The United States is not the only country that faces financial problems stemming from a growing elderly population. Throughout the world, a combination of increased longevity and shrinking work forces is hastening a stunning global trend: By 2050, the world's population of people 60 and older will triple to 2 billion.
The implications of those demographics are beginning to come under intense scrutiny. In April, delegates from 160 nations met in Madrid for a United Nations-sponsored assembly to discuss ways to deal with global aging.
Indeed, as problematic as America's aging trend may be, it pales in comparison to what is occurring in other parts of the world. While birthrates have fallen in the United States, they have stabilized at the replacement level of around two children per couple. But in many other industrialized countries, birthrates have turned negative, meaning that native populations are actually shrinking.
“Europe's population began declining in 1998, while Japan's has leveled off and looks like it's about to decline,” says Paul S. Hewitt, project director of the Global Aging Initiative at the Center for Strategic and International Studies, an independent research institute. Italy — where traditionally large families have given way in the last several decades to an average 1.2 children per couple — could face a 45 percent drop in its working-age population by 2050, he points out.
Immigration can help boost the ranks of workers, of course, and it plays an important role in the United States. But immigration is controversial in much of Europe, where fear that Third World newcomers threaten national cultures has given rise to right-wing, anti-immigrant political parties.
In any case, it would be almost impossible to maintain a stable working-age population in Europe through immigration alone. “If one were even to try to maintain a constant ratio of workers to retirees in Germany through immigration, by 2050 about 80 percent of the people living in Germany would be from foreign lands,” Hewitt says. “This is immensely destabilizing.”
Germany and other European countries are looking to Eastern Europe to provide needed workers, but this too has negative implications. “Western Europe is enthusiastic about opening up to the East because they really don't want to bring in the Third Worlders,” Hewitt explains. “But the countries of Eastern Europe are not very well off to begin with. If all the young people leave, it would leave the East with a lot of old-age dependency and no tax base. Europe has not begun to face up to this problem.”
Developing countries face potentially more daunting problems. “You're going to see a virtual explosion of dependency in poor countries that aren't prepared to handle the aging problem,” Hewitt says. Falling birthrates already are jeopardizing care for the elderly in countries like China and Vietnam, where seniors traditionally depend on family members to see them through their golden years. Young people are moving to cities in search of work, leaving many elderly vulnerable.
Some critics of birth-control policies say the aging trend confirms their view that birth-control policies threaten future economic growth by reducing the labor pool. “To some of us, the wisdom of this crusade to depress birthrates around the world (and especially among the world's poorest) has always been elusive,” writes Nicholas Eberstadt, a political economist at the American Enterprise Institute, a conservative think tank. “Simply put, the era of the worldwide 'population explosion,' the only demographic era within living memory, is coming to a close.”
But other experts say this argument ignores the negative impact of a continuing rise in global population. “Another 3 billion people on the planet in the next 50 years will put intolerable strains on the environment and quality of life,” writes William B. Dickinson, director of the Biocentric Institute, a division of the International Academy for Preventive Medicine, a nonprofit organization in Warrenton, Va. “Yes, an aging population puts more pressure on the financing of social programs. But to equate more people with economic growth spells disaster for a human race that, in the end, must answer to Nature's imperatives.”
Hewitt sees two possible outcomes of global aging. “The implication for the developing world is potentially horrendous, and it's potentially very good,” he says. “Scenario one, which results from business as usual, is that the industrial countries all melt down together, and we'll have one big [bankrupt] Argentina. Scenario two is a new global renaissance.”
To survive the global aging trend, Hewitt says, industrial countries will have to stop protecting their least productive sectors, such as agriculture and textiles, and promote investment in those sectors in developing countries, which would then be able to employ their citizens instead of exporting them to industrial countries.
“Industrial countries could then focus their scarce labor resources on highly compensated activity, because the upshot of shrinking labor forces is that all growth in the future in the industrial countries will come from productivity gains,” he says. “We're going to have to outsource our labor-intensive work and find very good ways to improve productivity.”
Seen from this global perspective, America's retirement security cannot stand on Social Security reform or other domestic policy changes alone. “Increasingly, retirement security is going to require foreign policy,” Hewitt says. “We need to be working very carefully with the developing countries to improve their ability to absorb capital.”
At this point, Hewitt says, the two scenarios he cites are “equally plausible.” World leaders will need to engage in “some real international cooperation and management to make sure we end up with the win-win rather than the lose-lose scenario.”