Sunday, 25 August 2013

Depose her or not?

The underground, divided into two separate sections since 29 June was opened last Friday, 9 days before original deadline. The decision the two stations located in the hub of the capital would be opened on Friday was announced on Monday and accidentally coincided with another important piece of news.

Last Monday it was proclaimed the number of valid signatures collected was sufficient to call the referendum. Now the fate of mayor lies in voters’ hands. Thus, the campaign has started out. The communiqués in the underground on Thursday and Friday smacked of success propaganda. The tone in which a speaker informed the passengers of the success of getting ahead of the schedule was repulsive and infuriating. I looked at fellow passengers’ faces and felt I was not the only one holding such view.

Is the just called referendum a political move or an essential step taken to improve the way capital is governed? Probably the answer is ‘both’, however with a tilt at the former. The current mayor had several slip-ups, which spoilt her image rather than had real influence on how the capital is run, but also made several errors, some of which are hard to be forgiven.

What I remember and hold against her? Increasing the number of clerks in the town hall, bonuses and pay rises for them, ignorance in terms of the simple things that affect city inhabitants (e.g. how much a single ticket costs), badly organised implementation of new rubbish collection law. And that complacency, conceit and smugness she and her henchmen exude every day.

Which situations will I remember? Her refusal to purchase an entrance ticket for 5 PLN, her statements irate drivers sitting in traffic jam on detour of the flooded tunnel along the river should enjoy beautiful sights, the ludicrous page showing what was done since the beginning of her first term in 2006 – the map is full of spots, such as “building an individual waterworks link to a building located… for 65 thousand zlotys”.

What I cannot understand? How, despite ticket price hikes, proceeds from public transport fares diminished? Laffer curve worked in practice? I am in two minds about rising prices of public transport – the value for money in terms of 90-day ticket is still damn good, but how come a 20-minutes ticket costs the equivalent of petrol used to drive 7 kilometres in town (if you drive on your own, take three passengers and same money is enough to drive 28 kilometres – from one end of the capital to the other).

What I can say to defend her – really a lot has been done in the capital since the beginning of her first term, the stride made is noticeable. The city has caught up on development that was really overdue… Lack of proper co-ordination is the other story… Only the one who does nothing does not make mistakes… In 2010 voters elected her almost unanimously, as the first term was indeed fine. Only later she fell into the same trap of complacency as her party did…

I am registered beyond the borders of capital, so even if wanted, I would not have the right to vote. If I could, I would definitely go, but cannot tell you in which rectangle I would put a cross. The party is shooting itself in a foot by discouraging citizens from participation in the referendum which is a vital instrument in democracy. If somebody thinks the mayor should stay, they should go and vote against ousting her. They probably think urging on boycotting the referendum is a better strategy as the low turnout will make it invalid. Guys, this is a dead-end street. The true virtue will defend itself (in fact here you cannot talk about a true virtue, so a drowning man tries to catch a straw), so whoever thinks she should hold the office until the end of the term, do not stay at home!

What will the referendum change? My guess is nothing, it will just serve as a barometer of support for the mayor and her party. The more probable scenario is that she is deposed. Then the prime minister will likely appoint a caretaker mayor to run the city until local election scheduled in autumn 2014.

No matter what you think of it, follow my short reasoning. You cannot have your flat refurbished without letting in painters and having to endure a few days of total mess (or spending more time doing it on your own and falling flat on you face at the end). Similarly, you cannot enjoy the pleasure of using modernised infrastructure without enduring inconveniences beforehand. In other words, each improvement requires some sacrifice… Therefore I put up with inconveniences patiently.

I somehow sense the summer won’t last long, autumn will come this year soon and will be chilly, wet and gloom. Take delight in wonderful weather until it flies past.

