Sixty years ago, 34 developed nations of the Organization for Economic Cooperation and Development (OECD) had seven workers to support each retiree.

Today, there are only four workers per beneficiary.

In 50 years, that figure will be halved to two: a grossly unsustainable scenario.

The reasons include these demographic changes:

1. Decreasing birthrates

2. Increasing lifespans

3. Underfunded social welfare programs such as social security, healthcare, and pensions

Expenditures as a percentage of income (GDP) for old age social programs is highest in Europe (nearly 11 percent on average). The OECD and United States spend 7 percent and 6 percent, respectively. Moreover, the European Central Bank (ECB) projects the figure for Europe will reach 14 percent in 50 years.

Global pension plan assets total nearly $27 trillion. The UK Guardian reports that it is quite common for pension plans to be under funded by roughly 25 percent (liabilities exceed assets by 25 percent). Therefore, there is a global pension fund deficit of approximately $9 trillion.

Pension under funding is primarily the result of defined benefit pension plans that guarantee a specific rate of return per annum ad infinitum, regardless of the actual return.

However, the actual return has been much less than the guaranteed return, resulting in a deficit (less assets to pay liabilities).

Twenty years ago, I correctly suggested that the defined benefit pension system was imprudent and untenable.

The National Center for Policy Analysis suggests the U.S. pension system is under funded by nearly 50 percent or $3 trillion. This represents one fifth of our annual income. Ten states are under funded by 64 percent or more: the worst state is 73 percent under funded.

The future prospects for the global economy are anemic for the coming decade or two.

The following recommendations are advisable:

1. Reduce debt levels

2. Increase investment by lowering tax rates on production

3. Decrease consumption by increasing tax rates on consumption

Note:

a. Consumption generates much less income than investment due to an increase in the economic multiplier or monetary velocity (more transactions per unit of currency).

b. Consumption as a percentage of income rose 25 percentage points (from 45 percent to 70 percent) during the past 60 years, which reduced monetary velocity and income growth.

4. Teach our children to think creatively, strategically, and critically.

The economic dynamics we face have developed over a half century. It will take decades to repair effectively.