1. Context. The social dimension of a state represents, unquestionably, the foundation of its very existence. As a subject, cause and mobile of the act of governing, society justifies the creation, implementation, maintenance and constant evolution of one of the largest known socio-political institutional structures – the state. As such, society consists of ‘a unitary and complex system of human interactions’ (Muraru & Tănăsescu, 2011, p. 1 sqq), which ‘can exist, develop and that can exercise its power only in and by the means of organised structures’ (ibid).
Given the profound social nature of the state as an entity, social policies (alongside tax policy and military provisions) stand out as core concerns in the development of governmental strategies. As a result, social, economic and military (public order) security are seen as fundamental values of any given contemporary society.
Socio-economical security is mainly provided by salaries, pensions, as well as other funds like those managing social security institutions charged with the protection of more vulnerable or economically-challenged social groups. Even though the principles regarding pensions have crystallised in time, the need for clarification regarding certain aspects of this state business subsist. With that in mind, this article will focus mainly on the state’s responsibility and the parties’ quality and obligations. Also, the nature of the ‘contract’ and some procedural aspects regarding the management and destination of funds and who is entitled to benefit from them will also be discussed.
2. The state and social security
Social security policies developed as instruments of compensation for the market’s weaknesses and complementary to its mechanisms for that, as the English speciality literature states, the fundamental objective of social policies is to provide the well-being of citizens. O’Connor and Gough both believed that advanced capitalist societies require a specialised infrastructure for maintaining social peace and in order to develop acceptable education and health standards. Once the milestone of well-being is reached, it is considered a won right and it cannot be restricted beyond its inferior limit, without breaching the principles governing human rights and acting against the purpose of the social state itself.
Even though social policies are initiated or extended more intensively in times of social tension, as noticed by Piven and Cloward, they are constantly present in a state’s governing strategy, for that, at any given time, the risk of the economy lacking the ability to self-adjust persists. Thus, social policies are the answer to the community’s problems, so the higher the risk, the more intense the state’s countervailing duty. As such, the state’s social-economic status quo consists of 3 elements fallen under the welfare state’s umbrella of responsibility: the social life of the community (with self-adjusting possibilities), standard social security policies and, respectively, extended and initiated policies.
Rousseau’s ‘Social Contract’ engages all participants in the state’s social life towards reaching a compromise: the workers acknowledge the capitalist state’s legitimacy for it to grant a sufficient profitability standard and an economic surplus on the basis of which social strategies will be applied. This way, society develops a forced solidarity system between generations in the matter of public pensions, in which the now working class pays for the now pensioned workers. Part of the worker’s earnings is, by law, distributed to the Public Pensions Fund in anticipation and with the aim of the ‘now’-ers of subsequently benefiting from the same security the ‘then’-ers are now granted through the working class’ contributions. The fight against poverty was accurately tackled in the ‘Beveridge Report’ (1942), regarding British social policy and social security services, as solidarity between members of the community by redistributing the national income, in the light of human rights standards and in consideration of individual economic power, expression of individual liberty, according to John Keynes. Moreover, The International Organisation for Migration, in the ‘The 21st century: development of social security’ report, describes social security broad-sensed as the providing of a security standard. In terms of economic global evolution and in consideration to Keynes’ affirmations, this implies the proportional evolution of rights (and the correspondent revenues) to the evolution of prices, so that the individual economic power complies to the set standards, in spite of inflation.
Taking into consideration the above mentions, the general premises of the state’s responsibility in matters of pension consists of a national effort of implementing a state compensation system by means of mandatory measures (laws), a coordinated institutional activity of fundraising and the allocation of a part of the national resources (provided by individual contributions or direct allocations from the state budget) to a special fund (pension budgets). The resources are then redistributed to a systematic process of answering the needs created by inequality, poverty, sickness, and illnesses. The state is charged with the primordial obligation of providing social security through available resources, overlaid by secondary individual contributions from citizens – in consideration to the principle of social solidarity (which nowadays represents a general global practice for the supporting of social security funds).
