Article 50 of the 1978 Spanish Constitution proclaims "the public authorities will guarantee economic adequacy to old age pensioners by means of appropriate and periodically updated pensions." I would be very naïve to suppose that the signed agreement the past 9th October between the Government and two important unions of our country seeks to give a real and definitive practical solution to this constitutional precept. The declarations of good nun-like intentions occurred in an unusual demagogic cascade for both parts. The agreement signed without the managers' conformity was, according to them, to satisfy and reassure the whole of Spanish society, transmitting trust in the future. The pensions stopped being an electoral argument that generated uncertainty or fear and the signing meant the beginning of a new road in which guarantees would be given to the current pensioners and those who were to stop being active in the future would be taken into account. In short, that from now on we shall live happily ever after.
But human nature has its age-old laws that are basically the same ones as four thousand years ago in Egypt or in Babylon; two thousand years ago in the Roman Empire or in the tribes of the island known today as Madagascar; five hundred years ago among the Amazons from the Caribbean; or, at the moment, in India, Korea, Venezuela, Ukraine, Sebastopol, Berlin or Almendralejo. Precisely for that reason the economy, the damned economy, also has its age-old multi-spatial laws that do not differ a lot, rather at all, from the laws of human behaviour that end up being imposed, against the wind of demagoguery or the tide of good intentioned declarations, with the stubbornness characteristic of the human being since he was expelled from paradise by a tempted slip that ended up in an attack against the divine right of property. The famous Agreement, idolizing the Pact of Toledo, tries to patch up the allotment system for financing pensions so that it remains for centuries and centuries. Why is there that stubbornness for the allotment system if all the studies carried out prove that in the short or long term that system fails and that therefore the public authorities in this way will not be able to guarantee appropriate and periodically updated pensions, nor economic adequacy for old age pensioners?
The most serious and substantial deficiency of all, I repeat, all the allotment systems where some get paid while others finance what the former receive, is not a technical question but one of incentives and rules of human behaviour connected with the philosophy of life. In a system where some pay and others get paid, with the public authorities politicised by middlemen, each and every one, they will devise thousand and one tricks to contribute the least possible to the system when it is their turn to pay and to take advantage of the most possible when it corresponds to them to get paid. Although thirty three Pacts of Toledo are signed by all the representative political forces, all will continue requesting more rights looking out for number one and looking craftily away when the time comes to contribute and fulfil the duties that assure those rights. The allotment system in Spain has only been able to maintain rates at a minimum in recent years due to the larger state contribution and the significant increase registered in contributions corresponding to the active population. The latter has logically suffered higher rates of social security and growth of wages that imply an incentive for unemployment and a significantly important barrier to employment. A point has been reached where it is impossible to continue increasing rates nominally nor really. The concretion of the measures of the Pact of Toledo in motion is not that they are convenient and necessary but rather they are oxygen masks for urgent application because otherwise, the sick person dies. The separation of sources that finance public health, contributive and externally funded pensions; the amplification of the payment limit to be entitled to certain pensions; the creation of a bank reserve (where will the contributions for the reserve come from?); the promotion of the voluntary delay of retirement... etc. etc., they are nothing but urgent shock treatments that do not solve the problem but rather delay it.
Sooner or later, we shall have to undertake with courage the transition to a capitalization system, even if it is public, that effectively guarantees pensions. In those systems, the classic ideal of justice that consists of "giving to each person what is his." is fulfilled to perfection. Each worker's personal contributions are updated, even if it is at the long term rate of interest of Debt, and they will receive no more and no less at the end of their active life than their saved work. In this way fraudulence and trickery would be discouraged whereas labour, saving, investment and employment would be fostered. Freedom and disposition capacity would increase; it would allow us to organize our lives in a stable setting that did not depend on others. Perhaps pensions would even rise; productivity of capital would increase and, importantly, the system would be notably depoliticised.
All the technical and legislative measures that are guided in this direction are those that indeed will assure the public system of pensions and strengthen economic development. One will be able to make reality this way, not only that indicated in article 50 of the Constitution but also that written in article 41: "The public authorities will maintain a public regime of Social Security for all citizens that guarantee assistance and enough welfare payments in the face of situations of necessity", and article 35 that contains the most important for the assurance of pensions and for authentic economic, scientific and social development in its first sentence: "All Spaniards have the duty of working."

Joseph John Franch Menéu
NEGOCIOS, Tuesday 19th November 1996