The recent boom in reckless behavior by people working for mortgage brokers and investment banks—behavior that in some cases wrecked entire companies— can be explained in large part by the fact that the people who made the bad decisions had a short-term interest in doing so. And pensions, of course, exacerbate the principal-agent conflict, because of the factor of time. In the short run, taking a tougher line on pensions means that executives need to pay higher wages, raise taxes (or cut profits, if they’re running a company), or risk a strike. None of those options are especially attractive. By contrast, if they’re generous with pensions, they get to keep the peace and not give up very much in the present. Everyone wins—except the future citizens or shareholders, now saddled with hundreds of millions or even billions of dollars of debt. As Lowenstein suggests, this was a recipe for disaster: “Retirement schemes necessarily involve a treaty between today and tomorrow, and on a mass scale. It is no surprise that so many have run aground, or that when they do, financial upheaval is the result.”

After reading Lowenstein’s book, it’s hard not to come away with a picture of leaders as almost weak and self-interested. But there’s another piece of the equation: most of us, as shareholders and taxpayers, also prefer not to face reality. The quintessential case of this is San Diego, where citizens accepted the delusional and outright deceptive statements of their politicians because they didn’t want to pay higher taxes, even though San Diego has some of the lowest taxes in the country. San Diego is an extreme case of a dysfunctional city, but it captures something important about voters, which is that they, too, seek to avoid short-term pain even if it means longer-term suffering.

The other problem, of course, is ignorance. There just aren’t that many people who understand how pension benefits really work, and institutions are good at covering up what they’re doing, at least in the short run. (Not long before everything started to fall apart in San Diego, Lowenstein writes, “to the outside world, San Diego was the picture of health.”) But to some extent, this ignorance is willed. Lowenstein demonstrates that, particularly in places like New York, editorials have been inveighing against pension giveaways for at least three decades. And while the local paper in San Diego did a very poor job of covering the burgeoning crisis—in part, the author suggests, because of its anti-tax ideology— one would be hard-pressed to say that the mainstream media have ignored the pension debacle. Lowenstein himself has done a number of pieces for the Times on this very subject.

Ignorant or indifferent voters, greedy workers, and shortsighted and self-interested executives: that’s not really a recipe for finding a way out of a crisis. So it’s not surprising that while Lowenstein ends his book with some sensible suggestions, the overarching tone of While America Aged is unrelentingly grim. To some degree, things are already changing: with fewer and fewer companies offering pensions, and with union power on the wane, there will be fewer budget-busting promises being made. But that creates problems of its own, given the finances of Social Security and the failure of most Americans to save. A lot of people are going to have keep working a lot longer, and be much poorer after they retire, than they had once counted on. There is, on the whole, not much solace to be derived from the situation. America is aging. Too bad it’s not doing so gracefully.

 

James Surowiecki is a staff writer at The New Yorker and the author of The Wisdom of Crowds.