The hollowness and the cruelty of the savings illusion
Friday, 15 May 2026
Rob Campbell has an extensive background in trade unionism, business leadership, governance and public service.
OPINION: There is a common theme in economic and political commentary around financial saving. A seeming consensus that increasing personal financial savings is good for one and all. Many even go so far as advocating compulsion to save and save more.
One might think that in these “free market” days such ideas would be unfashionable. But this is a misunderstanding. The advocates of market freedom are more concerned about the freedom of those with power to do as they wish and the key freedom for others is also the freedom to do what those with power wish.
The savings illusion forms part of this view of the world. It sets aside, for a start, the simple practical issue that many do not have the capacity to reduce spending in favour of saving. From the top it is hard to conceive of the possibility that one could not sacrifice a daily flat white to add $35 per week to your personal savings. But the reality is that many are not so caffeinated or otherwise coddled by discretionary spending capacity.
Telling someone struggling to make ends meet that the answer is to have even less capacity to reach that objective for many decades is cruel more than laughable. It’s the modern equivalent of the jingle from early last century: “Work and pray/live on hay/you’ll get pie in the sky when you die”. Or retire if you get there.
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Savings on a whole economy level are also not a solely positive objective. Saving can be regarded simply as not currently spending. China has struggled with the outcomes of excessive saving not being channelled into either consumer spending or socially productive investment in quite recent times.
As societies become more unequal (that will be us, now) the ability of the wealthy to save might be nice for them but not always for the rest of us. This was well observed by the chair of the US Federal Reserve in the 1930s when he commented about the rich: ”To protect them from the results of their own folly, we should take from them a sufficient amount of their surplus to enable consumers to consume and business to operate at a profit.” Exactly. Not take more from those who do not have.
In the economy constructed by ideologues over the last few decades more and more of life which was experienced in common has become individualised and privatised. The much vaunted KiwiSaver is an example of this.
It is a recognition that common experience in later years of life would not be attractive for many reliant on common resources. The answer to this was a scheme which did not build common but private resources, saving and eventual reward individually. Such a scheme does not prevent either poverty or inequity but proportionately (or even more) builds it.
Those who can afford this saving, and live acceptable lives as they do, will (subject to the extent that market returns on saving are positive) benefit. Those who cannot will not. As we see. Pressure builds on the residual common resource (government superannuation) accordingly.
We are privatising ageing, not completely (yet) but significantly. Along with that goes how we think about ourselves and social responsibilities.
Those who manage those mandated (by incentive or compulsion) savings can profit greatly from the role, and many do.
Some may limit their own returns and socially target some investment but they are significantly comparable to their competing peers in seeking at least normal capital market returns. The savers become investors by proxy.
These savings do not magically appear from nothing. Every dollar saved by the worker is a dollar not being spent. The “employer contributions” are simply an additional labour cost and equally a dollar foregone by the worker i.e. a dollar that the employer is capable of paying for the work performed now directed to the individual worker savings pool.
This is not to suggest that workers should not participate but simply to point out the reality. There is only one source – sacrificed earnings not spent on anything from housing to food or something more discretionary. This dollar is then invested by (or rather for) our proxy capitalist who by this logic must seek the best risk adjusted returns. Enmeshed in the system.
Much is made by those running the process of the potential to invest in socially desirable infrastructure and the like. Subject to the normal risk judgements about asset and geographic allocation there is some potential for this.
But unless the managers take excessive risk such “social” allocation will always be minor or demanding returns which vastly exceed those of the option and therefore cost of direct social infrastructure investment by governments, which hardly serves the common interest.
Things are not always the way they seem or are portrayed in economic matters. What is good for the individual (or some, even many, individuals) is not always good for the common interest. When we starve the common interest in favour of private options we hurt ourselves too. There is no free lunch as the marketeers love to tell us – not even for their own projects.
We will not save our way out of inequity, poverty or economic stagnation.