Global economies need money

Coffers around the world are running dry, so governments must dramatically scale back social programs – unless they increase their tax bases.

Stéfane Marion, chief economist at National Bank Financial, told this to the Toronto Financial Information Summit today.

Problem is, “democracies are ill-equipped to deal with changes to the social contract,” he says.

Read: Spain to shave budget by $79 billion

It’s not that governments shouldn’t spend on programs; they just have to make sure the tax base can support them.

But demographics are making this more difficult.

In 1971, Canada had 6.8 taxpayers for every retired person. By 2030, there will be fewer than two.

Read: Hope for the Canadian job market

To maximize their tax bases, countries need to increase the efficiency of their labour markets.

This means reducing systemic discrimination against older workers and women; increasing the effective (if not official) retirement age; making it easier to hire and fire workers; and increasing the number of hours in the work week, especially in countries like France.

Read: Ways for women to opt back into workforce

Does Marion think these changes will happen?

“The odds are 100% they will;” otherwise countries won’t survive.

“There’s just not enough money in the world.”