STEVE INSKEEP, Host:
Dambisa Moyo is an economist who has worked for the investment firm Goldman Sachs and for the World Bank. She's just written a book called "How the West Was Lost." Moyo argues that many government and private pension plans are just not sustainable.
DAMBISA MOYO: Companies have to make investment decisions. And having inordinate or very sizable pension costs means that their business strategy inherently has to change. And this has made American companies, as we know, relatively uncompetitive when compared to their international counterparts, which have much more flexibility in the labor space and obviously have not had the burden of pension costs anywhere to the degree that Western industrial companies have.
INSKEEP: Wasn't it desirable, at least at some point, to offer a pension to someone in order to attract their labor?
MOYO: Absolutely. The problem is the manner in which they were structured. I mean, these were essentially what in financial terms is called out of the money options. They absolutely rested on the fact that we needed a larger, younger workforce that was always going to pay for an older generation. But as we know, the shift in demographics means that we will have many more old-age pensioners relying on a much smaller and shrinking work base. And we knew this, but it's one of these very convenient things that policymakers have been able to kick to the future.
INSKEEP: Well, let me ask about that, though, because when you talk about the future, these kinds of defined benefit pensions are things that a lot of corporations have, with great pain, shaken off in recent years. Some have simply walked away, often illegally, from pension plans. Some have negotiated and gotten rid of them. Some have handed them off to the Pension Benefit Guaranty Corporation, which is a government entity.
MOYO: Mm-hmm. Yeah.
INSKEEP: Aren't corporations shedding themselves of these kinds of commitments, even as we speak?
MOYO: Well, they are, simply because something has to give. And I think that's something that the private sector has come to terms with very begrudgingly. But in terms of the public sector, that's something that we still haven't got much clarity on.
INSKEEP: Well, let's figure that out next. The biggest of all pension plans, of course, in the United States would be Social Security...
MOYO: That's right.
INSKEEP: Social Security is expensive, as you point out in the book. But how serious do you see the problem of Social Security right now?
MOYO: It's arguably the biggest problem that the United States faces over the medium term. I mean, already, if you add in Social Security and Medicare and Medicaid, we're talking about around 40 percent of the United States budget.
INSKEEP: President Obama sponsored a deficit commission. This deficit commission. This deficit commission came up with one plan. It's one of many that are out there.
INSKEEP: And it seemed to be relatively moderate adjustments over a very long period of time would make this program solvent in the long term. Are you saying that even if Social Security is solvent, that's not your main concern? It's just costing us too much? It's too much in the federal budget? We're spending too much money on old people.
MOYO: No. What I am saying is that your programs have to be viable, and something has to give.
INSKEEP: Thanks very much.
MOYO: Thank you very much for your time.
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