economic question

[firsty]

i'm wondering what y'all think of this article:

http://www.newyorker.com/fact/content/articles/060828fa_fact

a few snippets:

The key to understanding the pension business is something called the ?dependency ratio,? and dependency ratios are best understood in the context of countries. In the past two decades, for instance, Ireland has gone from being one of the most economically backward countries in Western Europe to being one of the strongest: its growth rate has been roughly double that of the rest of Europe. There is no shortage of conventional explanations. Ireland joined the European Union. It opened up its markets. It invested well in education and economic infrastructure. It?s a politically stable country with a sophisticated, mobile workforce.

This demographic logic also applies to companies, since any employer that offers pensions and benefits to its employees has to deal with the consequences of its nonworker-to-worker ratio, just as a country does.

?When a company gets in trouble and restructures,? he said, those underfunded pension funds ?will eat it alive.? And how much sense does employer-provided health insurance make? Bethlehem made promises to its employees, years ago, to give them medical insurance in exchange for their labor, and when the company ran into trouble those promises simply evaporated. ?Every country against which we compete has universal health care,? he said. ?That means we probably face a fifteen-per-cent cost disadvantage versus foreigners for no other reason than historical accident. . . . The randomness of our system is just not going to work.?

and i'm wondering what the truly scalable elements of a completely free market system are, where the govt is completely out of the picture. i agree with many of the arguments against socialized medicine and welfare/pensions, but i'm wondering how they relate to the truth of the global economy (much less a national economy).

and how do we compete in an economy where other countries, with different priorities than we have, have an increasingly influential role.

thoughts?

[Lex]

Many companies allow you to opt out of their pension plans/health care plans and give you the money directly, so you can...

Example Company Pension Scenario
They take 100% of your income subtract 5% add their own 10% and invest that into a company pension plan. So, you get 95% of your income but 15% of your income is invested. Benefit is that more money is invested, negative is that if the company goes under or something else happens you may lose your pension.

Example Personal Pension Scenario
You get 100% of your income, invest the 5% yourself in a  private fund independent of any company. Benefit is that you have total control of your pension, negative is that you invest only 5%.

Both have their pros and cons. I know many people who go with the Company Pension scenario and then ontop of that invest into their own pension plan.

The entire article is completely superficial. It took a non-issue, turned it into an issue and then provided a solution.

Why not go to an investment firm and have them help you instead? For example, AG Edwards, they will sit down with you no matter your income and work out a savings plan with you based on your concerns and income level and then help you achieve your goals, free of charge to you. (they make their money from actual trading companies) How many government pension plans offer this kind of service?

The problem is that socialists are so averse to the idea of private property and business that they even refuse to give it a chance. Yes, there are people that will rip you off, but for every bad business there are ten good businesses. If people spent more time educating themselves about which businesses are good and which are bad instead of promoting more statist solutions we wouldn't even need government!

[firsty]

Many companies allow you to opt out of their pension plans/health care plans and give you the money directly, so you can...

Example Company Pension Scenario
They take 100% of your income subtract 5% add their own 10% and invest that into a company pension plan. So, you get 95% of your income but 15% of your income is invested. Benefit is that more money is invested, negative is that if the company goes under or something else happens you may lose your pension.

Example Personal Pension Scenario
You get 100% of your income, invest the 5% yourself in a  private fund independent of any company. Benefit is that you have total control of your pension, negative is that you invest only 5%.

Both have their pros and cons. I know many people who go with the Company Pension scenario and then ontop of that invest into their own pension plan.

The entire article is completely superficial. It took a non-issue, turned it into an issue and then provided a solution.

Why not go to an investment firm and have them help you instead? For example, AG Edwards, they will sit down with you no matter your income and work out a savings plan with you based on your concerns and income level and then help you achieve your goals, free of charge to you. (they make their money from actual trading companies) How many government pension plans offer this kind of service?

