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date: 15 June 2021

(p. vii) Preface

(p. vii) Preface

The macroeconomic burden of paying for the retirement of the baby-boom generation has focused attention on one of the most important issues facing the developed economies over the next 50 years. Already, within the budgets of many OECD countries, choices are being made between the conflicting priorities of current expenditures on the education and opportunities of younger generations on the one hand, and the health and welfare of retirees and those approaching retirement on the other. As macroeconomic costs of supporting the elderly increase proportionally with the ageing of the population, the budgets of the developed world will experience increasing strain in meeting the income expectations of their elderly populations. This tension is already introducing dissention into the relationship between younger and older populations.

At the same time, expectations about population growth in the developing world have changed dramatically. Those who might have imagined the global population growing beyond the 10 billion mark have been forced to reassess their forecasts over the last ten years. Of course, the Chinese and Indian populations will grow substantially in the next 25 years, and this growth will affect the balance of trade between developed and developing economies and environmental conditions both locally and globally. On the other hand, rapid urbanization, combined with remarkable changes in fertility, seem likely to put substantial brakes upon the rate of population increase. While other changes—in productivity, in the social and political environment, and in the underlying economic infrastructure—will play their part, looking beyond the next 25 years, population ageing will almost certainly become a crucial issue in the developing world, and the funding of retirement will loom large in domestic and international politics. The provision of retirement income is of enormous importance for countries, whether developed, developing, or undergoing structural and economic transformation. We are concerned with technical issues regarding the design and structure of retirement income systems and with the equity and efficiency consequences of different types of retirement income systems. Most importantly, we believe that planning for future intergenerational obligations is a vital ingredient in any comprehensive commitment to social justice. To think otherwise, to imagine that these issues will be accommodated by incremental political decisions over the decades, may be simply to repeat the mistakes so obvious in the historical record of developed economies during the eighteenth and nineteenth centuries.

Remarkably, some countries have taken significant steps toward being explicit about intergenerational welfare and the balance of income and expenditure. Both the World (p. viii) Bank and the OECD deserve credit for bringing these issues to the top of the domestic and international policy agendas over the last decade. These efforts were not always welcomed, especially by domestic political and economic elites and other entrenched interests. Over the past few years, however, a number of countries have grudgingly accepted the notion that we have a commitment to our children and their children and not only to current constituencies. Around the world a number of nation-states are publishing intergenerational accounts that bring to the fore issues that were otherwise submerged in annual national budgets. Most importantly, countries have recognized that welfare policy is not just an issue of income distribution but involves issues of financial stability, long-termeconomic growth, and development.

On the other hand, the contributions to this book as a whole indicate that there are no settled solutions, no obvious templates, and no real consensus on many issues involved in the financing of retirement income. Many systems around the world remain pay-as-you-go (PAYG), although a number of countries, particularly in Latin America and Eastern Europe, have adopted funded pension arrangements. Understanding the diversity of interests and the advantages and disadvantages of different systems is a most important goal of this particular volume. The Handbook attempts to provide this understanding by bridging the academic debate and the real world of working men and women, their fathers and mothers, and their children.

This volume is at once interdisciplinary and committed to a rigorous understanding of the most important issues. The editors have very different backgrounds and experience. Gordon Clark is an economic geographer most interested in comparative pension systems and especially the intersection between the institutions providing retirement income and financial markets. Alicia Munnell is an economist with extensive government experience and a significant reputation for research on US social security and the structure and performance of employer-provided pension systems. And Michael Orszag combines the skills of an economist with experience around the world on issues such as pension funding. The editors share a commitment to a broader understanding of the social, historical, and political dimensions of pensions and retirement income. At the same time, by integrating economic analysis with these broader dimensions, this volume differs from those that focus on social welfare and the politics of social insurance.

We hope that the reader will draw on the book both for a comprehensive analysis of pensions and retirement income and as a reference text on specific issues. We hope that the reader will look carefully at the contributions on the historical and social development of pension systems, and equally, at the contributions on private pension systems, their design, and allocation of risk. Many pension systems carry with them the legacy of reform in the late nineteenth century and immediately after the Second World War, and nation-states have evolved quite different solutions to the common problem of funding retirement income. Taking seriously history and geography is of course a vital ingredient in any understanding of current debate.

In sum, we hope this volume sets the stage for further debate and analysis about an issue that is here and will be with us for the next 50 years.