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Transforming Post-Communist Political Economies
perspective of social integration, since even funded schemes may include elements of solidarity.
It is the so-called mandatory privately managed pillar that embodies the most disturbing elements. Optionally elected private saving contracts represent a positive development and enhance individuals' free choice in determining the use of their savings. This picture changes, however, when these contracts become mandatory and an integral part of retirement security, as is currently being proposed not only by the private banking and insurance sector, but by many supranational agencies as well. There are problems associated with money markets, and these are exacerbated in countries with fragile and inflation-prone economies, as well as underdeveloped banking systems. Slow economic growth and public commitments to those already on pensions may make the transition extremely expensive for both taxpayers and pensioners.
Summarizing the experiences with privately funded schemes, it is often observed that they have low potential coverage (never more than two-thirds of the population and often less); that the risk of noncoverage is particularly high for the chronically sick and disabled, as well as the long-term unemployed; and that, especially in the take-off period, but even beyond, they are much more costly than public schemes (Townsend and Walker, 1996; Myers, 1995; Kritzer, 1996). From the perspective of solidarity and integration, certain further elements should be mentioned. First, the benefit that will be received, particularly if it takes the form of an annuity, may suffer from the absence of solidarity. Annuities are actuarially calculated. Hence, women and men with exactly the same working careers will receive different benefits. A further divisive characteristic is the fact that the benefits one receives can potentially be related to prices, but they can never be related to wages. Thus the gap between the incomes of active and retired people may fluctuate or increase depending on prevailing economic trends.
Many different means are being used to bring home to people the message that the intergenerational contract should be abolished. The potential for conflict between the old and the young was noted by the demographer Samuel Preston over a decade ago when he suggested that "the social security system was becoming increasingly generous to the elderly while adopting a more severe attitude towards . . . welfare payments for children." He was, however, "careful in his address to avoid any explicit suggestion that children and the elderly were direct competitors for a fixed sum of public resources" (see Johnson and Falkingham, 1992:131-132).
In quite a few Organization for Economic Cooperation and Development (OECD) countries, at least some pensioners have indeed fared comparatively well recently because of relatively generous earnings related to pensions, but some of these advantages may not be sustainable over the long run. The poverty of children may have increased recently as well as a result of increased unemployment and parsimonious child benefits. Increasingly, the idea is being ad-