France’s penchant for public displays of political discontent is frequently at odds with the basic tenets of economics and logic. Alexis de Tocqueville, the famous 19th-century French writer, noted as much during the Paris Commune unrest of 1848 when he observed that French rioters understood quite a bit about politics but very little about the economy. Over a century and a half later, not much has changed.
Energetic protests against plans by the government of President Nicolas Sarkozy to reform the French retirement system have cut national fuel supplies, stopped trains and roiled the nation. But despite all this furious protesting, the motivation behind it requires a deliberate blindness to economic reality.
The current minimum age for retirement in France is 60, and a full public pension is available at 65. Today, there are approximately four people of working age for every person in France receiving public benefits. Without changes, the ratio will drop to 2:1 by 2050. A falling birth rate and lengthening life expectancy are to blame for this demographic crunch, along with a lowering of the retirement age from 65 to 60 in 1983 by the socialist government of François Mitterrand. It’s one of the lowest retirement ages in the developed world. The pay-as-you-go public pension plan is forecast to run a $45-billion deficit this year.
To correct this untenable situation, the government plans to raise the minimum retirement age to 62 by 2018. The age for a full pension will rise to 67. It seems a fairly obvious solution to an obvious problem: if people are living longer and having fewer children, then the age of retirement must also change. Such common sense does not apply in France, however. Early retirement is held as a sacred trust to be defended at all costs, facts be damned. Some unions have even called for the retirement age to be lowered further to 55.
Such unreasonable demands made of the taxpayer-supported social welfare system are observable across Europe, punctuated by frequent street protests and violence. This overheated approach to democracy appears in sharp contrast to Canada’s calmer and more restrained attitude toward political discourse. And yet, Canadians shouldn’t feel overly smug. Despite the greater civility of Canadian politics, Canada is not immune to equivalent gaps in reason. We can be just as unreasonable and self-satisfied when it comes to our own favourite social welfare program.
Consider health care. As with the French air of superiority in claiming the right to retire early as the pinnacle of their social contract, an entirely publicly supported basic health care system is similarly treated as a Canadian birthright and reason for our own national feelings of self-righteousness. But considering current demographics and rates of growth, it too will be impossible to sustain over the long term.
In 2004, then-prime minister Paul Martin claimed he had “a fix for a generation” on health care funding. But this fix, called the Canada Health Transfer, was premised on funnelling ever-greater amounts of federal cash to the provinces. By 2014, when the current agreement runs out, the annual sum will have grown from $19 billion to $30 billion. As the federal Office of the Parliamentary Budget Officer pointed out earlier this year, it’s “implausible” to expect such a growth rate can continue. And we face the same future demographic squeeze of fewer workers per beneficiary as in France.
A Canadian health care crunch thus seems inevitable in less than four years. Unfortunately, health care reform is arguably more toxic to Canadian politics than pension reform is to French politics. Any suggestions that this looming crisis might be solved through the logical application of private sector efficiency and competition or other reforms to check demand are considered beyond the pale.
None of the federal parties will touch the subject. Attempts at the provincial level, such as Quebec’s recent proposal for a modest $25 medical services user fee, have been quickly abandoned in the face of widespread opprobrium. No street riots are required to rigidly maintain this status quo. And yet every other developed country includes some sort of private option or co-payment in their health care system to improve delivery and keep costs down. Even France. Given our financial constraints, it simply makes sense to look at new models for health care delivery in Canada.
French riots in defence of their unsustainable pension plan fail a careful examination of the economic facts. The same can be said for Canadians’ refusal to consider real health care reform.