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“New forms of global political
economy and ageing societies.”
Paper for European Sociological Association
Conference, Murcia, Spain Sept 23-26 2003
AGEING IN EUROPE: Challenges of
Globalisation for Ageing Societies.
Introduction: Political economy
of global society.
• Societal reproduction has economic and
demographic aspects.
• Demographic reproduction of the next generation
is shaped by social institutions and populations
may expand or decline.
• Economies also require a processes of succession
and vary in their ability to sustain themselves and
yield economic benefits to their members.
• There are boom and bust generations.
The social solidarity of
generations.
• There are vertical social processes which cut
across generations and link people together in
family, kinship and community groups.
• There are horizontal social processes which
sustain solidarity between people in different
cohorts and differentiate them from people of
other generations.
• In what circumstances do horizontal solidarities
prevail over vertical ones?
The sociology of generations
• Relationships between generations should also be
looked at through the framework of political
economy. Sociological examination of generations
as social movements has not progressed far from
Mannhiem.
• A cultural sociology of generations examines the
symbolic construction of identity.
• A political economy of generations should to be
able to demonstrate the social consequences of
cohorts developing common material interests.
Generational conflict?
• Specific historical circumstances have created
divergences of interest between different
generations.
• It is argued that the size of the post war generation
and the structure of the welfare state has produced
a situation which has placed a specific generation
in conflict with others.
• Are the “baby-boomers” really in conflict with
succeeding generations over entitlements to a
share of societies productive wealth?
Pension fund capitalism, what it
is, why it is so important
• The specific form of modern global capitalism I
want to address is what Clark has called ‘pension
fund capitalism’. The key analyses of this
phenomenon as Clark (2000) and Blackburn
(2003) see also Minns (2001).
• These changes have not only effected the US and
UK but profoundly changed key relationships in
global capitalism.
UK Pension Funds: Balance Sheet: Total identified assets (IIPT First Release)
900000
800000
700000
600000
500000
400000
300000
200000
100000
UK Pension Funds: Balance Sheet: Total identified assets (IIPT First Release)
01
20
99
19
97
19
95
19
93
19
91
19
89
19
87
19
85
19
83
19
81
19
79
19
77
19
75
19
73
19
71
19
69
19
67
19
65
19
19
63
0
Pension fund capitalism
• Who benefits from Pension Fund capitalism, who
carries the risks, who’s work is sustaining of
which members of society? How are these
arrangements are seen as right and proper? What
is the potential for political stability and change
embedded in these new relationships?
• In particular we can ask how these new
relationships of pension fund capitalism relate to
issues of the relationships between generations
and the ability of global society to reproduce itself
demographically and economically.
Political economy of pension funds
• The new global capital markets need funded
pensions to supply a continuing stream of cash to
invest.
• Pension fund capitalism is a political economy. It
requires politics as well as market relationships to
succeed.
• It requires politics to provide the social stability,
co-ordination of markets and regulation and
policing of the system. Hence for many the
globalisation of finance is tightly associated with
US political hegemony.
Conflict between different roles and interest
groups in the ownership and management of
pension funds.
• savers,
• trustees,
• fund managers,
• financial advice and management industry,
• managers of enterprises invested in,
• workers in enterprises invested in,
• current pensioners.
A new generation entelechy?
• Pension fund capitalism potentially links
class and age group.
• Changing roles through the life course and
historical changing opportunities for
generations interact.
• Real conflicts and insecurities emerge and
generations have the potential as selfconscious actors.
Savers v. Consumers
• Conflicts of interest exist between savers and
consumers. e.g. over interest rates. Example:
Privatisation of mutual funds
• The balance of these interests change over a life
cycle - middle aged savers and elders using
savings.
• Opportunities have varied through generation
specific historical experiences - economic cycles,
increases in earning power or loss of savings
through inflation or stock market failure.
Generational cycles of investment and
disinvestment.
• There is a contradiction between savings as a
source of investment and savings as deferred
consumption.
• Stock markets values, and families go through
cycles. Sometimes stockmarkets boom sometimes
they slump, sometimes families need to cash in
their savings sometimes they can save.
• The demographics of the baby boomers and the
changing dependency ratio will impact on capital
markets as they will on national PAYG schemes.