Sunday, 18 August 2013

Priorities in life

Second half of August. Still warm and sunny, but after prolonged drought trees begin to shed their leaves, nights are getting longer, evening and morning are getting colder. Imminent onset of autumn brings out reflective moods, thoughts of time inexorably passing by. Seasons of the year change and with each next such cycle each of us a year older, one year closer to departure, has one year fewer to make the most of our lives…

On 1 August I got a text message. An university friend invited me for a party thrown on occasion of her 26th birthday. Many of us after passing by the quarter-of-century milestone avowed to desist from fulsome celebrations. These were naturally jokes, we are far from being and feeling old, but one’s 20s are the times when you no longer want to be older to get more independence, freedom, etc. The best years, that are said to be the period of studies, are gone and so many of my peers, although they still feel young, would appreciate a chance to rejuvenate themselves… Coming back to the main thread, I was delighted to get the opportunity to meet up with some of fellow students and to… maybe meet some new people. From what I noticed, with time such opportunities may become rare, especially if you have a specific circle of friends that seldom extends beyond them and if your life begins to revolve around work… The party was scheduled, conveniently for me, for Saturday evening, but on the preceding Wednesday the friend decided to bring it forward for Friday evening. Not a favourable coincidence. Had that day a rough ride at work that went on despite Friday late afternoon and continued, for me, until after seven p.m., when I could hand over the job to another team, whose members were supposed to finish it, and knock off. Tired, hungry and anything, but freshened up I turned up home twenty minutes after eight p.m., barely escaping an impending rainstorm. An opportunity missed. A friend who, for the same reasons, also could not make it on Friday promised to meet the party host when pressure in her office eases up, but… well, it won’t be the same.

What I’m getting at is that life after graduation has grown in some monotony and funnily enough, amount of spare time has shrunk since then. Just look at the history of this blog – in summer of 2010 when I began the first full-time job with my current employer, posting frequency declinde to reach the bare minimum of one post per week (such frequency, on average, allows to call your blog “regularly run”). Weekly timetables changing each semester, new courses and lecturers, every-day opportunities to get familiar with someone or something new are, in their pre-2011 intensity, thing of the past. Each day begins to look the same – knocking on at 8 a.m, leaving office between 4:30 p.m. and 7 p.m., each day roughly the same faces (I should be thankful to my employer for its methods of accelerating staff turnover ;-)), one of a few routes to and from work. Don’t get me wrong – I’m not complaining. I do draw a lot of satisfaction from my work, get on well with my workmates (feeling of being the odd one has waned a bit), the job is financially rewarding and despite some drawbacks, the bottom line is without doubt positive. The monotony has crept in and it can’t be helped. If you say changing a job might be an option, I will refute by saying “not really” – I’d meet new people, face new challenges, immerse in new corporate culture, etc., but after a few months the problem could revert and even exacerbate, if I felt the decision had not been right.

The real issue is that, like many people of my age, I utilise nearly 100% of my bountiful energy at work. This means I’m motivated, flexible, energising – each employer would appreciate such employee, before they burn out. From my standpoint such risk doesn’t threaten me, but in a few years, who knows? The rest of my energy I offload by cycling and swimming regularly and doing household chores that require more physical effort. This has commendable side effects, as I’m fitter than as a student (despite starting to use a car every day), and should be kept up no matter what future holds, but is not a sustainable way to ensure mental balance in the long-run. To be truly happy in life, you can’t live for pleasure or for money, you can’t live for yourself, you have to live for the others… Focusing on work is not sustainable, especially if your employer doesn’t offer you stability. Job loss hence does not have to be confined to loss of salary and financial hardship or blank hole in your CV, for someone whose commitment (not mistake it for a drama of workaholics, these are two different problems) to work is excessive, mental shock might be more painful…

The only real option is pairing up and raising a family. At some stage bonds with friends naturally loosen up when they get married, go abroad, become preoccupied with their carriers. Personal life should have a priority, professional life is essential, should give satisfaction and pleasure, be the source of income, but should not occupy the top position on the list of priorities…

Just signed up for the level 2 of the exam. The exam is traditionally scheduled for the first Saturday of June, my self-study is planned to kick off with the end of summer holidays. Nine months spent learning. A friend (incidentally the same who failed to come to the party on account of burning the midnight oil at work) said it would do me good, as I would have a goal to pursue. I argued this coin had the other side, as this goal is too specific and set in time, so that there is little beyond it. I can take the exam, a few weeks after learn to have passed it, maybe get a pay rise. And then what? The third level? Next some nine months spent swotting up? If I do well, again passed. Then what? Earning a charter? Getting a promotion? More money? More authority? More respect? And on the sidelines what? Life slipping through my fingers, feeling of time passing by more and more quickly – turning 30 soon and apart from professional success anything else?

I’m not trying to debase the importance of development and education. Such career path is chosen by many young people who deliberately put back raising families until they turn 30, reach financial stability etc. Some do this successfully, some fail and suffer. It’s not that I claim one idea for life is right, while the other wrong. It’s not about passing judgements, it’s only about weighing up pros and cons, before it’s too late, to avoid regretting.

