4.3.1 Postponing the pension age – the biggest economical nonsense ever

In today times it is a habit to listen from politicians, that because of underfunding of pension systems the present workers will have to postpone their retirement, as there is no money and so in order for workers to ensure their decent pension they will have to work a bit longer. And therefore they are slowly, quietly approving laws which are making this a reality and are postponing the start of pension.

It sounds logically, simple and sound – as you have saved not enough money, you will have to save a bit more.

But it is a great lie, demagogy and unemployment which is steadily growing ( and mostly among young people) is its direct consequence.

Imagine a mini economy, in which there is 1 company producing cakes. This company employs 12 people and its production is enough to satisfy needs of 220 people ( 120 employees, 50 children and 50 pensioners)

How the financial system which enables is functioning is not important at this moment.
Simply, there is a distributional mechanism which enables that every member of society gets his fair share.

After a time, new technological progress occurs which enables this company to substitute 20 employees with machines and produce instead of 220pc, say 250 cakes.

How the situation looks now ?

The result is quite worrying:  the company produced more, but in reality this surplus has no market as the buying power decreased by 20 customers, who became unemployed and additional production which arose as a result of automation has no customers at all.

If before the automation the pension system ( whatever type it is) was getting  contributions from 120 people, now it is just 100 – so it is logically underfunded by 20%.

But this deficit in pension system is just FINANCIAL, and has to do solely with the way financial resources are distributed.

The REAL, RESOURCES based economy produced the same, even bigger amount of goods as before and therefore it is possible for people to go to pension at the previous age or even sooner !

What needs to be done  for this scenario to materialize is to recalibrate the FINANCIAL economy, so as the redistribution of financial resources is adequate to the new production capacities of REAL economy.

Because in reality there is no problem, people in this society did nothing wrong. Quite the opposite – through technological advancement they reached higher level of production, which provides the basis for higher consumption. But it is just a potential and to make it transform into reality there is needed a change in financial flows, otherwise there will be, due to technological advancement quite opposite, illogical situation, where citizens will suffer.

While in the previous situation the company was getting 220 financial units ( 50+120 employees and their children, 50 pensioners) and was producing 220 units of production, now it is in a situation where it gets 200 financial units ( 50+100 employees, children and 50 pensioners) and is producing 250 production units – and this represents a loss against previous variant.

What logically follows is reduction of production, as there are no customers for it:

The result of unmanaged technological progress is an increase of unemployment and a finding, that built production capacities ( not so a small investments ) were in reality quite useless. There comes a desinvestment, which is even bigger as previous increase of production capacity and accompanying factor is growing unemployment. This reduction of REAL production potential is real threat to society as a whole, as it is really diminishing the amount of goods the economy will be able to provide in the future. It is not just an optical illusion, which arises as a result of wrongly calibrated financial system.

( we can see it on a daily basis, whether it is a case of automobile producers, steel makers or other industrial factories which are shedding thousands of employees, or cities going bust, which were once a pride of the nation and home of millions)

Of course, such approach is a total stupidity.

And imagine, that reaction to such problem is prolonging the amount of working time available through postponing the retirement age ! It is not enough that there is unemployment rising in the society, which is signaling the surplus of available labour ( due to the rising automation), but we are going to increase this available working time even more !

Because postponing the pension age is exactly this, increasing the available working time on individuals and society as a whole. In reality, our problem is quite the opposite and requires quite the opposite solution: to decrease the available working time, which is not needed to be so high due to the technological advancement and to redistribute the financial resources so that everybody would get the fair share from increased production capacity of our economy.

So the postponing of retirement age is stupidity squared !!!
( and indeed leads to deepening of existing problems, drifting further away from real solution)


Imagine a hypothetical society in a distant future, where all the work is done by robots. Robots are working in factories, robots are serving in restaurants, providing all sorts of services... But this production is not for free. There is still a private ownership of production means and therefore their owners are asking money for their production.

Who will give it to them ?  And where they will take them from ?

The buying power comes from wages, and entirely. The pensions are just transformed wages and savings are just wages not consumed so far.

As all work is done by robots, who are not taking any salary, citizens who have no income has no buying power and are not able to buy not even basic necessities.

Such a society would soon go bust, because after extinguishing the savings which would be flowing in just one direction ( towards owners of robots) no more transactions could occur – simply there would be no money for it, and technological advancement of such world would soon show itself as quite useless.

The only way how such a world could survive would be 100% taxation, which would be regularly taking away all sales going to robots´s owners and redistributing them back between citizens.