The problem is that socialists are so averse to the idea of private property and business that they even refuse to give it a chance. Yes, there are people that will rip you off, but for every bad business there are ten good businesses. If people spent more time educating themselves about which businesses are good and which are bad instead of promoting more statist solutions we wouldn't even need government!

i agree with you 100% on the advantage of private investing. when i was reading the article, i noticed that right away, that the author was ignoring that option entirely.

what did interest me, however, was the idea that a global economy seems to demand a closer look at economic ideas and their viability as the population within a market increases (or simply changes).

how do we compete on a global scale when other countries are doing things like socialized pensions and medical care? how do we compete one to one with those workers and those consumers? do we establish these small (within the shell) economies and then wait for everyone else to catch up?

[Lex]

how do we compete on a global scale when other countries are doing things like socialized pensions and medical care?

Sit back. Relax. And watch as they collapse like all socialist systems do

how do we compete one to one with those workers and those consumers?

Compete in what?

do we establish these small (within the shell) economies and then wait for everyone else to catch up?

What is "these" small economies that you are talking about?

[firsty]

how do we compete on a global scale when other countries are doing things like socialized pensions and medical care?

Sit back. Relax. And watch as they collapse like all socialist systems do

how do we compete one to one with those workers and those consumers?

Compete in what?

do we establish these small (within the shell) economies and then wait for everyone else to catch up?

What is "these" small economies that you are talking about?

1st point - i dont know that we can consider the countries discussed in the article as socialist systems. certain parts of their economies are socialist, but not all. isnt it possible that socialism can evolve just as capitalism can evolve - isnt it a reality that they both must evolve, necessarily?

2nd point - compete in labor markets and consumer markets.

3rd point - i'm referring to the mutualist idea of "to build the structure of the new society within the shell of the old" before we try to break the shell."

[Lex]

i dont know that we can consider the countries discussed in the article as socialist systems. certain parts of their economies are socialist, but not all. isnt it possible that socialism can evolve just as capitalism can evolve - isnt it a reality that they both must evolve, necessarily?

What do you mean by evolve?

Socialism is stealing from the rich and giving to the power. It's more cyclical rather than evolutionary: You start out with a previous system, have revolution, socialist system steal from the poor and gives to the rich, after a while when all the rich are dead the system will start to plan the economy and force people to work nothing gets produced, lots of propoganda about abundance, people starve and government collapses, capitalism takes over and brings things back to reality, entrepreneurs become rich, socialists get jealous, return to step one.

Capitalism is just people trading. Not much to evolve there either. It's a very simple system and it just works.

compete in labor markets and consumer markets.

Too abstract for me. How does pension play into you competing in labor markets and consumer markets? Bring it back to earth for me and give me an example or something.

i'm referring to the mutualist idea of "to build the structure of the new society within the shell of the old" before we try to break the shell."

Oh, boy! Did you know FrankChadorov is a mutualist too? 

[FrankChodorov]

Oh, boy! Did you know FrankChadorov is a mutualist too?

yes - we both broadly consider ourselves "left-libertarians"...

the "dual power" or "counter-economics" strategy is more generally a tactic of anarchist action.

from collectivist anarchists to individualists anarchists (mutualists to agorists)...

http://en.wikipedia.org/wiki/Agorism

[firsty]

i am not a mutualist.

[firsty]

i dont know that we can consider the countries discussed in the article as socialist systems. certain parts of their economies are socialist, but not all. isnt it possible that socialism can evolve just as capitalism can evolve - isnt it a reality that they both must evolve, necessarily?

What do you mean by evolve?

Socialism is stealing from the rich and giving to the power. It's more cyclical rather than evolutionary: You start out with a previous system, have revolution, socialist system steal from the poor and gives to the rich, after a while when all the rich are dead the system will start to plan the economy and force people to work nothing gets produced, lots of propoganda about abundance, people starve and government collapses, capitalism takes over and brings things back to reality, entrepreneurs become rich, socialists get jealous, return to step one.

Capitalism is just people trading. Not much to evolve there either. It's a very simple system and it just works.

compete in labor markets and consumer markets.

Too abstract for me. How does pension play into you competing in labor markets and consumer markets? Bring it back to earth for me and give me an example or something.

i'm referring to the mutualist idea of "to build the structure of the new society within the shell of the old" before we try to break the shell."

