By Gwydion M. Williams
Trump and Musk are giving voice to what members of Britain’s Labour government must be privately thinking. Saying more crudely what the elite have come to believe. It is just not possible to fund welfare to the needy. The state risks going bankrupt, and welfare is anyway mostly wasted.
It is not explained why we were able to manage fine from the 1950s to 1970s, when we were all less prosperous. Instead, voters are confused with claims that their tax money is going to cheats.
In the USA they go further, with Elon Musk saying “Keynes was a great evil”.[1] Starmer and Rachel Reeves are acting as if they believed it.
On the matter of evil, if someone claimed that Keynes was in the habit of summoning Satan and receiving instructions from him on economics, that would be rather hard to disprove. Other matters can be given a logical analysis.
Elon Musk has also denounced state pensions as a Ponzi Scheme.[2] And amazingly, this ignorant comment got nothing like the derision it deserved. Four and a half decades of New Right dominance have left many people seeing wealth as something that comes just from profit-driven commerce. So profit-making commercial pension schemes are seen as real, but state schemes as some sort of fraud.
A Ponzi scheme is an investment fund that is advertised as giving unusually high returns. But actually there are small returns or no returns. Much of the money is gone when those owed it try to reclaim it.
“Ponzi’s investors were practically wiped out, receiving less than 30 cents to the dollar. They lost about $20 million in 1920 dollars (approximately $314 million in 2024 dollars).[16] By comparison, Bernie Madoff’s similar scheme that collapsed in 2008 cost his investors about $18 billion, 53 times the losses of Ponzi’s scheme.”[3]
Interestingly, Madoff’s victims recovered 91 cents to the dollar[4]. Modern governments became much more interventionist since the 1920s, and this included better investor protection. The New Right denounced interventionism, but has kept it when it comes to looking after people in the richest tenth of the society. Various lawsuits forced financial institutions that had done business with Madoff to pay the victims.
Plenty of rich people were ruined by the Wall Street Crash. But in the crisis of 2008/9, the US and British governments chose to cover their gambling debts. They lost much less.
Another social shift since the 1920s is the status of Italians (see photo of Ponzi). It was much lower then, with Italians and first-generation Jews blamed for rising criminality and bootlegging. That none of this would have been possible without Irish police and WASP politicians was glossed over, just as Latinos get blamed for the wave of drug abuse caused by foolish consumers. Encouraged by pharmaceutical companies and regular doctors spreading fentanyl. So it’s not surprising that the unfamiliar but easily pronounceable name ‘Ponzi’ was used for something much older.
“Some of the first recorded incidents to meet the modern definition of the Ponzi scheme were carried out from 1869 to 1872 by Adele Spitzeder in Germany and by Sarah Howe in the United States in the 1880s through the “Ladies’ Deposit”. Howe offered a solely female clientele an 8% monthly interest rate and then stole the money that the women had invested. She was eventually discovered and served three years in prison. The Ponzi scheme was also previously described in novels; Charles Dickens’s 1844 novel Martin Chuzzlewit and his 1857 novel Little Dorrit both feature such a scheme.”[5]
There’s a contradiction in this Wiki entry: the fraud was invented in its modern form in 1869 and described earlier by Dickens? Maybe Dickens exaggerated and invented schemes much cruder than happened before 1869. For that matter, Ponzi thought he had a viable scheme, but then accepted a flood of investors who had obviously exceeded any profit for which he could hope. Someone with time to spare should clear up that entry: the key point is that it was nothing new.
Musk is not the first to call pensions a Ponzi scheme. The logic is that state pensions depend on contributions paid by current workers. But exactly the same thing is true of private pension schemes, and of people who live off personal ownership of property. Or people supported by their children and grandchildren, which was the traditional system, and was unfortunate for the childless or abandoned.
In Britain and the USA, and I think most other places, old age pensions are theoretically part of a savings scheme paid by wage earners along with income tax. It is a debt that gets paid to those who live long enough to collect it. The money is there.
If a country went for extreme libertarianism and abolished future payments of Social Security / National Insurance, it would then presumably run that insurance fund down to zero by paying proportionate pensions to those who had contributed. Or maybe giving them the money as a lump sum.
In reality, no government has a special cellar full of gold bricks reserved for pension payments and unusable for other purposes. It is just a pool of funds, and governments can also order the central bank to create extra money when it is needed. But they are also under an obligation to pay all their debts, including debts to private individuals who are often foreigners. There is no logic in saying that the money can suddenly be withheld from pensioners and others in need.
No logic, except for the New Right claim that growth and prosperity is entirely dependent on profits made by the rich, with the work of the rest of us ignored.[6] This overlooks the awkward fact that Classical Capitalism never managed better than a growth rate of 2% per year, whereas many systems that invested without concern for profits grew much faster.
The West won the Cold War by relying on what’s loosely called Keynesianism, or Mixed Economy, or Commanding Heights.[7] A rejection of New Right ideas: China and India are among many who flourish with different sets of belief.
[1] https://x.com/elonmusk/status/1895530791138189323
[2] https://www.nytimes.com/2025/03/14/us/politics/musk-doge-social-security.html
[3] https://en.wikipedia.org/wiki/Charles_Ponzi#Magnitude_of_losses
[4] https://www.deminor.com/en/news-insights/mvf-brings-victims-of-madoff-fraud-to-a-total-recovery-of-91-percent-on-fraud-loss/
[5] https://en.wikipedia.org/wiki/Ponzi_scheme
[6] https://labouraffairsmagazine.com/m-articles-by-topic/48-economics/adam-smith-on-productive-labour/
[7] https://labouraffairsmagazine.com/problems-magazine-past-issues/the-mixed-economy-won-the-cold-war/
Labour Affairs 