[T]he global economic crisis is really about old age—and how to encourage prosperous countries to have more children.
Europe's demographic problems are not only forcing startling cutbacks in the welfare state but also are damaging the Continent's prospects for sustained growth and economic recovery. Worse, Europe's today is the rest of the world's tomorrow.
We have now entered a radically new phase in human affairs. Due primarily to the global decline in birthrates, such population growth as remains is mostly in the form of increasing numbers of old people. The absolute supply of children is already in steep decline, not only in Europe but even in once highly fertile places like Russia, China, Mexico, and Iran.
Over the next 40 years, according to the UN, world population will grow from 6.9 billion to 9.1 billion, which may sound like more of the same robust growth that we saw throughout the 20th century. But this will be a very different kind of population growth from anything humankind has seen before. The rate of growth is perpetually diminishing toward zero, and more than half of the remaining increase in population (56 percent) will be among people over 60 — among people, that is, who have already been born.
This may seem impossible, but when calculating population growth, declining death rates are just as important as rising birthrates. Today's children are more likely than their parents to live to advanced ages. Even without any new children being born, this decline in mortality by itself would add to the number of people on the planet. Today's population explosion among those over 60 will be echoed in twenty years by a population explosion among those over 80. Most of the predicted 2.2 billion in world population growth between now and 2050 will not come from children. Indeed, over that period, the population of young children (0 to 4) is expected to fall by 49 million.
---"Demography and Economic Destiny," by Phillip Longman, Big Questions On-Line (8.17.10) [Phillip Longman is a senior research fellow at the New America Foundation and Schwartz Senior Fellow at the Washington Monthly. His latest book, co-authored with Ray Boshara, is The Next Progressive Era: A Blueprint for Broad Prosperity.]
So, we are to understand that most of the future population growth in the world will be first among those over 60, then those over 80. If what is being reported here is anywhere near correct--and it has that credible ring to it, doesn't it?--it is sobering stuff, my friends. And if you think about it, we should not be surprised. We have seen the trend to fewer children and older populations work its way through the European countries, then Japan and our own. Projections for China are for more of the same--and there it could create the most challenging situation of all. The article further explains:
The financing of the welfare state depends critically on population growth. So long as there are rising numbers of younger workers, each new generation of retirees can get back far more in pensions and health-care benefits than they ever paid in, and they can do so without creating a financial encumbrance on the future. As the Nobel Prize-winning economist Paul Samuelson once proclaimed, in defense of America's Social Security system, "a growing nation is the greatest Ponzi scheme ever contrived. And that is a fact, not a paradox." But Samuelson was writing in 1967, when it looked as if the Baby Boom would go on forever.
Consider the popular understandings and prescriptions for our social security system that have been the subject of greater concern and more hand wringing with each passing decade. It is projected to start operating at an annual deficit sometime around 2017, and then to be operating without sufficient funds to meet its obligations sometime before 2040. And we know that is in large part because of the bloated Baby-Boom generation now beginning to fall into their retirement years. And the dramatic, necessary increase in social security tax cost per worker in the following generations will be onerous indeed, regardless of adjustments or changes.
But we've been addressing this issue as though it were a unique phenomenon which, after it passes through the system, will leave behind a normal array of generations reflecting the demographic growth of those preceding the Boomers. That is, each succeeding generation will have more children and be larger than the last. But not likely. And so our problem becomes larger, much larger, and the implications more frightening.
These data and prognostications forewarn us that what we will be left with--indeed, what is already the case and proceeding--are following generations themselves unique, but for their growth in the elderly, not the young. It's true that this is not the first time we've read suggestions or ominous projections along these lines. Perhaps the headlines are never prominent enough, the publications not influential enough, the data not unequivocal enough, or the authors not authoritative enough. Or, perhaps we are holding on to every possibility of a silver lining, every short-term reprieve that we hope will somehow be longer lasting. There are apparently transitional stages, temporary upsides, that give us that hope. As the article explains:
But, apparently, this too will pass--and what will be left to us is a failed social welfare funding scheme. And it's effects lurk just another decade or two down the timeline, just around the next political bend. But, regardless, we remain somehow in denial, and the reality does not achieve traction, not really, not the right level of attention by the right people, the opinion makers and reporters, and those who move and define the political agendas. But perhaps, it's because it's just too challenging, too complicated and threatening to know how to begin to address it or place it before the voting public--especially when no one yet has workable, politically-viable answers. From the same article:But we've been addressing this issue as though it were a unique phenomenon which, after it passes through the system, will leave behind a normal array of generations reflecting the demographic growth of those preceding the Boomers. That is, each succeeding generation will have more children and be larger than the last. But not likely. And so our problem becomes larger, much larger, and the implications more frightening.
These data and prognostications forewarn us that what we will be left with--indeed, what is already the case and proceeding--are following generations themselves unique, but for their growth in the elderly, not the young. It's true that this is not the first time we've read suggestions or ominous projections along these lines. Perhaps the headlines are never prominent enough, the publications not influential enough, the data not unequivocal enough, or the authors not authoritative enough. Or, perhaps we are holding on to every possibility of a silver lining, every short-term reprieve that we hope will somehow be longer lasting. There are apparently transitional stages, temporary upsides, that give us that hope. As the article explains:
Falling birthrates do not instantly damage an economy. Indeed, at first, they often do just the opposite. A first-order effect of a society's producing fewer children is that a rising share of the population occupies the prime productive years of young adulthood. Also, with fewer children around to demand attention, vast reserves of female labor are freed up, and there are more resources available to invest in each remaining child, so that, for example, literacy rates improve. Japan experienced this demographic "sweet spot" in the 1960s and 1970s, and China is experiencing it today.
Perhaps there is an economic system that can preserve prosperity even in the face of an aging, stagnating population, but it has not yet been devised. It is no coincidence that modern industrial capitalism emerged amid the population explosion of late 18th-century England or that it flourished most in the rapidly growing United States. A young, growing population creates more demand for products and a larger supply of labor. By encouraging people to look for more efficient ways to provide food, energy, and other essentials, it also spurs innovation and entrepreneurism...
[And] In every country of the world, regardless of its stage of economic development, form of government, or age structure, the highest rates of entrepreneurial activity are found among those who are age 25 to 34.We can't be surprised about that either. If we cannot find the political will to deal with social security funding and the retiring Baby Boomers as an isolated phenomenon--especially when the answers have been around for decades, and the pain modest, indeed--how do we ever expect politicians and governments to deal with world-wide stagnant demographics and increasingly aged populations? Politicians don't get elected on platforms like that, and governing parties don't remain governing when they address them realistically.
It will take a completely fresh and innovative rethinking of social welfare benefits and funding--and perhaps, as this author suggests, a rethinking of economic models, creativity and productivity, informed by a competent, sober sensitivity analysis of the economic effects of changing demographics.
Can democracy and democratically-elected government meet these challenges and effect the necessary changes before an angry and denying citizenry votes them out of office? How does the level of anger and impatience in today's economic and political environment inform us about answers to that question? Will more autocratic governments fare better? The next generations deserve and will require more effectual, more accountable government than we now have. It will be absolutely essential to meeting their future with the necessary level of informed understanding and commitment to timely, orderly change that will assure economic and social stability in their time.
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