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Massive protest in France today against what appear to be rather modest pension reform plans. The minimum age will, in the plans, be lifted to a modest two years to 62, although to earn full pension it’s more likely to oblige people to work to 65-67.

The pension system was introduced by Bismark at the end of the 19th century when people’s life expectancy at 65 was two(!) years. In the most advanced nations that’s more like 25 years now, add to that the much more expensive medical care and a falling birth rate (below the replacement rate which keeps the population stable in many Western countries and Japan), and the credit crisis and you have the making of a pension crisis.

In essence, the choice is very simple. Either we work longer, or pay more for our pensions. The rising incomes in the West can (and have been) used for more free-time, as long as one understands there is no such thing as a free lunch. The protesters are implicitly arguing that future generations have to pay for (part of) their pensions. That’s folly, so yes, the French have gone mad.

The French have a history of fighting reality in the streets. In 2006, there were massive demonstrations against modest proposals to address the serious youth unemployment problem, proposals that had proved to work in other countries (like the Netherlands).

Some understanding of the anger on the streets is nevertheless warranted. The average working family did little, if anything to create this crisis, which was a systemic one, produced by excessive risk and leverage in the financial system and under-regulated financial markets that allowed one-way bets and rigging the system. While many of the purpetrators escaped with millions, some sympathy is warranted perhaps for those that wonder why they have to pay.

But pay they will have, whether it’s fair or not.