Looking for Something Else to Feel Bad About?
Bank stocks got you down? Mortgage foreclosure mess giving you the blues? How about a general malaise from trade deficits and worldwide currency issues? Well, here's something that will make those problems seem not only manageable but relatively short-term in nature: global aging.
The global population is aging — and those demographic shifts are causing major structural, long-term economic challenges. In an Op-Ed in yesterday's International Herald Tribune, the authors point out some of the grim challenges:
- In the U.S., the youngest Baby Boomers will become eligible for full Social Security and Medicare benefits in 2011. And that's just the kickoff to a "two-decade cost spiral" - which is projected to double government benefit spending as a percentage of G.D.P.;
- In Europe, the growth in pension expenditures was a significant factor in this year's debt crisis;
- In China, the aging population is causing the so-called "4-2-1 problem" — one child who must care for both parents and all four grandparents.
What's to be done about the problem?
Well, like many articles written about Big Problems — often authored by really smart people, employed by institutions with weighty names like "Center for Strategic and International Studies," — the suggestions seem a little vague.
About the only reasonably concrete policy item I could discern in the article was a reference to Australia, which seems to be one of the world's few bright spots. Australia, apparently, has an approach "which combines a low-cost, means-tested floor of public old-age poverty protection with a large, mandatory, and fully funded private pension system." It certainly sounds impressive.
Also, it seems that "France and Italy, Germany and Sweden have scheduled deep reductions in the future generosity of their public pension systems" And who could argue with the wisdom of reducing generosity when times are hard?
Lacking more pragmatic solutions, the authors of the article are preparing to release something called The Global Aging Preparedness (GAP) Index. The index will provide "a quantitative assessment of the progress that countries worldwide are making in preparing for global aging, and particularly the old-age dependency dimension of the challenge." They go on to inform us that: "The GAP Index consists of two separate subindices — fiscal sustainability index and income adequacy." Not just an index — but two separate subindices: Sounds like a plan.
After all, who can argue with high minded sentences like these:
"Three of the seven highest-ranking countries on the fiscal sustainability index (Mexico, China and Russia) are among the seven lowest-ranking countries on the income adequacy index. Four of the seven highest-ranking countries on the income adequacy index (the Netherlands, Brazil, Germany and Britain) are among the seven lowest-ranking countries on the fiscal sustainability index. " Heavy.
To their credit, the author's do include a single paragraph that sounds highly sensible to me: "Saving more and working longer are a crucial part of any overall reform strategy because they provide the best means — indeed, the only means - to shore up the living standard of the old without imposing a new tax or family burden on the young."
Well said. If only we could find a way to translate that into policy action.
Perhaps the scope of Big Problems — and an obvious lack a Clear Solutions — gives me a headache. (Or maybe I'm just cranky from the eyestrain caused by studying the little numbers printed in JPMorgan's 3Q10.)
In any case, I'm sure the Serious People writing here about Big Problems mean well.
Now, don't forget to do the following before you go to sleep tonight:
Call your Nana, tell her you love her very much — then blame her and her canasta buddies for bankrupting the world.
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