In Rare Albion, social security is based on a feeling that in a healthy society most people will seek to play their part, so that no one begrudges setting an amount aside each
week for those who in earlier, less enlightened times were called ‘unproductive’. This was such a silly term. Even the unproductive consume things, perhaps more than the productive; so they are in fact remote producers. Calling production into
being, they induce productivity in others.
In Rare Albion money reflects and never precedes events, so social security is carried out on a cash basis, not accrual. It
is all done with income (and expense), rather than borrowings (and savings). It is done by shared pooling, so that the charge falls on the community generally. The process and therefore the funding arrangements are autopoietic, that is, they arise
and manage themselves naturally and the amounts are determined by economic circumstances, not politicking. The task of the Social Security Office is to ensure that nothing abstract or exogenous gets in the way of these arrangements.
Pension funding is a case in point. In the late twentieth, early twenty-first centuries, a number of problems had arisen. Firstly, there arose a serious demographic imbalance between the contributors
and the drawers. But this was caused by the fact that everyone retired at the same, relatively low, age and because, for some inexplicable reason, women were deemed to be less economically effective five years earlier than men – and that in a society
where women were the predominant agents of economic change!
The second problem was that mutuality had given way to everyone looking after himself. The ‘suppressed
asset value’ of traditional funding vehicles, such as what were called building societies, was replaced by demutualization, but the effect was disastrous. Instead of a day-to-day transfer system, people began stocking money with the idea that it would
grow apace and maintain purchasing power for when they retired. This seemed to make sense, except that money can never be stocked. It only circulates. When it stops circulating it loses its value.
So the stocked money was put into funds, which were charged with the task of keeping apace with inflation. They did this, of course, by the device of tradable assets and did not
see that the rise in values of real estate and art works, for example, was not due to economic events, but was the equivalent to the bow wave of a ship as it pushes its way through the water, an effect without reality of its own.
In itself this would not have been a problem, had two practices not developed, which to us seem bizarre indeed. Firstly, people began to put their pension funds into shares, thus pulling and pushing
on the value of businesses from outside, when this should be determined inherently. Looked at on the computer screens of the time, the true economic nature of this approach went unnoticed. Whether one put one’s pension money in a house, in stocks, or
in art was thought to be a matter of indifference.
The problem was that the system starved the world of current income. People found they had less and less income relative
to their outgoings, which all the time were being forced up by the cashing in of rising asset values, which in turn pushed up the level of rents. Things became even more complicated when, in order to keep afloat, people borrowed against the ‘increased
equity’ in their homes and properties. This was a house of cards, of course, so no one dared breath a word. The slightest current of air, and the whole lot stood to collapse. The central bankers of the time stayed well hidden, lest they inadvertently
sent a signal to the markets, which could have caused a sigh of relief or even an indrawn breath, either of which could have sent the cards a-tumbling.