Friday, November 28, 2008

War between private and public sectors

One of the many collateral damages inflicted by the depression is, I believe, the revival of the 80's war between public and private sector employees in European countries. Not that the conflict was not always latent, but it's time it came to the fore again. David Cameron, the Tory leader, has already started gathering the troops for a potential retrenchment of the public pensions system in Britain:

“We have got to end the apartheid in pensions,” he said, where growing numbers in the private sector rely on, usually much less generous, defined contribution pensions but public employees still enjoy final salary schemes largely paid for by the taxpayer.


Private and public sectors, at least in my mind, often represent two different drives of society, one that is mercurian and risk-loving and the other that is conservative and risk-averse. Because the former is substantially more dynamic, it is also more volatile and initiates political turbulence.

And this is what is going to happen now: for many years policy analysts have stressed the importance of reforming an unsustainable public pensions system, but it will take the disenchantment of the private sector to finally put conventional wisdom into practice. This is, of course, quite ironic, because the public sector has absolutely nothing to do with the current economic crisis - in fact the collectivization of risk in a public pensions scheme has seen its appeal increase recently. Not to mention that tying pensions to the stock market has proven to be an incredibly stupid idea. Yet the public sector might stand to lose a lot from the thrift epidemic among employees in the private sectors of the economy.

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