2009 January 04 Sunday
Aging Populations Seen Causing Political Conflicts

Neil Howe and Richard Jackson argue that the demographics of aging populations will cause political conflicts as the young and old battle over how much the young will fork over to support the old.

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.

High taxes to pay for huge increases in old age entitlements will cut living standards for younger workers. They do not mention this but those taxes will also cut economic growth by reducing investment and in some cases by reducing labor force participation.

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.

At first glance the US looks in better condition than the European countries because the US has a higher overall fertility rate. But immigration of low wage earning and low education achieving ethnic groups is setting up the US for a substantial decline in average per capita income and greater demand for social services for poorer ethnics. But Howe and Jackson do not recognize our second demographic problem and claim we are in much better shape.

America's economic problem due to immigration will become too noticeable to miss in the 2010s. US states with declining per capita income will be hard to explain away any other way. California per capita GDP will decline 11% by 2020. Texas will decline as well. The US entitlements financial crisis will be much larger than the 2008 crisis. While many libertarians like open borders America will become less libertarian as a result of immigration. The libertarians are wrong on immigration.

Share |      By Randall Parker at 2009 January 04 06:33 PM  Economics Demographic

Fertility Rate Observer said at January 4, 2009 7:10 PM:

"At first glance the US looks in better condition than the European countries because the US has a higher overall fertility rate."
You should clarify that the U.S. non-NAM fertility rate is significantly below replacement already, with NAMs above replacement.

mike said at January 5, 2009 10:18 PM:

"At first glance the US looks in better condition than the European countries because the US has a higher overall fertility rate."

Same situation in Canada, Australia and New Zealand - low-income minorities out-breeding higher income whites and Asians.

Xenophon Hendrix said at January 7, 2009 11:22 AM:

Not only did the article fail to address the fact that not all racial groups are equally productive, it didn't consider changing technology. People who read this blog know that both of these things need to be considered if one is going to attempt to make accurate prognoses. The usual suspects--biotech, nanotech, automation, communications, cybernetics, and serendipity--are all going to make themselves felt over the next twenty years. To my grief, my mind boggles every time I try to consider all of the relevant factors at once and try my hand at serious prophecy.

A few examples:

Will we be able to increase drastically the amount of automation in healthcare? If so, it ought to greatly relieve the problems of caring for an aging population.

What about smart pills? We already have high-school and college students, including grad students, using the first generation of these things. We know that better generations of these drugs will follow. Fighting the diseases of aging will provide all the stimulus necessary for continued research.

We also know that average IQ has a large influence on wealth. Most of the people who read this blog regularly have also read La Griffe's articles of the "smart fraction"--and if they haven't, they should. Will smart drugs be able to significantly boost real intelligence and, therefore, real wealth? Will smart drugs allow aging Boomers to keep their mental faculties sharp for a few extra years, thus maintaining their productivity? I wish I knew. Might next generation smart drugs allow entire nations the extra intelligence they need to move into the first world?

More scientists are putting their papers on the Web. That almost has to affect the rate of technical change, but how much?

Et cetera, et cetera, et cetera.

In short, I think we have a battle for the future going on between demographics and technology. I wish I were smarter so that I could better understand it.

Randall Parker said at January 7, 2009 11:32 PM:

Xenophon Hendrix,

Drugs that boost brain development during childhood and adolescence will not get released for many years and then will take many more years before they produce smarter adults. So drugs that boost cognitive performance have got to have benefits for adults in order to make a substantial economic impact during the next 25 years.

Smart drugs and aging minds: I think in the next 10 years drugs that improve circulation will have the biggest impact to slow down brain aging. I'm just guessing. But my take is that better circulation is the best nearer term way to try to slow brain aging.

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