“Polityka” in July printed an article on singles and their loneliness. My Soulmate (my workmate, aged 38, married woman) upon reading this said I was on the path on become one from the most pitiful group of singles… Young (below 30 or even 35) singles have been accepted by the society and postponing the moment of tying the knot is natural these days; reasons to worry crop up when you turn 35. The group is said to be most pitiful, as one of their representatives, woman aged 38, TV producer, claims even her rubbish are pitiful. Key conclusions from that part of the article are:
1) most of older (>35) singles in fact don’t look for a partner or their search is doom to fail, as their expectations towards idealised second half are too exorbitant,
2) they have been convinced by their nearest and dearest they deserve someone exceptional,
(my comment: the two together entrap them, in a certain age it’s no use in “cherry picking”, as cherries are long in relationships are few of them return to “secondary market”, they can only go after “leftovers”)
3) one fourth of well-educated women from big cities are not in a relationship and fill in the emptiness by working like dogs,
4) the demand for a self-confident, motivated, excessively committed to their employer single has been created by contemporary capitalism, which apart from letting singles earn well and bringing them on unfettered consumption, produced hollow employees who might easily get lost in critical situation and whose value for the company might diminish rapidly,
5) being in a relationship increases resistance to stress and reduces risk of burnout and becoming a workaholic, because living for another person gives sense of life…

Of course as one day your company may fire you, your personal life may also shutter unexpectedly. Bereavements, divorces and other misfortunate events happen and so what – life’s about taking risks. You may say having a happy personal life without good job, decent money, wealth, feeling secure is worth little, but having all things people bend over backwards to chase and grab, and having no personal life, is then worth nothing…

How many times can the delusions be shattered? Over the last two years, how many times did it seemed this gloom was coming to an end? How many times did I think the orange glow on eastern sky signalled those were the last moments of darkness before the dawn? Each time the glow darkened and there was no sunrise. There were intimations of daybreak, the was some dim light in the night, but the sun has not come up. After each such dashed hope there is a period of withdrawal that lasts some 4 months (in more serious cases it takes longer to recover). Then ensues a revival. If you don’t try, you won’t succeed. Happiness is in your hands, if this time and next time it doesn’t work out, you can’t lose your heart…

Sunday, 11 August 2013

"Katastrofa emerytalna..." - book review

Imagine an economic system 18th-century liberal economist Adam Smith called for. Imagine a state which serves only as a night watchman, i.e. secures law and order, sets regulations and enforces observances of law and leaves all other aspects of social and economic life in hands of citizens and the invisible hand of free market. A mind-bending picture? No wonder, post-WW2 societies have become so accustomed to governments’ interferences into social and economic interactions that any attempt to whittle down the scope of government’s tasks would trigger hue and cry among spoilt populace…

Despite this, still there are niche associations that advocate idea of lean state and returning to traditions of classical economics. The most important such organisation in Poland is Centrum im. Adama Smitha, headed currently by Mr Robert Gwiazdowski. This ultra-liberal think tank which espouses ideas of lean state, low taxes and deregulation, from the very beginning of the pension reform in late 1990s was against compulsory participation in private-run pension funds… The profound justification of the think-tank’s stance is comprehensively explicated in a book released last year, titled “Katastrofa emerytalna i jak się chronić się przed jej skutkami”, literally: “The pension calamity and how to shun its aftermaths”.

Bemused? You thought if the free-market campaigner, Mr Balcerowicz fiercely defends private entities facilitating the pension reform, each free market believer should support private-run pension funds? Well, life’s a bit more complicated. And Mr Gwiazdowski can tell you why!

What’s your first association when you think of free market and capitalism. Words that come first to my mind are freedom and responsibility, but because those two rarely go together these days, Mr Gwiazdowski claims an average citizen when he thinks of capitalism has in mind huge investment banks, too big to fail, bailed out by governments in 2008 and free market is for him a game similar to tossing a coin: head – I win, tails – you lose. In fact this is how the economies work now and, as Mr Gwiazdowski rightly notices, those to blame are politicians, who have given financial sector freedom, but have failed to require responsibility in return. The current economic system is a blend of free market mechanisms and socialism, an upshot of decades of attempts of combining security citizens want from the government with market mechanisms which in economic theory should allocates resources most efficiently. Mr Gwiazdowski claims as you cannot mix up water and fire, there is no point in building in market mechanisms to socialist solutions. Such actions only lead to expansion of socialism and its further distortions… Conclusion? If a society requires a certain level of security from the state, the state should provide them with such “bare minimum” in the most simple way and refrain from improving anything by harnessing free market mechanisms or private sector.

