The third way to pensions : navigating a third way in [the] attempt to solve the pensions' crisis

Abstract

One of the most significant phenomena of the 20th century has been the dramatic increase in the proportion of persons aged sixty and over. This means that the world is today experiencing an aging population, whereby the population is moving from high fertility and mortality rates to low fertility and mortality rates. This study sets out to examine the fiscal and social implications of the population aging in the context of present public pensions arrangements, with particular reference to the major industrial countries, including Malta. Chapter 1, confirms and presents statistical evidence provided by Janet H. Clark (1994) and th.P Worlrl Bank (1994), that under the existing public pension arrangements, which rely on PAYG schemes, the aging of the population has started to contribute to serious fiscal stress in most of the major industrial countries, and that these are likely to get much worst over the next few decades in the absence of appropriate reforms. Despite to some critics such as Dean Baker, Mark Weisbrot and Phil Mullan (2000), who retain that this crisis is only an invention of people with personal interests in private schemes, there is the general agreement that the pensions' crisis is real and the public pensions schemes should be reformed. Fortunately, there is still a window of opportunity for most of the industrial countries, as full impact of aging problem is not likely to be felt another 15 years or so. This means that there is still time to reform. In fact much of the countries referred to in Chapter 2, have already taken this path. Yet the reforms being suggested or adopted are very often too much oriented towards solving fiscal perplexities. They hardly measure or consider the impact they are to leave on society. This is where the "third way' (Lawrence, 1988 and Giddens, 1998) comes in. This is a new way in politics that goes beyond left and right and attempts to satisfy social needs more than suggesting fiscal reforms. Whilst proposing pension reforms, the 'third way' would be aware that pensions issues stretch mute broadly than the question of who should pay at what level and by what means. In a world that is less concerned with economic growth and consumerism and more interested in the possibility of having freedom of expression, social autonomy and a better quality of life (Inglehart 1990), governments should not limit themselves to reform the system only economically. This applies also for the local situation, discussed in Chapter 3. From a document analysis of the two major reports published recently about pension reforms in Malta - the Interim and the GWU Report, and two interviews with Dr. L. Gonzi and Mr. M. Cutajar- it resulted in Chapter 4 & 5, that Maltese reformers (especially the GWU) stand far from adopting the 'third way' and like the rest of the world focus more on fiscal reforms rather than on satisfying social desires. Perhaps, this happens because in Malta the economic development still places as a priority for both the government and the population. Moreover the innate political polarization within the Maltese character makes it more difficult to accept fully the 'third way'. Hence in conclusion, I chose to come out with possible solutions that could accomplish both what the Maltese government, in particular, is after and some of the 'third way' proposals. In other words, in this study I tried to flex the 'third way' to accommodate our local needs and trends!!