The World Won't Be Aging Gracefully. Just the Opposite.

By Neil Howe and Richard Jackson
Sunday, January 4, 2009

The world is in crisis. A financial crash and a deepening recession are afflicting rich and poor countries alike. The threat of weapons of mass destruction looms ever larger. A bipartisan congressional panel announced last month that the odds of a nuclear or biological terrorist attack somewhere in the world by the year 2014 are better than 50-50. It looks as though we'll be grappling with these economic and geopolitical challenges well into the 2010s.

But if you think that things couldn't get any worse, wait till the 2020s. The economic and geopolitical climate could become even more threatening by then -- and this time the reason will be demographics.

Yes, demographics, that relentless maker and breaker of civilizations. From the fall of the Roman and the Mayan empires to the Black Death to the colonization of the New World and the youth-driven revolutions of the 20th century, demographic trends have played a decisive role in precipitating many of the great invasions, political upheavals, migrations and environmental catastrophes of history. By the 2020s, an ominous new conjuncture of these trends will once again threaten massive disruption. We're talking about global aging, which is likely to have a profound effect on economic growth, living standards and the shape of the world order.

For the world's wealthy nations, the 2020s are set to be a decade of hyperaging and population decline. Many countries will experience fiscal crisis, economic stagnation and ugly political battles over entitlements and immigration. Meanwhile, poor countries will be buffeted by their own demographic storms. Some will be overwhelmed by massive age waves that they can't afford, while others will be whipsawed by new explosions of youth whose aspirations they cannot satisfy. The risk of social and political upheaval and military aggression will grow throughout the developing world -- even as the developed world's capacity to deal with these threats weakens.

The rich countries have been aging for decades, due to falling birthrates and rising life spans. But in the 2020s, this aging will get an extra kick as large postwar baby boom generations move into retirement. According to the United Nations Population Division (whose projections are cited throughout this article), the median ages of Western Europe and Japan, which were 34 and 33 respectively as recently as 1980, will soar to 47 and 52, assuming no miraculous change in fertility. In Italy, Spain and Japan, more than half of all adults will be older than the official retirement age -- and there will be more people in their 70s than in their 20s.

Graying means paying -- more for pensions, more for health care, more for nursing homes for the frail elderly. Yet the old-age benefit systems of most developed countries are already pushing the limits of fiscal and economic affordability. By the 2020s, political warfare over brutal benefit cuts seems unavoidable. On one side will be young adults who face declining after-tax earnings, including many who often have no choice but to live with their parents (and are known, pejoratively, as twixters in the United States, kippers in Britain, mammoni in Italy, nesthocker in Germany and freeters in Japan). On the other side will be retirees, who are often wholly dependent on pay-as-you-go public plans. In 2030, young people will have the future on their side. Elders will have the votes on theirs. Bold new investments in education, the environment or foreign assistance will be highly unlikely.

Aging is, well, old. But depopulation -- the delayed result of falling birthrates -- is new. The working-age population has already begun to decline in several large developed countries, including Germany and Japan. By 2030, it will be declining in nearly all of them, and in a growing number, total population will be in steep decline as well. The arithmetic is simple: When the average couple has only 1.3 children (in Spain) or 1.7 children (in Britain), depopulation is inevitable, unless there's massive immigration.

The economics of depopulation are grim. Even at full employment, real gross domestic product may decline, because the number of workers will be falling faster than productivity is rising. With the size of markets fixed or shrinking, businesses and governments may try to lock in their positions through cartels and protectionist policies, ushering in a zero-growth psychology not seen since the 1930s. With each new birth cohort smaller than the last, the typical workplace will be top-heavy with graybeards. Looking for a flexible, creative, entrepreneurial labor force? You'll have come to the wrong address. Meanwhile, with the demand for low-wage labor rising, immigration (assuming no rise over today's rate) will double the percentage of Muslims in France and triple it in Germany. By 2030, Amsterdam, Marseille, Birmingham and Cologne are likely to be majority Muslim.

In Europe, the demographic ebb tide will deepen the crisis of confidence reflected in such best-selling books as "France is Falling," by Nicolas Baverez; "Can Germany Be Saved?" by Hans-Werner Sinn; or "The Last Days of Europe," by Walter Laqueur. The media in Europe are already rife with dolorous stories about the closing of schools and maternity wards, the abandonment of rural towns and the lawlessness of immigrant youths in large cities. A recent cover of Der Spiegel shows a baby hoisting 16 old Germans on a barbell with the caption: "The Last German -- On the Way to an Old People's Republic." In Japan, the government half-seriously projects the date at which there will be only one Japanese citizen left alive.

An important but limited exception to hyperaging is the United States. Yes, America is also graying, but to a lesser extent. We are the only developed nation with replacement-rate fertility (2.1 children per couple). By 2030, our median age, now 36, will rise to only 39. Our working-age population, according to both U.N. and census projections, will continue to grow throughout the 21st century because of our higher fertility rate and substantial immigration -- which we assimilate better than most other developed countries. By 2015, for the first time ever, the majority of developed-world citizens will live in English-speaking countries.

America certainly faces some serious structural challenges, including an engorged health-care sector and a chronically low savings rate that may become handicaps as we age. But unlike Europe and Japan, we will still have the youth and fiscal resources to afford a major geopolitical role. The declinists have it wrong. The challenge facing America by the 2020s is not the inability of a weakening United States to lead the developed world. It is the inability of the other developed nations to be of much assistance -- or indeed, the likelihood that many will be in dire need of assistance themselves.

A major reason the wealthy countries will need strong leadership are the demographic storms about to hit the developing world.

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