At least for this very reason privatisation part of pension system in Poland was doomed to fail from the very beginning. If at the end of the day how high the pensions will be depend, apart from demographic trends and labour ratio, on general performance of the Polish economy as it underlies both stock market performance and solvency of government as sovereign debt issuer, does it make sense to put in private sector entities and entrust (and pay) them managing assets whose value in the long term will not rise much above GDP growth rate? And after all, is it possible and fair to encumber one generation with a burden of paying for current pensioners’ benefits and at the same time saving for their own pensions, if the only beneficiary of such shift would be the last generation living on earth and knowing about the oncoming doomsday?

For all those less familiar with pension system and its origins, Mr Gwiazdowski delineates a chronicle of insurance and social security schemes. This introduction helps a reader realise the pension system has a form of insurance protecting from the risk of old age and disability to work. Shift towards obligatory pension savings is an experiment then…

Mr Gwiazdowski points out the Polish pension system is full of absurdities and generally has a built-in inability to generate decent pension benefits. Ludicrous are the workings of state-run ZUS, that costs each year taxpayers over three billion zlotys, or 3 percent of paid contributions (compared to 3.5% charged by private pension funds). If you are curious what the load of money is spent on, Mr Gwiazdowski quotes a list of tasks of the ZUS that occupies several pages of the book – the purpose of author was not to bore a reader to death by enumerating what the social security system administrator has to do, but to give the feeling of how bloated the state sector is. Given the multitude of tasks ZUS must carry out, hundreds of clerks the institutions employs should not sit on their hands! Some of the tasks are truly ridiculous and expenses incurred for them totalled to billions of zlotys, such as the system for administering the pension reform which inter alia serviced transfers to pension funds and calculated so called kapitał początkowy (starter capital), an imaginary amount of paid contributions which then influenced pension amount.

Pension funds and their defenders are given a proper belting. Stability of safety of the private-run part of the pension system is called into question. Look just at the numbers, more up-to-date, from the government’s recent review. If assets under management totalled to 270 billion zloty at the end of 2012, and aggregate equity + guarantee fund totalled to 4.5 billion zloty, it means on average the safety valve covers 1.7% of assets amassed in pension funds. Lehman Brothers just ahead of its collapse had lower leverage! In the meantime owners of pension fund management companies paid out 4.2 billion zloty in dividends. In fact profits have been sucked out of Poland and in case something goes wrong, the private pension fund manager loses its equity (3.4 billion zloty, the rest is in the guarantee fund), liquidates the profit-making business and its responsibility ends. Responsibility for benefit payments rests then with the state or, let’s face it, taxpayers. Profits – privatised, losses – socialised! Please note with time the ratio of pension fund managers’ equity to assets under management will only rise, as assets will grow faster than equity, each year depleted by generous dividend payouts.

Pension fund supporters have a separate chapter dedicated to them (“Wojna o OFE…”). Their ferocity is best described by sentence “Profesor Balcerowicz zachowywał się, jakby OFE były najważniejszą rzeczą na świecie, a poza OFE życie na istniało w ogóle” (Professor Balcerowicz acted, as if pension funds were the most important thing in the universe and life without them did not exist). In all developed countries private institutions do not run obligatory pension schemes and life goes on despite this, but this is not the case. I recommend reading of this chapter, as Mr Gwiazdowski does in it what I called for – quotes specific statements of OFE defenders and then disproves them. Instead of shouting with angry face and talking of distortions and manipulations just like Mr Balcerowicz does, Mr Gwiazdowski puts under microscope each single myth on pension system and debunks it. You an argue with his reasoning, but can’t deny him precision and clarity.

The final question Mr Gwiazdowski asks is – if pension funds are as good as their defenders assert, why is participation to them obligatory? The true virtue will always defend itself! In fact Mr Balcerowicz, who refuses to give people freedom whether to choose to rely on state-run social security system, or to trust private sector asset managers, treats people like idiots (barany), not the government.

