This arrangement was proposed and adapted in Germany more than hundred years ago, and marked the start of what has since become known as the progressive era, in which we still live. Impressed by the early successes of this system, other states soon followed Germany into the progressive era.
But things soon went awry. Central banks generated too much credit. A credit bubble ensued, and when it burst, many were left confused and insecure about their ability to save and invest prudently. Some called for the abolition of central banking, but the state had a better idea. Why not let government experts take care of savings for ordinary people? Modern finance is after all way too complicated for the average person to handle on their own.
The suggested argument went over well with the general public. A publicly guaranteed pension sounded like a great idea. It sounded secure and well founded. After all, government could never go bankrupt. There would always be funding, and hence a minimum pension available. With one less worry to think about, everyone could focus on more immediate matters. It was a win-win situation.
But then there was another crisis brought on by cheap credit from central banks. This time, people did not only loose their savings and investments. They lost their jobs too. Some blamed central banking, but most blamed free market capitalism. Something better had to be invented. Something more than a pension plan. Essential services had to be guaranteed by the state. Education, health, food and a roof over one's head were natural additions to the pension plan.
A series of moderate taxes were proposed in order to pay for the new services, and when it was clear that the vast majority would get more out of the proposed system than they would put in, it was a done deal. Everyone but the very wealthy were better off by the stroke of a pen.
However, it soon became clear that the system was underfunded. To make up for the short fall, taxes inched upwards, and states put on debt. The welfare system started to resemble a Ponzi scheme. Nothing of what was taken in as taxes was put aside as savings. Every penny was immediately "invested" in payments for the daily operation of government. State "savings" took the form of roads, dams, bridges, gunships, tanks, bombs and other favorite fetishes of government bureaucrats. Medical bills, salaries for government workers, pensions, and so on were similarly registered as "investments".
On the face of it, most states were well funded. Some operated enormous sovereign funds, full of "savings". But those savings were mostly in the form of state issued debt. Anyone willing to look into the finances of the welfare state could see that it was but a giant empty shell. None of the savings were actually worth anything. Some politicians started to ring the alarm. Future pensions had to be supplemented by additional savings for anyone wanting more than a bare minimum.
Private saving schemes and pension funds were recommended to the public. But only those saving schemes deemed safe by the state would get the mark required for savers to deduct their contributions from their taxes. Not surprisingly, the safe assets were precisely the sort of toxic stuff that the state had themselves bought.
Meanwhile, entire families lived off of welfare checks. Multiple generations had known no other source of income than that provided by the state. Then, a pandemic hit, and the number of state dependents skyrocketed. Everybody felt entitled to the protection of the state. They had after all paid taxes, and these taxes were supposedly invested on their behalf for a rainy day.
Just about everybody were neck deep in debt and with no other savings than what the state had either guaranteed or recommended. They were completely and utterly dependent on the state. But the state turned out to be broke. All the state could do, was issue more debt and have central banks issue currency based on this debt. There were no real savings anywhere. Only a tiny percentage of the population had their house in order when things turned ugly. The rest were trapped.
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