The safety net problem world needs to start thinking about
Financial Times, supposedly the global conscience keeper of capitalism points us to an old problem that has not yet received enough of attention. The fact of the matter is that with the healthy rise in global life expectancies and the baby boomer generation retirements in full swing already, the safety net mechanism of the world hasn't yet reached a tipping point.
There is a "savings gap" with regard to the elderly consumption and what they receive out of their much prized pensions/retirement benefits. Now the ways in which the subsidized entitlement systems were supposed to work are entirely different from the times they had been conceived. Medicare from the United States, is a valid case in point. Payroll taxes are supposed to fund the system and way back in the 1965 when the system was brought into place, four individuals were being taxed and there was this one elderly gentleman (Or woman :), who received the benefits from all of the good work he has put into the system. But with increasing numbers of retirees joining the system and not much of a increase in the subsidized pool to cover up for the additional costs, 2025 would the year when the entire system would go belly up as per a Brookings report. Also not enough of young people are not contributing to the system as much as people are moving out of the workforce and joining the retiree pool. See where its going?!?
Same is the case with net pension payouts of most Western countries not just limiting to Canada, Netherlands, UK, Japan, Australia where in the savings gap from what has been pooled Vs. what needs to be paid out stands close to 70 Trillion $. By 2040 its extrapolated to grow to a mammoth 400 Trillion $. I mean its utterly incomprehensible for Governments to think that they can tackle this problem alone. Hence the need for private run Pension management funds and pool of funds. There is a whole bunch of SWF's working in conjunction with Government run benefit managers but the kinds of efficiencies and independent decision making abilities of private run organizations best suit this problem, I feel. It goes without to say that a clear moral and ethical framework has to be put in place even before any of the funds resort to these sorts of arm-length deals (the likes of which include but not just limited to CALPERS, OMERS, CPPIB, SAMA, KIA) with the private sector. Maybe central banks of most countries can all come up together and draft some cool regulating frameworks similar to BASEL?
One exception to this conundrum is Norway though, with an estimated rake up of one Trillion! Good lord what are those poor folks going to do with all of that money.