In the last chapters the author lays out the concept of the ‘civic pension’, a pension scheme similar to the one in Canada. The ideal pension system in Mr Gwiazdowski’s opinion should be as simple as possible – not to generate unnecessary costs for taxpayers, guarantee subsistence allowance, leaving any initiative to save for or insure against pension in citizens’ hands, and… be funded directly from taxes… Then he casually muses about workings of the state and advises how to save for pension on our own.

For my part, the book is:
- deftly and brightly written (I noticed some complication of Mr Gwiazdowski’s blog posts),
- could do with some more thorough editing, as spelling and other minor, easily discernible errors have not been eliminated,
- biased, but this not an academic publication, but expresses private judgments of its author (probably therefore strikes a chord with me),
- thought-provoking and compels a reader to think over how a variety of pension system solutions work, what their advantages and drawbacks are and which of them can be eliminated.
All in all – a recommended read, particularly less than a month before final settlement on the shape of pension system in Poland.

Sunday, 4 August 2013

Pension funds – awaiting the resolution

Low season is reaching its nadir. Summer, that according to long-term forecasts issued in May was supposed to end in June, brings weather ideal for those holidaying and not enviable for those having to work. In the meantime, far in the background, the government runs consultancies on the future of pension system in Poland. The temperature of public discourse is not as hot as in the last days of June, when variants of pension system turnaround were unveiled, yet at some moments emotions are running high.

Last Tuesday Jacek Żakowski invited for his radio interview in TOK FM prof. Leokadia Oręziak – probably the most avid academic critic of private-run pension funds. Her view of the issue is more or less the total contradiction of what Mr Balcerowicz advocates. Whoever wants to acquaint with the problem, can read the transcript, I will only take the liberty of pointing your attention to comment thread. In the last weeks I began to observe a shift in Poles’ view of pension system reform. In brief – Poles badly assess performance of private-run pension funds and costs (including charged fees) they generate, but discern superiority of pension funds over state-run social security fund (the lesser of two evils). The superiority consist in the fact pension funds are a pool of real assets, while the social security fund has no money, just a book record. Commentators frequently argue whether the assets in pension funds belong to them or not, quoting manifold arguments to underpin their assertions, some resort to insults to prove their supremacy :)

I particularly liked one comment (not remember where I read it) in which someone aptly noticed those who now are trying to capitalise on demonising pension funds and urge on scrapping them might in a few months end up is management or supervisory boards of newly created state-run institutions managing assets taken over from pension funds…

Some time ago I mentioned my futile attempt to check correctness of calculation of returns fetched by two pillars of the pension system. Last week the ministry of finance responded to accusations of Komitet Obywatelski Bezpieczeństwa Emerytalnego (literally: Civic Committee of Pension Security, abbr. KOBE) regarding wrong methodology in government’s calculations. The whole, 35-page-long response is available here. Whoever wishes to drill down into its, good luck, I see some more productive activities for Sunday summer afternoon, but one day I will probably revert to that document. So far the Civic Committee has not issued any announcement after the government’s counter-report. I leave the assessment up to you and can only bring two statements to your attention:
1) “prof. Marek Góra (...) Pytany, czy weryfikował obliczenia rządu i obrońców OFE, odpowiada, że nie. - Wyliczenia przygotowali znakomici ekonomiści, którzy nie mogą się mylić. Ministerstwo Finansów nie ma takich ekspertów” – these words have wound me up. There are no infallible people, even the most outstanding economists can be wrong and blindly trusting somebody on account of their impeccable academic credentials is appalling!
2)Wyniki przedstawione w opracowaniu pokazują jak wrażliwe są one na przyjęty zestaw założeń „upraszczających"; w szczególności dowodzą, że w zależności od formułowanej hipotezy możliwy jest taki dobór mierników efektywności, aby wnioski z ich zastosowania przemawiały na korzyść OFE lub I filaru w ZUS” – this is what the whole dispute is all about and why it might never cease. Given multitude of variables and simplifying assumptions one has to make, there is plenty of room for manipulation. Tack on the pressure for reaching a specific outcome (the government wants to prove superiority of ZUS, while pension fund defenders will seek to prove superiority of OFE – look at KOBE’s webpage – am I only one who has impression their goal is to save pension funds, not the benefit of future pensioners?) and you will realise dashed are the hopes for finding impartial calculations…