Category Archives: Pension system

A “democratic” pension system despised by 97 percent

In the previous postcard I mentioned an exotic part (PPM) of the Swedish pension system in which people are expected to choose between 800 different (or “different”) stock funds produced by the finance industry. Since this is an absurd and impossible task for normal human beings, the finance companies provide pension advisors to help out (and try to make even more money out of the system). But there is not too much to gain. Provisioning to this part of the pension system is only 2.5 percent of people’s salaries.

There also is the snag that people sometimes are quite clever. So when faced with an absurdity like this, Swedes just refuse to choose. Of all who entered the system last year only 3 percent made an active choice. The others land up in a large public stock fund called AP7. It so happens that this AP7 fund performs better than the average of the private funds in terms of capital appreciation, and has lower fees than most of the others, at that.

One may really wonder how this bizarre idiocy came about. Well, it all happened in 1994 when the whole pension system underwent a thorough reformation, which almost all the parliamentary parties endorsed. The basic principle was changed from a “pay-as-you-go”-system to a fund-based one, a major swap from social democratic thinking to more (neo)liberal standards. And as the liberals (=conservatives in the US) really had tailwind they succeeded to squeeze in this “premium fund” system, so as to force people to play capitalists. As a conspiratory idea this one is not too bad: By luring people to become shareholders they can be made more susceptible to employers’ points of view, and less focused on their interests as employees.

Today, center-right intellectuals probably marvel over the fact that the Social Democrats surrendered cherished principles so easily in the negotiations about the pension system. But it may be explained by the fact that the soc.dem. then recently had won the parliamentary elections and was about to enforce harsh neoliberal measures to try to counteract the effects of a deep, domestic economic crisis caused by a burst housing bubble. The party’s leadership more or less aligned to neoliberal ideas, and has stayed that way since. To his honor it has to be said that the party’s chairman recently proposed that the PPM system should be abolished, but he was silenced in that attempt by all the bourgeoisie parties.

97 percent of the people demonstrate what they think about the ridiculous blooper that the PPM-system has turned into by openly rejecting it’s core principle. 97 percent of politicians demonstrate what they think about democracy by defending the same system. What does that demonstrate?