When the world grows old

The political hot potato that are pension crises in Europe and North America point to the problems of an aging population, where pension support for an increasing number of retirees and eldery folk are having to be met by a decreasing base of economically active people. Elsewhere, Japan is a well-known example. But the rest of the world, too?

There’s a fascinating piece in last weekend’s NY Times Magazine that illustrates global aging – not just about the challenges that industrialised countries face, but about how the young countries emerging as economic powerhouses will soon find large swathes of their own populations entering the ranks of the elderly and retired. The slowdown in human fertility, attributed to longer life expectancy and urbanization, suggests that the median age is on a pretty inexorable drift upwards. Particularly stark is the forecast that China’s working population below the age of 65 will start to shrink by 2015 – and so while for the moment, “Older countries lose work to younger countries…One of China’s biggest fears, expressed repeatedly in public pronouncements, is that it will grow old before it grows rich.”

Some interesting features emerge:

  • The race to attract capital and investment while a population is still young – and to drive down costs, little is done in the way of pension benefits (so that the future cost of old age is not borne now)
  • We hear a lot about immigration, but this human movement is emigration from somewhere else, leaving an older population left behind (increasingly, in poor countries, as talent heads for the West)
  • “The transformation of older workers into a giant contingent work force” – labour conditions for older people demanding ‘flexible’ conditions such as temping, part-time work, self-employment, a return to post-retirement work.

The final paragraphs try to put these forces in the context of global power and economic clout:

It now looks as if global power rests on how willing a country is to neglect its older citizens…The most advanced countries owe trillions in age-related public expenses. The most straightforward solutions, like higher payroll taxes to pay for benefits, raise the cost of doing business and chase off investors and producers to lower-cost economies. Mark Haas of Duquesne University has argued that aging forces all high-income democracies into triage mode. They can pay for income support and services for their elderly and drastically reduce financing for schools, defense, infrastructure and everything else, or they can decide older people will have to make do with far less.

“China has gained new financial clout in relation to advanced industrial nations because it has grown rich enough as the youthful factory of the world to act as the developed countries’ banker. Yet the Chinese government says the country is still too poor to put a more comprehensive social safety net in place. Perhaps, but it is the financial sacrifices of its people that give China the means to lend trillions of dollars to the United States and other industrialized nations. That’s a bargain China may be happy to accept, but it, too, is caught in the irreversible dynamic of aging, and its demographic denouement is coming.”

While I am normally wary of deterministic arguments, what’s being described here is a bit like climate change – a problem structured in terms of slow-moving but longer-running phenomena and trends, the scale of which can be pretty daunting, and for which dealing with immediate consequences only hints at the underlying challenge. Can societies shape long-term policy that only manifests itself across the course of a generation or two?

And for a literally grey picture of the world – belying conventional images of young and vibrant societies – check out this photo essay from Foreign Policy.

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