100% taxation is inevitable, because with lower ( say 90%) the citizens would get only 90% resources back to revitalize their buying power which would mean only 90% future sales. In further year it would be only 90% from 90%, so 81% and so on, so rather easily understood recession of such overrobotized world.

Such society is so far highly utopistic and represent pure communism, which corresponds to the level of taxation. But with such level of technological advancement it would be the only possible economical system.


The second extreme is some prehistoric society, where there are no production tools and so all people have to work to survive ( to really produce, what their society needs). As work of everyone is essentially inevitable for survival and all have to consume rather equal amounts of goods ( food) to survive, everybody will get share of common production (food = wage) and taxation is 0%.  If there would be any taxation, some members of such society would not get their full share and they would perish by hunger. As everybody´s work is essential for survival of society as a whole, there is no taxation and everybody uses his full wage ( share ) to maintain his life.

Our present position is somewhere in the middle. Production is partially automated, and is moving more and more to the right of the chart. During last 20-30 years there has been an enormous technological progress, mainly because of computerization and automation in production. That means shifting of profits towards owners of production means. If such shift is not matched with higher taxation, there comes an automated decrease of sales and fall of economic system into recession, as buying power was reduced due to technological progress and its revival to previous level is not happening.

The rise of capital share on society product ( so clearly visible during last 20-30 years) is inevitable asking for higher taxation, which will shift part of profits ( and so buying power) back towards employees. Otherwise the increased production capacity of our economy will come in vain and temporary substitute of regular buying power ( wages) by personal debt will inevitably lead to bust. Personal debts are not a sustainable form of aggregate demand.

So if you are hearing argument of the Right, that taxes were lower in the past and now they are too high and so to start the economy we have to lower them again, you can understand why this reasoning is wrong.
Those, asking for lower taxes often go in their reasoning back to the medieval times, where they quote 10% taxation as that time prevailing tax to landlords and comparing it with today´s 25-30%.

 Of course! This historical increase of taxation is an inevitable reaction to technological progress, which is more and more removing the need for human work. Production remains (increases) but the number of people working towards its achieving is continuously falling. Therefore we need higher and higher redistribution, so that production output would get to previous number of members of society.

(if the Right is not asking for removal of certain number of citizens by war, which would of course clearly depict its agenda for potential voters. And not to mention that even such barbaric solution would not bring equilibrium to economic system. Why to build an industry if its builders will get only destruction and its production capacity will remain useless ?)

The another argument, you may come across is the following:  technological progress, and unemployment that comes with it is OK, those who are against it are idiots and the society always managed to cope with this problem and moved to higher level. They will tell you about demolishing of machinery in GB during industrial revolution and they will point out to the indisputable progress and higher living standards of today.

It is a matter of course that technological progress is OK, and this theory never disputed it. Technological progress increases production capacity of REAL, resources based economy as an only possible way to provide higher consumption to the people.

But these critics will never tell you, HOW the society actually managed to cope with this problem !!!

Before industrial revolution people commonly worked 10-12 hours per day, 6 days in week, children labor was a matter of fact and nobody from common employees even dreamed about paid vacation.

After the industrial revolution, and as a mean to solve problems related with unemployment the situation of employees changed dramatically:

What happened:

  • Shortening of working time to 10, later just 8 hours per day
  • Ban on child labor
  • Shortening of working week to 5 days
  • Introduction of paid vacation and increasing its duration
  • Introduction of paid pension
  • Continuously shortening of weekly working time

So, all measures logically aimed at shortening of working time ( as the need of human labor is continuously decreasing)  and parallel increasing of taxation ( in order to pass the increase in productivity on all members of society, not just owners of production means)

Without these measures the society would quickly deteriorate into chaos, revolutions and civil wars.

So which way shell we go now?

Will it be the way of enlightenment, further passing of benefits of increased productivity towards the people in the form of decreasing the working time ?

We can choose from:  to further lower daily working time, more weeks off, sooner pension

Of course, it is historically inevitable and in line with technological progress to further increase the rate of taxation, which will enable the FINANCIAL side, redistribution which will enable consumption for all.

Or will it be the path of barbarity?

Increase of unemployment, not utilizing and destruction of already existing production capacities or even worse – war?

And all of this just because we are not able to understand the necessity of redistribution, accompanying the technological progress?

Situation in Europe seems as if we forgot all the knowledge accumulated during the 30. of previous century and we are going to repeat all the cruel mistakes again and again.

Postponing the retirement age is definitely one of wrong ways, which will lead only to further suffering and decline.