The present Romanian legislation defines the contributor as an individual or legal entity which pays sums to the public pension system. The aim of this specific contribution is to obtain the contributed sums later, after the fulfilment of specific conditions. Now, how can the legal entity benefit from the pension? How can an individual person benefit from pension if death intervenes? How can the sums remain constant and proportional, given the evolution of economy and rights? Is the contributing conduct a risky economic activity? How does the social contract apply to pensions and is the contribution a deposit or is the pension a state-given credit? To bring light into these matters, we will take a look at the credit and deposit dimension of the pension funds as compared to banking activities and, also, the possibility of the National Administration of Public Pension to act as a state bank with a specific area of activity – social security.
3. The deposit
A simple deposit happens between a depositor (offeror of sums) and a depositee (person who receives the sum) and is identified as ‘a sum of money entrusted conditioned by being entirely refundable, with or without interest or other facilities, on request or at a given date set by the depositor with the depositary, and which does not refer to transmission of property, provision of services, or granting of guarantees’ (Șaguna & Rațiu, 2007, p. 178). Regarding the contributor to the pension fund, the general individual’s subjective attitude is that he ‘saves money for hard times’, as such, the return is justified, but the target revenue varies depending on the years of contribution, the sums contributed, the quality of the depositor, and other aspects. The institution of interest is the one that raises a more complex debate regarding its justification and necessary nature, for that it represents an extra, in the context of repayment (through pension), covered by the state or other relatively undue revenues and solely justified by the evolution of rights.
Interest is more efficiently justified by the contractual nature of a bank deposit, identified as any transaction where ‘any sum, including due interest from a bank account of any kind, including collective account, or from transitional situations provided by banking transactions, and which a credit institution owes to the account holder, according to legal and contractual applicable terms, or, also, any debt owed by the credit institution provided by a certificate issued by it […]‘ (Șaguna & Rațiu, 2007, p. 178). In this case, the sum may represent the monthly revenue (pension) correspondent to the previous contribution to which interest is added as compensation to the inflation rate and the devaluation of a fictive individual fund (resulted in a lesser economic individual power, subsequently a passive restriction of individual economic freedom). There is no physical account directly attributed to a contributor (client), but, in light of the principle of (forced) solidarity between contributors, all contributions are ‘stored’ in the collective account from which individual pensions will be later on determined (according to specific criteria – age, health, contributed sums according to the labour contract).
Although quite similar, bank deposits and ‘pension deposits’ are fundamentally different in terms of purpose, for that an ideal bank deposit is aimed to become a free of use capital, a non-attributed sum, with no specific destination, whereas pension funds are destined to be immediately reintroduced in the economic circuit in order to perform the due obligations (payment of pension) to the pensioners. Still, workers’ contributions are performed in perspective, for that the fictive deposit is created under a suspensive condition, with a fictive state debt to the citizen, which becomes enforceable in the future, with the fulfilment, by the beneficiary, of the legal terms. As such, ‘deposits represent a source of credit’ (Șaguna & Rațiu, 2007, p. 179) (and of the state’s obligation of future payment) of the final non-refundable sum to be distributed to the beneficiary. Given the two states of being of the pension fund, we can identify its legal double-nature: ‘on the one side, it represents an obligation of the bank to the depositor and, on the other side, it represents debts of the depositor to the bank’ (Șaguna & Rațiu, 2007, p. 179).
Regarding the legal nature of the relation, Romanian doctrine rallied to the French perspective, considering ‘the bank deposit as a species of civil law deposit, on which grounds the banker becomes the owner of the raised amounts from the clients and has to refund the equivalent, and not the identical object received into depositing’ (Șaguna & Rațiu, 2007, p. 179). As such, the bank deposit can be identified as a ‘consumption loan, for the enforcement of which the client lends the bank a sum of money and the bank must return the equivalent of the borrowed goods’ (ibid). The clients’ sums are used in the enforcing of actual state obligations (principle of solidarity), for that they leave the potential beneficiary’s patrimony in exchange for a potential future right (pension), conditioned by the meeting of several legal terms. Regarding the equivalency of the reimbursement, the final sum takes into consideration the evolution of rights and economy. Along with the standard contributed sum, there will also be offered a compensatory revenue, equivalent (in theory) to the devaluation of the initial goods (due to inflation) and as additional protection in case of a positive evolution of the level of social risks.
