The West is getting old
Itâs the demography, stupid.
There are a lot of different reasons this is turning out to be such a politically hot summer in so much of the Western world. But one way to understand this seasonâs acrimony â from the protests of the indignati in Spain and Greece, to the budget deadlock in Washington and even to the tragedy in Norway â is as diverse symptoms of a shared condition: The West is getting old. That demographic fact is becoming a generational war, and there is every reason to believe that in the coming decades it will get worse.
The heart of the problem is arithmetical: The post-World War II social welfare state, created at a moment when the baby boom was still gestating, is built on a generationalÂ Ponzi scheme. As life expectancy increases and fertility declines, that population pyramid is being inverted â and in some countries, that is causing the entire economy to topple.
Thatâs true in Greece and Spain, where the young are taking to the streets partly because state pension commitments have become so heavy they are suffocating the economy and depriving the seniorsâ grandchildren of any chance of a job. Likewise in the United States, where, notwithstanding the national self-image as a laissez-faire land that has eschewed Europeâs lavish social safety net, the budget battle is really a fight about the old: Programs for the elderly constitute almost half of non-interest government spending, about $1.6 trillion in 2010, of a $3.3 trillion total. That figure will swell as the baby boomers retire.
According to a paper by political economist Nicholas Eberstadt, who has done extensive research on the issue, âcosts associated with population aging are estimated to account for about half the public-debt run-up of the O.E.C.D. economies over the past 20 years.â
It is not just at home that graying societies are creating wrenching political and economic tensions: The demographic squeeze may be contributing to one of todayâs biggest dangers in international finance: the threat of sovereign default. Ali Alichi, an economist at the International Monetary Fund, argues in an essay published by the fund last month that âold folks may be less willing to repay sovereign debt.â According to Alichi, âAs the number of older voters relative to younger ones increases around the globe, the creditworthiness of borrowing countries could decline â resulting in less external lending and more sovereign debt defaults.â
This demographic crunch has transformed the way a lot of us think about the relationship between economic growth and population growth. Not so long ago, the conventional wisdom was neo-Malthusian â for individuals, for families and for societies, one of the keys to prosperity was having fewer children. Now, that thinking has been turned upside down.
In a speech at the Aspen Ideas Festival a few weeks ago, former Treasury Secretary Robert E. Rubin cited the United Statesâ âfavorable demographics relative to Europe, Japan and even to China and Koreaâ as one of the principal reasons to believe that the country has sunny economic prospects.
President Dmitri A. Medvedev is so worried about his country’s shrinking citizenry that the Kremlin is offering families that have a third child financial incentives.
Even China, the most brutal apostle of population control, now fears it will get old before it gets rich. Meanwhile, India, whose fertility was once seen as its national curse, is touted as a rising investment prospect thanks to its âdemographic dividend.â
One solution to the demographic dilemma isÂ immigration. But absorbing immigrants can be tough. And thatâs true not just for the traumatized Norwegians, but also in U.S. states like Arizona, which have less homogenous populations and a history of immigration.
Moreover, immigration is a zero sum game that canât work for everyone forever. As the worldâs poor countries get richer, their citizens have less reason to emigrate â and they begin to suffer their own demographic squeeze.
Eberstadt points out that this is true not only of one-child China, but also of the economically prospering Indian south, where fertility levels are at, or already below, replacement levels.
The other answer is to persuade families to have more children. So far, thatâs something no developed country has really figured out. As women get richer, better educated and more autonomous, they have fewer babies. That decline in fertility is driven by harsher economic forces, too: Most middle class families in the West need a motherâs wage to survive, and women in industrial and postindustrial societies canât bring their babies to work in the way their peasant great-grandmothers could.
As countries awaken to the demographic squeeze, their first instinct is often fiercely conservative. That is the case with Medvedev: As well as giving families incentives to have a third child, the Kremlin is restricting abortion and making common cause with Russian Orthodox Church activitists and social conservatives who condemn ârefusal of marriage and child-bearingâ as a âsocial deviation.â
But there isnât much evidence that a return to patriarchy will bolster fertility. After all, some of the societies where the birthrates are plummeting the fastest â like Japan or Italy â are the ones where women have made the least social and economic progress.
Yet there is one political movement that has long campaigned for societies to find a better way for women to be both workers and mothers: feminism. Until now, we have framed those efforts as being about expanding personal choice â and government and business have paid them lip-service, but not much more.
As graying countries become angrier and more dysfunctional, that could change. We think the most pressing issues in the rich West are budget deficits and job creation. To fix our economies in the long term, what we should probably be talking about is maternity and paternity leave and workplace day care.