Introduction

Two approaches to retirement and pensions are considered alongside oneanother in this chapter. Both take the political and economic context astheir starting point but they reach very different conclusions. Politicaleconomy has a long tradition within the social sciences and two basic formsare identified. For the sake of clarity these will be referred to as‘orthodox’ political economy and ‘radical’political economy. Orthodox political economy is traced to Adam Smith, thefigure whose shadow is the longest, with Karl Marx the major figure indeveloping radical political economy. These categories are complicated bythe fact that radical versions of political economy can appear quiteorthodox while orthodox political economy has been quite radical in somerespects. The easiest way of thinking about the two schools of thought is torecall that orthodox political economy has the longer tradition and is oftenassociated with the political Right, whereas radical political economy wasdeveloped by the political Left in the latter part of the 19th century. Bothversions are quick to identify their respective political allegiances andtheir roots. Thus, for example, on the first page of their book, theFriedmans (1980) nail their colours to “The wealth ofnations … the masterpiece that established the ScotsmanAdam Smith as the father of modern economics” (p 1). In contrast,Deaton (1989) makes it plain, in the first sentence of his study, that he is“using the approach of Marxist political economy” (p 1).Orthodox accounts will be considered first, with some examples from the UKbetween 1979 and 1997 provided to illustrate the approach. Radical politicaleconomy follows, with the discussion focusing on occupational pensions.

Ease and plenty:orthodox political economy

Adam Smith and Thomas Malthus are the two figures that are most significantin the development of orthodox political economy. Smith often appears to bethe optimist and Malthus the prophet of doom and gloom. Smith asserted thata capitalist market benefited everyone in society, including the poor.Provided governments could resist the temptation to interfere, a capitalistmarket would generate goods and services to meet demand. Markets mustoperate within legal boundaries but if the market allows free and faircompetition, then the ‘invisible hand’ of supply and demandwould reward hard work and enterprise.