I’m currently in the Faroe Islands, a relatively unknown and semi-autonomous part of Denmark located in the North Atlantic. Sort of like Greenland, but too small to appear on most maps.
I’m in this chilly archipelago for a speech to the annual meeting of the Faroese People’s Party. According to Wikipedia, “the party is supportive of the economic liberalism.” But liberal in this context is classical liberal, so they’re my kind of people.
The current government of the Faroe Islands, which includes the People’s Party, has modernized its Social Security regime with a system of personal retirement accounts. Starting next January, workers will begin setting aside some of their income to finance a comfortable retirement income. When fully implemented, workers will be putting 15 percent of their income in their accounts, creating a system that’s even larger than the private retirement models in Australia andChile.
So why did Faroese politicians take this step? Well, unlike politicians in most nations, they looked at the long-run data, saw that they had an aging population, realized that a tax-and-transfer scheme no longer could work, and decided to reform now instead of waiting for the old system to collapse.
Here’s a chart put together by the Nordic Council. As you can see, the Faroe Islands were (and other jurisdictions are) heading to an intolerable and unsustainable situation of too few workers and too many retirees.