Oh, boy! Did you know FrankChadorov is a mutualist too? 

what i mean by "evolve" is to change over time. not that a nation changes over time (altho of course, it does), but the definition of socialism, just like anything, can change over time to adapt to new ideas, new situations, new populations, etc. capitalism changes, too. it's simply not as simple as trade. you cant honestly believe that if the entire world were to adapt a capitalist system, it would suddenly and simply start working, forever and always.

these "isms" reside only in the theoretical. their applications in the real world evolve over time.

"socialism" isnt how you define it. no more than "capitalism" can be defined as all owners making unfair profits.

you asked me: "how do we compete one to one with those workers and those consumers?" - "compete in what?"

my answer is: compete one to one with workers and consumers in other places of the world. how does capitalism reconcile the fact that some workers live in china and some workers (for the same product) work in ireland? how do you put those workers on the same level, driven by the same market forces, when they live in such different places?

did you read the article? my basic question is, i'm asking for the point of view of this group in regards to how free market capitalism in america (or any given state) can operate in a world where the competition for america's (or NH's) product and resources are, in some cases, overseas, in environments where workers (for instance) have a socialized pension?

[Lex]

"socialism" isnt how you define it. no more than "capitalism" can be defined as all owners making unfair profits.

Okay, lets use the Wikipedia definitions:

Socialism refers to a broad array of doctrines or political movements that envisage a socio-economic system in which property and the distribution of wealth are subject to social control. [1] As an economic system, socialism is usually associated with state or collective ownership of the means of production. This control may be either direct, exercised through popular collectives such as workers' councils, or it may be indirect, exercised on behalf of the people by the state.

http://en.wikipedia.org/wiki/Socialism

Capitalism is an economic system in which the means of production are owned mostly privately, and capital is invested in the production, distribution and other trade of goods and services, for profit. These include factors of production such as land and other natural resources, labor and capital goods. Capitalism is also usually considered to involve the right of individuals and groups of individuals acting as "legal persons" (or corporations) to trade in a free market. Various theories have tried to explain what capitalism is, to justify, or critique the private ownership of capital, and to explain the operation of markets and guide the application or elimination of government regulation of property and markets.

http://en.wikipedia.org/wiki/Capitalism

you asked me: "how do we compete one to one with those workers and those consumers?" - "compete in what?"

my answer is: compete one to one with workers and consumers in other places of the world. how does capitalism reconcile the fact that some workers live in china and some workers (for the same product) work in ireland? how do you put those workers on the same level, driven by the same market forces, when they live in such different places?

did you read the article? my basic question is, i'm asking for the point of view of this group in regards to how free market capitalism in america (or any given state) can operate in a world where the competition for america's (or NH's) product and resources are, in some cases, overseas, in environments where workers (for instance) have a socialized pension?

I read the first half of the article and skimmed the rest.

I'm still puzzled by your question. You compete by you selling your product and them selling their product and let consumers decide which they want to buy. The same type of product will have lots of different properties per individual consumer: obviously the price, the quality, packaging/branding, where it was made (some people only buy local others don't care), which company made it, etc. That's how you compete, you try to figure out what consumers want and you try to provide it.

The fact that some countries have have socialized pensions is just a small variable in the equation and doesn't really prevent competition. Am I answering your question?

[firsty]

you're not answering my question at all, because, while socialized pensions may be, in your words, a small part of the equation, the article cites examples of that model as reasons for tangible changes in countries over the past several years. you can disagree with that, but you're not simply dismissing something i'm mentioning. that was kind of the point of the article. are you saying that socialized pensions have no bearing (or so minimal as to be not worth discussing) on the global economy, contrary to what the author is saying and contrary to that research, examples, etc?

it would be better if you had further pressed private pensions.

besides, even if socialized pensions were minimal, you're dodging the issue. the global economy is not a free market.

RE: definitions: for socialism,  i'll stop at "refers to a broad array..."

and for capitalism, i'll direct you to, "Various theories have tried to explain what capitalism is, to justify, or critique the private ownership of capital, and to explain the operation of markets and guide the application or elimination of government regulation of property and markets."

