to raise awareness of the following fact: within the wide plethora of old-age benefits, pensions (that are drawing the most attention to politicians) represent only one side of the story. Recent studies have pointed out that elderly voters have slowly moved their interest to the realm of health benefits, rather than the actual size of pensions (Rose:2008), thus further undermining the fatalistic predictions pointing with certainty towards gerontocracy.Obviously, rather large amounts are still being spent on pensioner-related policies, though again I stress that they do not seem to be indicative of classical gerontocracies.

 Ways forward?

It’s become common knowledge that the intergenerational cleavage is growing deeper and deeper. As hinted above, the pay-as-you-go system tends to rest on a type of contractualist ideology according to which current workers pay the retirement of their predecessors. This post-WW2 normative consensus was loosely built on multiple assumptions: avoiding the trauma of war, tight economic cooperation, comprehensive social safety nets and Keynesian economics.

There are two intersecting axes whose convergence point might be the building block for a profound reformation of the welfare-state: on the one hand the growing interconnectedness and mobility of today’s youth cohorts (voting turnouts are still comparatively low, though they must not be taken as an absolute indicator!), and the raised awareness of population aging on the other hand. As the former gains momentum and the latter becomes mainstream knowledge we might envisage the following scenario: a drastic retrenchment of pension levels, and a renewed welfare-ist contract based on re-directing funds towards youth cohorts (this type of solution is also suggest by Esping-Andersen&Sarasa:2002). The important balance to be struck here will most likely revolve around the need to balance the electoral weight of pensioner constituencies and the more direct pressure of youth cohorts (although a bit forced one can look at the Arab Spring through this lens to give just one example). I would argue that a step-by-step introduction of three-layered model of welfare (the Chilean model springs to mind here as a classical example) might ease the transition and reduce the political costs: by introducing the market and private insurance schemes into the equation incentives will be given to more age-groups, whilst for the still powerfully elderly voters there will continue to be a “cake to split” (to use the metaphor ofTepe&Vanhuysse:2008).

All things considered, the implications of the demographic changes in the last decades seem profound. It is rather clear that in under the umbrella of specific pathways put in motion in the so-called Golden Years, today’s older generations have the upper hand in political competitions. However, it is equally safe to assume that we are not on a collision course with gerontocracy. Albeit difficult to foresee, the consequences of the on-going economic crisis seem more likely to bring about complex political and fiscal reforms, than to simply exaggerate the side-effects of older path-dependent evolutions.

Image Source: The 2%Factor