People as both savers and
consumers
• An increase in the fraction of middleaged people (aged 40-64) tends to
boost real asset prices. A corollary is
that a decline in this cohort in coming
decades will tend to weaken them.
(Philip Davis and Li1 2003)
Workers and savers
• Conflict between workers and savers (owners of
capital). Example: over local investment and
return on capital.
• Peoples balance of interest changes before and
after working life.
• Post second world war welfare state was a
generation specific experience. Baby boom
enjoyed the benefit of the welfare state compared
to those before (and after?)
International divisions of labour
• Global markets in finance internationalise the
problem of conflict between savers and workers.
• The relationship of demographically ageing
affluent populations through the financial markets
and pension funds to younger post colonial
societies, reinforces established global divisions.
• New developing economies with large expanding
young populations may be a source of crisis for
Western pensioners if the balance of returns
between capital and labour alters.
Savers and citizens
• Conflicts exist over regulation of the economy. A
political balance is struck between security and
risk, regulation and enterprise. Theories of risk
aversion in later life are disputed.
• Does the redistributive role of the state promote
welfare or equity redistribution or inhibit
enterprise.
• Changing institutional arrangements for pensions
give different generation different interests. e.g.
differences of those on state pension and those on
occupational pensions in UK.
Ideologies
• The institutions of Anglo-American pension fund
capitalism are founded on a belief in economic
individualism.
• However, the collective rationality of economic
individualism when applied to pensions is
problematic. Individuals seeking their own
interests has unintended social consequences.
• There are a series of contradictions through which
pension fund capitalism undermines itself.
Social solidarity issues.
• There is a contradiction between social cohesion
and ‘efficient’ financial markets.
• Markets both need and undermine social
solidarity.
• The removal of the welfare function delegitimises
the state, the pension fund capitalism requires
efficient states and legal and regulatory regimes in
order to function.
Bases for social solidarity
What are the bases ideological bases for the
intergenerational contract and which legitimate
access to resources in old age.
• Individual self interest – private property and free
markets.
• Nationalism – the ‘imagined community’ of the
welfare state.
• Family solidarity – moral obligations of kinship
Markets promote insecurity
• Ideologies based on private property and markets
are not well equipped to sustain multi-generational
stable relationships. Eliminating the volatility of
markets which make them unsuitable for such
intergenerational solidarity would eliminate the
very rationale for the ‘efficient’ allocation of
capital through the price incentives produced by
the mismatch between supply and demand.
Nationalist ideologies are failing
• Nationalist ideologies are increasingly
unable to provide the necessary continuity
faced with the weakness of welfare states in
the face of globalised capital. Further
international migration and ethnic cultural
diversity also act to undermine the
solidarity
of
states
as
‘imagined
communities’.
Family solidarity is important but limited
• Familial models remain extremely powerful
ideologically but very weak economically.
Are there any other alternatives for multigenerational global exchange institutions?
What are the prospects and problems for a
universal pension fund, either as payg or as
a investment fund?
• Only global institutions can secure regular,
legitimised
international
transfers.
What
ideologies can make such institutions effective?
• Historical experience suggests that power and
wealth tends to become concentrated by global
markets.
• Collective responsibility for the risks that threaten
the world is essential.
• Collective responsibility towards all those who
bear those risks is needed. However, world family,
global citizenship or universal mutual insurance
are a distant prospect.
Alternatives
• Some see the growth of occupational pension
funds as a form of workers control and of pensions
as a ‘new socialism’. Robin Blackburn argues that
publicly controlled pensions funds provide a route
to ‘socialise’ capital, - make capitalism responsive
the real needs of the people. He advocates
something like an ethically responsible national
pension fund. My arguments are that such a fund
would have to be an international institution and
requires supra national loyalties to sustain it.
Conclusion
• Our common need for environmental stability
means that an older population necessary. A secure
old age including income maintenance and health
and social care can only be achieved within a
framework of social solidarity. Therefore unless
social change results in a sense of mutual
responsibility across generations and which covers
all parts of the globe, the twin goals of
environmental stability and a secure old age will
be unachievable.
• Copies of the full paper and the slide
presentation can be found at:
• http://www.ex.ac.uk/~JVincent/MurciaConf
erence/