Friday, January 14, 2005

The British Evasion

So Krugman has another article out today (saying something I've been saying, so I was excited about that) that I think is extremely interesting. See:

The British Evasion

The basic gist is that the Brits made the privitization move back in Thatcher's day, and that move was actually during a time when the Brits did not need to do major borrowing to do it. (whereas the proposed Bush move requires $2 trillion in borrowing, and that's only in the short term) Well, privitization FAILED for the Brits. It turns out that the risk associated with private investment has a cost that far outweighs its benefits.

In other words, "sometimes you get the bear, and sometimes the bear gets you." When people think about privitization, they expect that everyone is going to make money. However, everyone can't be making money. If everyone is making money, then they can't be making high yields. And this doesn't even account for how money managers can really screw someone. (note that financial institutions are major supporters of Bush; he's going to keep them in business)

So Brits are finding that the retirement funds allocated for seniors are far too low and taxes need to be raised in order to gaurantee a minimal amount of funds to be paid to all Brits on retirement. In other words, social security.

The Krugman article links to another article that gives a lot of information on the situation in Britian. Krugman also criticizes news agencies for not giving more exposure to the failure of privitization schemes in other countries.

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