15.

Societal issues and the economy

I. Introduction to the topic

The role of the state in the economy: fiscal policy

 stabilisation: providing the necessary framework for the operation of the economy
and evening out fluctuations in economic activity (i.e. stabilising the general level of
prices, production, unemployment and the value of the national currency)
 redistribution: collecting taxes and paying benefits in order to decrease income
inequalities
 allocation: redirecting resources

The government budget

This is the government’s financial plan, which includes the estimated revenues and
expenditures for the coming year. The national budget is drawn up every year and is
presented to Parliament by the Minister of Finance. The major source of government
revenues is the income from taxation and duties. When the revenues do not cover the
expenditures, the budget is in deficit. One way of covering the deficit is to borrow capital by
issuing and selling government bonds.

Areas of public expenditure

The government makes corrections in the income and wealth inequalities among citizens
through transfer payments, such as pensions, social security and unemployment benefits.
Transfer payments also include interest payments on the national debt and subsidies paid to
farmers and others. It is generally accepted that a government should provide a wide range of
goods and services, such as law and order, (courts, the police) national defence, public
infrastructure and culture. There are services, such as education and health care, which are
provided by both the market and the State.

The pension system

The government has the responsibility of taking care of retired people. One can receive a
pension from the social security authority. In the framework of the pay-as-you-go system, the
pension contribution of the active population is paid to pensioners. Membership in a private
pension fund also ensures payment for people reaching retirement age. Their payments are
invested in safe state securities to earn interest for them. In the advance-savings system the
money accumulating in their personal accounts will be paid in the form of an annuity or can
be inherited. Voluntary pension funds also provide security for the years after retirement.

The ageing population

While overpopulation is one of the major causes of the problems the third world is facing,
the developed countries’ welfare societies have a rapidly ageing population. The number of
retired people has never been greater than it is today, and will continue to grow in the future.
The increase in life expectancy makes disproportionate claims upon the social safety net
(pension system, health care system, social benefits, etc.).
 Vocabulary exercises based on the introductory text

A. Match each item in the left-hand column with one similar in meaning from the
list opposite

1. society a. average number of years a person is

expected to live
2. framework b. system of social insurance
3. in deficit c. becoming older
4. transfer payments d. regular payment to the state
5. social security e. money accumulated to be paid later
6. contribution f. gradually increasing in amount
7. advance-savings g. showing a debit balance
8. accumulating h. the community
9. ageing i. income received from the state by people
who give no goods or services in return
10. life expectancy j. structure

B. For each item listed below, find in the text a word or phrase given in bold that is
similar in meaning

1. assigning for new (i.e.different) purposes …………………………

2. sums of money received by the state ………………
3. sums of money spent …………………………
4. obtain as a loan ……
5. safety …………………………
6. ensure/offer …………………………
7. retired people …………………………
8. withdrawal from active working life …………………………
9. received from someone who has died …………………………
10. independent, supported by contributions
freely given …………………………

II. Hungarian text

Exercise 1
Cover the English words and expressions given on the right and try to guess the English
equivalents of the underlined parts of the Hungarian text .

Exercise 2
After checking your guesses against the equivalents listed on the right, give an oral summary of
the text in English.
Almunia: az unió tagállamaiban minél előbb reformok kellenek

Világgazdaság 2006. november

Reformok nélkül az elöregedő európai társadalmaki néhány év múlva nem fogják
tudni kiadásaikat finanszírozniii; minél előbb indulnak meg a reformfolyamatokiii,
annál kevesebb lakossági áldozatvállalássaliv járnak – mondta Joaquín Almunia, az
Európai Unió gazdasági és pénzügyi biztosav a Libération című francia napilapban
pénteken megjelent interjújában.

Az Európai Unió lakosságánakvi száma 2050-re nem fog változni, de a 65 éven

felettiekvii száma 58 millióval fog növekedniviii, a munkaképesekix száma pedig 48
millióval fog csökkeni. Jelenleg négy aktív munkavállaló tart elx egy nyugdíjastxi,
2050-ben már két aktív feladata lesz ez. Ha semmi nem változik addig, az
idősekkel is foglalkozó ellátórendszerekxii azaz az egészségügy, a szociális
ellátásxiii és a nyugdíjrendszer össze fog omlanixiv – hangsúlyozzaxv a pénzügyi
biztos.

Almunia felhívta a figyelmet: egy állam nem jelenthet csődötxvi, de kerülhetxvii

olyan helyzetbe, hogy a közszféránakxviii az adósságok törlesztéséhezxix az
adóemelésenxx, és a nyugdíjak biztosításáhozxxi a szociális járulékokxxii emelésén
kívül nem marad más lehetősége. Ez a szociális modell végét jelentené Európában.

A reformok a biztos szerint a lakosság egy része számára nyilvánvalóan

hátralépéstxxiii jelentenek. De azoknak, akik ijesztgetésrexxiv használják a
reformokat, észre kellene venniükxxv, hogy ahol megvalósultakxxvi, ott még soha
nem vezettek negatív eredményrexxvii. Bizonyos szociális csoportoknak le kell
majd mondaniuk kiváltságaikxxviii egy részéről a közjó érdekébenxxix, de minél
előbb vezetjük be a reformokat, annál kevésbé lesznek fájdalmasak.

