Modern governments need to explain what they’re doing, and why

French pension protest

A group of unusually young-looking anti-pension-reform protesters in France, Oct. 2010. (Click for source)

“You lied to us,” 63-year-old Solange Denis scolded Prime Minister Brian Mulroney outside the Parliament Buildings in Ottawa one day in June, 1985.

“You made promises that you wouldn’t touch anything. I was made to vote for you, and then it’s goodbye Charlie Brown,” she continued.

A TV network’s recording of the feisty near-senior putting the prime minister in his place made for electrifying television, and turned Denis into a temporary celebrity.

In fact, Denis herself had likely never voted Conservative at all, given that she had been an active Liberal Party volunteer in the Eighties.

“I have always supported the Liberals,” she publicly announced a decade after she confronted Mulroney.

But the point had been made.

The issue then: Finance Minister Michael Wilson’s plan to scrap a guarantee that the federal government’s Old Age Security (OAS) payments would keep up with inflation. Days after the Mulroney-Denis confrontation made the news, the government hastily retreated.

Conventional wisdom has it that governments tinker with pensions at their peril. Thus, when Prime Minister Stephen Harper announced this week that still-unspecified changes are coming to federal pension programs — thought to include a rise in the minimum eligibility age from 65 to 67 years — it brought back memories of the Mulroney government’s u-turn more than a quarter-century earlier.

Harper need not fear a confrontation with Solange Denis, who died in 2004 at age 81. In these more security-conscious times, it’s unlikely that the prime minister even shakes hands as freely with tourists, as Mulroney was doing when Denis began scolding him in 1985.

Some even doubt that “grey power” is as effective against Canadian governments as it is often thought to be. “Far less vocal and well organized than its U.S. counterpart, the Canadian ‘grey lobby’ has never played a truly central role in pension politics since [the mid-’80s],” academics Daniel Béland and John Myles wrote in a 2003 paper on pension reform.

Yet backlashes sometimes do work, as illustrated by the U.S. Congress’s embarrassing Jan. 20 retreat on the Stop Online Piracy Act (SOPA), 48 hours after the world’s most-used web services fought back in one of the swiftest and most successful public awareness campaigns in living memory.

It was even more remarkable that the bill’s congressional backers seemed unable to explain what they were doing, and why they were doing it.

That fueled suspicion that SOPA was not based on wide-ranging research and consultation — as all sound public policy should be — but was rather a law bought and paid for by campaign contributors.

So, how can a government avoid being SOPA’d on pension changes or any other controversial change?

The most important thing to do is to frankly explain what the government is doing, and why.

Like Canada, Italy is struggling to figure out what to do about a growing age imbalance — a bounty of older Italians and a dearth of younger Italians. In 2000, there were roughly four working-age Italians for every Italian aged 65 years or over. That ratio is expected to drop to three-to-one by 2020 and two-to-one by 2040.

That will make traditional pension benefits difficult for governments to pay for. This inspired Tito Boeri and Guido Tabellini at Milan’s Bocconi University to take a closer look at what works best when a government is trying to make pension changes.

“We find that individuals who have read newspaper articles or watched TV debates on pension reform are not better informed than the other citizens,” they wrote in a paper most recently updated in 2010.

“One interpretation . . . is that individuals read newspaper articles or watch TV programs on the issue just to confirm their [prior beliefs], more than to collect new information.”

Yet, in a 2007 experiment with 267 adults, they found that when people were directly given information about the state of the Italian pension system from a neutral source, they became more likely to support pension reform than were those who had only heard about these changes through the media.

Informing the public “cannot just be delegated to the media,” they wrote in their concluding remarks, adding that the public would be more likely to support changes if  citizens are sent credible information “explaining to citizens how much they are paying into the system, what they will be entitled to, and whether the system is currently in deficit or in surplus.”

While many people in most countries have no idea how much they have paid in to the pension system or how much of a difference a slightly earlier or later retirement makes, Boeri and Tabellini highlight one government that has dealt frankly with its population when it comes to pensions: Sweden.

In Sweden, everyone paying in to the pension system receives an “orange envelope” every year — a statement that includes basic information on the pension system, plus “a statement of past contributions and projections of the annual entitlements under three retirement ages and for two assumptions on economic growth.”

The “orange envelope” plan hasn’t worked perfectly — a 2006 World Bank report noted that even though public confidence in the new system was high, many Swedes still didn’t fully understand how the pension system worked.

Yet Sweden’s relatively smooth experience in changing over to a pension system that offers fewer pay-out guarantees, but is at least financially sustainable, stands out in contrast to the experiences of France, Britain and Belgium.

In those countries, public mistrust of their elected representatives led to serious backlashes — including rock-throwing and car-burning youths (!) in France’s case.

Trust that reform is based on a careful study of the facts and an eagerness to be frank with the public — not on ideology or an industry buy-off of legislators — is what separates Sweden’s relatively successful pension reform from other European countries’ failure in that area, and from the U.S.’s SOPA failure.

Here in Canada, the government will need all the public trust it can earn. It should not assume it will come easily in these cynical times.

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About theviewfromseven
A lone wolf and a bit of a contrarian who sometimes has something to share.

One Response to Modern governments need to explain what they’re doing, and why

  1. Yer Pal says:

    As a 43 year old man contributing to the CPP for about 25 years – I am THIS close to rock throwing.

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