Debt and the Demographics of Aging

Greece’s recent fiscal meltdown wasn’t caused just by carefree government spending. It was an inevitable result of the country’s aging population, which has long been accustomed to extravagant health care and retirement benefits. This is what happens when 19th-century policy prescriptions are applied to 21st-century realities.

That’s why the most recent European bailout package is only a short-term remedy to the complex issue of global aging. For decades, Europe has built a health-and-welfare system designed around providing support to its citizens at what in an earlier time might have been the very first signs of senior citizenship. Greeks are eligible for government pensions at age 53. The problem will only get worse. Over the next 40 years, a third of Europeans will be older than 60. The debt crisis is really just a proxy for the aging crisis that is coming to every country in the world.

Indeed, the global scope of the graying demographics are well known – and irreversible. Like Europe, Japan and Korea will by midcentury have 40 percent of their populations older than 60. In China, at least a quarter of the population will be elderly. In the United States, the number of citizens older than 65 will double during the next 20 years. These demographic trends will define our social and economic needs and government policy for decades. It requires a radical new way of thinking, which includes a 21st-century approach to policies that align with the longevity revolution begun in the latter part of the 20th century.

The implications are dizzying. Asian countries will have to import health workers to care for their elderly. Public pension plans will have to be re-examined to account for the millions of workers who will need retirement funds even as they continue to work into their 70s. The number of Alzheimer’s patients is expected to double every two decades, affecting more than 115 million people by 2050. The incidence of other age-related diseases, such as skin cancer, also will soar. And as longevity extends, insurance and retirement savings plans will need to be reconceived as bulging populations need to stretch benefits for longer periods of time.

Last week, President Obama established a bipartisan “debt commission.” Instead of looking at the usual combination of tax increases and spending-cut triggers, this commission ought to lead a conversation about a new approach to aging that will shape the political economy. That conversation should include policies to keep people healthy as they age, but also how we approach work, retirement planning, labor supplies and technology.

There is solid evidence that aging can be treated as an unprecedented opportunity for investment in economic growth. Economists David E. Bloom and David Canning have found that nations that have a five-year advantage in life expectancy have a 0.5 percent faster economic growth rate.

Business and government leaders ought to seize this insight to make the case for a far more enterprising, innovation-based and growth-focused approach to issues of retirement planning, workplace and the treatment of long-term illness.

The workplace is an obvious starting point. Almost all government pension plans, and most private ones, still operate on obsolete assumptions that people stop working in their mid-60s and die soon after. For the 21st century, all G-20 countries need policies aligned with the transformation that aging populations represent – on retirement planning, financial literacy and workplace “healthy aging.” Our new middle age can become an engine of productivity, not a cohort of dependence.

The treatment of age-related health conditions will also require policy shifts, just as we have shifted with communicable diseases. France, the United Kingdom, Australia, Sweden, Norway and Japan already have national Alzheimer’s plans in place, as do a handful of states here. But to find treatments that reverse the effects of this disease and make progress on care and early detection will require massive, global public-funding commitments.

This fall at the G-20 meeting, our government leaders surely will address the debt crisis. But instead of looking at it only as a short-term fiscal challenge, they ought to use the occasion to introduce a “call to action on aging.” Incentives for innovative technology solutions for long-term care, transformational thinking about work and retirement planning and a global fund for age-related diseases such as Alzheimer’s might be good places to start.

The alarm bells over Greece ought to be a wake-up call for creative and innovative policy changes that will turn this demographic reality into a platform for wealth creation, innovation and even greater prosperity.

Dr. Robert N. Butler is president and chief executive of the International Longevity Center and received the 1976 Pulitzer Prize for “Why Survive? Being Old in America” (Johns Hopkins University Press, 2002). Michael W. Hodin is adjunct senior fellow at the Council on Foreign Relations and executive director for the Global Coalition on Aging: Health, Work, Financial Security.

Source: The Washington Times

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