1339 n
III. English text
When I'm 64
By Hans Ulrich Maerki

The Wall Street Journal 29 October 2007

1. Falling birth rates, longer life spans and the imminent retirement of the baby boom
generation have combined to cast a long shadow over Europe. Between now and 2030, the
Continent will lose 20 million workers. These are demographic changes of a magnitude not
seen since consecutive world wars ravaged Europe in the first half of the twentieth century.
The proportion of people over 65 years of age will rise by more than 50%. Instead of four
workers to support every retiree, we'll have only two, with disastrous consequences for our
pension systems.
2. The challenges, though, are more than just fiscal. Many of today's retiring workers have
critical skills that Europe will need to stay competitive in an increasingly globalized economy.
Whether or not we can maintain the pension plans we have now, we simply can't afford to be
without those skills and manpower. If we can't produce enough younger workers to replace
the retirees, at some point Europe may find itself with an unusual problem: more good jobs
than skilled workers to fill them. The threats to Europe's economic growth prospects are self-
evident.
3. The demographic problem is exacerbated by state pension plans that encourage employees
to retire early. What's necessary is a cultural transformation: changing the preferences for
early retirement among workers, while employers overcome their bias toward hiring younger
workers.
4. Many older workers would like to keep on working, but can't because they would lose
benefits by doing so, or because of inflexible corporate policies about part-time or flexitime
work.
5. More people than at any time in history get not merely compensation but pleasure and a
sense of identity from their work. Most of us could imagine doing something interesting and
fulfilling, as well as gainfully economic, after we reach eligibility for retirement. Keeping
these people in work would be a triple win: It would reduce the strain on government
resources even as it provides more skilled workers for businesses and more diverse and
productive careers for people so that “living longer” really does mean “living better”.
1770 n

Important terms

baby boomer generation - those born after World War II from 1946-1964 (in
2007, those between 43 and 61 years old)

demography – the study of changes in numbers of births, deaths, marriages,

diseases, etc. (demographic changes, demographic problems)

retiree – a person who has retired

flexitime – a system in which employees can choose at what time they start and
finish work (also called flextime)

compensation – money paid for work done

gainfully economic – generating income (i.e. of economic value)
eligibility for retirement – the state of being qualified/entitled to retire

Extended vocabulary

 life span: the number of years that a person lives

 imminent retirement: retirement in the immediate future
 cast a long shadow (idiom): cause doubt or uncertainty
 magnitude: size or importance
 self-evident: obvious, clear
 bias: one-sided inclination, prejudice

Comprehension questions

1. What three demographic features are causing uncertainty in Europe?

2. What impact will baby boomer retirement have on the labour market in Europe over the
next 20 years?

3. What will the ageing population mean for the pension system?

4. Besides financial problems related to retiring workers, what other major challenge will
Europe face?

5. In what way does the government make this demographic problem even worse?

6. What sort of a “cultural transformation” is needed to address this demographic problem?

7. Often workers of retirement age can’t continue working even if they want to. Why is
that?

8. In addition to earning money, what other benefits does work bring to people?

9. In what 3 ways would everyone win if people who are eligible for retirement were kept in
the workplace?

IV. Discussion questions

A. Discussion questions related to the text

1. Whose responsibility is it to provide pensions for retired people – the government’s, or

should pensions be the personal responsibility of private citizens? Why?

2. Where should the money come from to finance pensions? Can the government afford to
pay pensions without at the same time raising taxes?

B. Additional discussion questions

1. Which sectors of the economy should be financed by the state?

2. How do demographic problems affect public spending?

3. What are some of the changes that Hungary’s participation in the Bologna process has
brought about in higher education?

V. Role-playing exercises

29. Top management: to hire youth or wisdom?

Student:
You are the HR Director at an international company that is seeking to hire a new top
manager. Two people have been shortlisted for the job – a talented 30-year-old and a 50-
year-old with a solid track record. Your CEO would like to know how the company would
benefit from hiring one or the other, and the possible drawbacks.

Examiner:
As the CEO of an international company, you are faced choosing between 2 candidates who
have been shortlisted for a top management job – a 30-year-old and a 50-year-old. You
want your HR Director to think about the benefits of hiring one or the other.
30. Incentive scheme

Student:
As sales manager at your company, your task is to develop a new incentive scheme for your
sales staff. Should pay be based on individual performance or based on the team, in which
case profits are shared? You meet with a colleague to decide on the pros and cons.

Examiner:
You are the colleague of the sales manager, whose task is to decide between an incentive
scheme based on individual performance or based on team performance. You meet to
discuss the pros and cons of both.

i
ageing European societies
ii
finance expenditures
iii
reform processes
iv
readiness to make sacrifices
v
economic and financial commissioner
vi
population
vii
people over 65
viii
will increase by 58 million
ix
active workforce
x
workers provide for/support
xi
pensioner
xii
social security systems
xiii
social care
xiv
will collapse
xv
stresses
xvi
declare bankruptcy
xvii
can get into
xviii
public sphere
xix
debt payment
xx
tax hike
xxi
provision of pensions
xxii
social contributions
xxiii
a step back
xxiv
scare tactics
xxv
notice
xxvi
where they were implemented
xxvii
result
xxviii
will have to give up their privileges
xxix
for the sake of the public good