"socialism" and "capitalism" are ideas, not models. there are models that in one way or another way or in a million ways or not, try to fit themselves within the context of a society towards one idea or another idea.

this is nitpicking. ireland isnt going to collapse because it's a socialist nation as you said in a previous post. it simply has a socialized pension program.

america has plenty of socialist programs. most of them are simply confined between the government and big business.

[Lex]

america has plenty of socialist programs

And I believe that America is on the verge of collapse.

The average age of the world's greatest civilizations has been two hundred years.
These nations have progressed through this sequence:

From bondage to spiritual faith;
from spiritual faith to great courage;
from courage to liberty;
from liberty to abundance,
from abundance to complacency;
from complacency to apathy,
from apathy to dependence,
from dependence back into bondage.

[FrankChodorov]

i am not a mutualist.

but you identify as a self-described left-libertarian - no?

[toowm]

Getting back to the original article, I thought I'd make some points. I am definitely an expert in this area.

Firstly, the fundamental flaw in the article is the calculation fallacy - the idea that a larger (government) system is more stable than decentralized (individualized company) systems. As is often the case, the growth of defined benefit pensions is difficult to evaluate in a free market, because government involvement was huge in what actually happened. Government-directed corporate benefits were first developed in Bismark's Germany, than spread to Roosevelt's New Deal. The post-WWII expansion in the article arose from two main factors: 1) Goverment wage controls left over from the war pushed total compensation into benefits, and longer-term, 2) The need to retain qualified workers while the baby boom moved into the workforce. Without goverment interference, some companies still may have offered pensions as a retention tool. Of course, others may not have, offering a competitive difference for the labor market. If plans were unfunded, or the employer was shaky, employees would put less trust in the pension promise. Not mentioned in the article is the fact that most pension, while sponsored by employers, were funded into insurance companies, who set contribution rules, invested assets, and paid benefits. Thus, they secured the benefits for employees - no government program was needed.

Second, there is a back and forth in the article between today's problems and those of the 1940s. What's not mentioned is the incredible increase in goverment regulation of pensions over these 60 years. Laws like ERISA in 1974, OBRA in 1987, RPA in 1994 and PPA just recently signed, all were supposed to fix pensions once and for all. The Pension Benefit Guarantee Corporation was created by ERISA to insure corporate pensions and is what is behind the billions of taxpayer liability mentioned in the article. One interesting note is that the UK was considering similar insurance recently and commissioned a study of how to make it work better than the US system. The researchers concluded that government-based insurance could never follow sound insurance principles. The UK government, of course, set up a system anyway. The increase in US goverment regulation of pensions is strongly correlated with the failure of pensions over time. While they may say it's in reponse to failures, government regulation is actually a cause.

The dependency ratio is more interesting. It's actually most appropriate for unfunded commitments, like almost all government programs. If a corporate pension is funded each year, and liabilities for retirees are invested in matched bonds, it really doesn't matter if there are 10 or .5 active employees for every retiree. This ratio does demonstrate the growth in Ireland and the coming issues for aging western countries. I'd recommend a video of demographer David K. Foot at http://www.footwork.com/video2.html if you're interested in the global issues. Not to re-start the immigration issue, but one reason the US is so much better off that places like Japan and Italy, is that our immigration keeps the dependency ratio from dropping quickly. As the Baby Boom does retire, we'll need not only immigration, but increased trade with fast growing economies, to keep our growth going. The other course is increased protectionism and less freedom.

There are products that are best produced on a mass scale, including insurance. However, governement is always a sub-optimal solution, and can never get better, only bigger.

Let me know if there other questions you have about global demographics or pensions.

[firsty]

america has plenty of socialist programs

And I believe that America is on the verge of collapse.

The average age of the world's greatest civilizations has been two hundred years.
These nations have progressed through this sequence:

From bondage to spiritual faith;
from spiritual faith to great courage;
from courage to liberty;
from liberty to abundance,
from abundance to complacency;
from complacency to apathy,
from apathy to dependence,
from dependence back into bondage.

lex, you're quibbling. my statement was that those socialist programs between big business and govt are bad. pls dont use it to skew the argument back to more quibbling. yo.

frank, i dont describe myself that, thats how an internet quiz described me. i think there were about 8 questions or something.

toowm - thank you for your reply. i shall read it in the morning when i am not altered.