Pensions in development
Stimulating dialogue?
There is now a substantial accumulation of evidence from the pension
reform experiences of middle income countries over the past two decades,
allowing for an evaluation of their outcomes. Findings from this evaluation
lead to important lessons, both positive and negative, for developing
countries.
Contrary to the current pension reform policy 'orthodoxy' led and financed
by the World Bank, the key implication to be drawn from cumulative evidence
from pension reform is the continued salience of the dominant role of
public management in the provision of old age protection. What has increasingly
become a pensions reform monologue should now become a more inclusive
dialogue on policies and institutions.
World Bank dominates
'Pensions in Development' (2001) analyses in some detail how during the
1990s, the World Bank inexorably assumed the role of the dominant international
advisory organisation in the field of old age pensions policy. Displacing
the Geneva Institutions, the International Labour Office (ILO) and the
International Social Security Association (ISSA) and supplanting their
role in standard setting and policy advice, the World Bank has been instrumental
in promoting the international expansion of private individual retirement
savings accounts at the expense of conventional risk-pooling public social
security.
The dominant international advisory position occupied by the World Bank
and its zealous promotion of a seemingly one-size-fits-all model for pension
reform has crystallised into what can only be described as a global pension
reform monologue. It has become increasingly difficult for voices critical
of the Bank's policy agenda to make themselves heard in international
arenas. Yet the available evidence, presented in detail in 'Pensions in
Development', gives little support to either the developmental or welfare
efficacy of key elements in the Bank's market-based pension reform strategy.
Alternative reform
This research challenges the institutional and policy implications of
the Bank monologue and offers a state-based alternative reform agenda.
In contrast to the Bank's overly narrow financial market focus, we conclude
that the national development needs of low- and middle-income countries
would be better served by pension schemes designed and balanced more strategically
to secure social welfare aims and to serve economic development agendas.
There are limitations in both market-based and contributory social insurance
pension schemes in meeting the social protection needs of the growing
number of informal sector workers in developing countries. Our proposal
is based on existing examples of good practice, pays particular attention
to issues of cost and administrative feasibility, and advocates the adoption
of mechanisms to achieve universality in coverage. It includes providing
at least a minimal cash income on a regular basis to all the elderly as
a policy priority. This prioritisation is overtly intended to meet the
social protection needs of the world's growing elderly population, including
the most marginalised among them, the numerous elderly poor in developing
countries currently without 'pensions' or other means of cash support.
A new dialogue
At the international level, we argue for the need to secure a more inclusive
dialogue on the issue of old age pensions. This could be achieved by the
establishment of a new international advisory regime with a mandate that
is
- more policy inclusive, encompassing all available pension reform and
restructuring options
- more inclusive of all the interests, including domestic ones, that
should legitimately be involved and
- sensitive to relevant domestic constraints and opportunities.
The intended outcome of such an advisory system is an enhanced likelihood
of forming a consensus among all relevant pensions policy stakeholders
for developing fiscally sound and administratively sustainable systems
of income provision for all the elderly within developing countries
Roger Charlton
School of Social Sciences
Cowcaddens Road
Glasgow Caledonian University
Glasgow G4 0BA
UK
T +44 (0)141 331 3161
R.Charlton@gcal.ac.uk
Roddy McKinnon
International Social Security Association
4 Route de Morillons
Geneva 22
CH-1211
Switzerland
mckinnon@ilo.org
See also
'Pensions in Development', Ashgate Publishing, Aldershot, England, by
R. Charlton and R. McKinnon, 2001
'Pension Funds in Emerging Capital Markets: Policy Implications for LDCs',
Savings and Development 25 (3): 257-292, by R. Charlton and R. McKinnon,
2001
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