A non-typical form of neither deposit nor consumption loan, the contract between the contributing future beneficiary client and state (through the Public Pension Administration) can be identified as an unnamed contract. There is no contemporary contract equivalent describing such an interaction between the contributing future beneficiary client and the state. Nevertheless, the way the parties’ obligations are strictly determined, the means of enforcement and the contents of the interaction imply the framing of transactions as ‘contract’, a convention through which a current continuous contribution of the contributing client is being provided in exchange for the state’s continuous, future, monetary contribution to the citizen, destined to provide a standard of security to the same contributing client, became beneficiary. Simultaneously and separately from the contributing client’s contributions, sums originated from him are being reinvested/redistributed for the enforcement of state’s obligation to counter-execute the contract with the client debtor who fulfilled his obligations and meets the legal terms to become an actual beneficiary.
4. The credit
Credit transactions and the compensatory dimension of the state’s obligations derive from the state legal theory. As concluded before, the state entity consists of an organised form of people’s power, enforcing the people’s will, as a unitary moral entity. The exercise of people’s power ‘targets the general interests of society and the state’s authorities find their reason of existence in directly or indirectly meeting specific needs or social focus points: personal security’ (Balan, 2015, p. 40). The primordial contract is, as such, created on the basis of the state’s obligation to grant individual social-economical security as a general objective of achieving social peace.
In the same comparative manner will the second component of the dual nature of the public pension fund be revealed – the credit dimension. Similar to the deposit transaction, the credit activity also represents a fundamental banking activity. Generally speaking, by credit, we define ‘any payment commitment of a sum of money in exchange for the right of reimbursement of the sum, including the payment of interest or other related payments’ (Șaguna & Rațiu, 2007, p. 197). This definition is susceptible of various interpretations and also requires specific explanations in order to match the topic, but certain is the ability of this given contractual instrument of raising the bank’s obligation, the state’s obligation (by means of Public Pension Administration) to award the former contributor client (and actual beneficiary) a sum of money. As a result, the credit transaction ‘has been assimilated as a loan on the basis of which the bank is charged with the obligation of providing a sum of money at the disposal of a person’ (Șaguna & Rațiu, 2007, p. 198).
Through the satisfaction of a public necessity, public service fulfils the urgency risen from ‘an activity of general interest, enforced by the administration, charged with the mission of satisfying the general interest’, as noted by Vedinaș (2014). As such, state credits become non-reimbursable, for that they originate in the state budget, so, even though ‘96% of social security budget comes from contributions’ (Coste, 2016, p. 29), the state still represents the basis of the public pension funds.
5. Public Pension Administration – bank of public security
As proven before, the Public Pension Administration holds the operational competence of a typical bank, with the particularity of being financially supported by the state budget. This institution is able of, both, credit and deposit transactions, and other banking activities, such as passive banking (accepting deposits), active banking (investment of national resources in non-reimbursable credit transactions – state compensations), and other related activities (maintenance and cash, data providing activities, non-financial activities).Similar to banking strategies, the cash flow is transferred from the client’s patrimony to a collective investment account which, on request, individualises the correspondent equivalent sums to be subsequently retransferred to the client. Given the fact that a banking institution should be able of both credit and deposit activities, Public Pension Fund can be considered a sui generis (unique) banking institution, in the service of the citizen and managed by an autonomous state institution.
Given the discussed aspects, social security can unequivocally be considered a fundamental state investment leviathan, overseen by the people, through public administration, of which lack of synchronisation is tempered by the Public Pension Administration. Constituted as a social security-centred bank, this institution, by means of clients’ solidary individual contributions, provides the security of an unpredictable future and the well-being of lesser fortuned social classes, with the sole goal of achieving the state of harmonious general peace, understanding and development of a much-deserved providential state.
By Bogdan-Alexandru Petrescu
This article has been originally published in issue 5.1 of the magazine, which can be found here. All references used can be found at the end of that issue.