The crisis in the Turkish pension system: a post Keynesian perspective

The Turkish pension system began experiencing some structural and fiscal difficulties in the mid-1990s: increasing dependency ratio (e.g., number of beneficiaries per active contributors) and budget transfers to close the deficit in the system. These trends resulted in a crisis in the system, and it thus underwent a major transformation as reforms moved the traditional pay-as-you-go (PAYG) scheme significantly toward privatization and personal responsibility for assuming risk. These changes reflect the interests of business (e.g., İTO, 1999; TİSK, 1995; TÖSİAD, 1997, 1999, 2004) and international financial institutions (e.g., Government of Turkey, 2004; ILO, 1995; World Bank, 1994). This article establishes the overlooked underlying causes of the crisis by analyzing the Turkish pension data from a post Keynesian macroeconomic perspective. It argues that the problems of the Turkish pension system do not lie in the design of the traditional system (i.e., PAYG) but in the changes that have taken place in industrial relations (i.e., increasing unemployment, informal employment, and low wages) and social policy (i.e., narrowing the base and extent of social protection and financing health care and education via market mechanisms) in line with neoliberal policies pursued since the 1980s.