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Unlike the “Population Bomb,” This One Is for Real

Aging Nations Face Prospect of Shaky Pension Systems

LOS ANGELES, FEB. 23, 2002 ( Commentators in the mainstream U.S. press have been strongly critical of the Bush administration´s refusal so far to approve U.S. funding of the United Nations Population Fund.

Writing in the Jan. 20 Los Angeles Times, Paul R. Ehrlich, author of “The Population Bomb,” warned, “At a time when we´ve shown how quickly a nation can unite against the threat of terrorism, our lack of resolution in the face of increasingly threatening population pressures seems all the more strange.”

In fact, recent studies clearly show that it is aging, not excessive population growth, that is the main demographic problem. Even some sectors of the United Nations (but not the Population Fund) recognize this. To address the problem, the United Nations will hold the second World Assembly on Aging, in Madrid, Spain, from April 8-12.

The purpose of the meeting is to review the outcome of the first World Assembly, held 20 years ago in Austria, and to adopt a plan of action and a long-term strategy on aging. Beforehand, a forum of experts will gather in Valencia to discuss themes related to the conference. A forum for nongovernmental organizations will be held in parallel to the main proceedings, from April 5-9.

According to the U.N. secretariat for the World Assembly on Aging, members of the Preparatory Committee for the Madrid conference will hold a final session Feb. 25-March 1. A main task of the committee is to finalize agreement on the International Plan of Action on Aging 2002 to be adopted in April.

The Plan of Action discusses, in part, the goal of eradicating poverty in old age and providing older people with opportunities to participate fully in the economic, political and social life of their societies. Among the agreed-on points is “recognition of the crucial importance of families.”

Some questions are still unresolved, including the matter of human rights as applied to aging, the needs of aging migrants, and end-of-life issues, such as assisted suicide.

A graying world

Data published by the Population Division of the U.N. Department of Economic and Social Affairs reveals the dramatic extent of aging in many countries. One out of every 10 persons is now 60 or older. By 2050, that ratio will be out of five, and, by 2150, one out of three.

The phenomenon of aging is particularly marked in some developed countries. Already one out of every five Europeans is 60 or older. By 2050, that proportion will reach one in four and in some countries one in two.
But the real “aging bomb” is in the developing countries. The Population Division notes that the tempo of aging in those countries is more rapid than in the developed world, meaning that the former have less time to adapt to the problem. What the United Nations does not say is that this rapid aging in the Third World is due, in part, to the programs of population control imposed by the U.N. itself and by rich nations.

The U.S. Census Bureau has recently examined the question of aging in its November 2001 publication “An Aging World: 2001.” Among its findings:

–People aged 65 and older comprise 12% to 16% of the population in developed countries. Italy, with 18%, is the “oldest” country, followed by Greece, Sweden, Japan, Spain and Belgium at 17%.

–In 2000, 59% of people over 65 lived in developing nations. By 2030 this will increase to 71%.

–Some countries took many years to double their percentage of citizens aged 65 or over, from 7% to 14% — for instance, France, 115 years; Sweden, 85 years; United States, 69 years; United Kingdom, 45 years. This trend is expected to happen much more rapidly in developing countries: China, 27 years; Chile, 25 years; Brazil, 21 years; Colombia, 20 years.

–While almost all people in developed countries are included in pension plans, those in developing countries are not so lucky. In 1995, 96% of Italians are covered by pension plans, compared with only 50% in Brazil.

Fiscal fallout

An aging population is costly for countries. A Working Paper published by the Economics Department of the Organization for Economic Cooperation and Development (OECD) last September outlined just how much aging will cost governments.

The study, “Fiscal Implications of Aging: Projections of Age-Related Spending,” noted that in developed countries there will be a near doubling, on average, in the ratio of the elderly (those 65 or over) to the working-age population (ages 20-64) between 2000 and 2050.

The OECD calculated the economic impact of aging. Spending on pensions is set to rise by an equivalent of 3% to 4% of gross domestic product (the sum of all goods and services produced within a country´s borders) in the period to 2050. Current spending in member countries averages around 7.5% of GDP.

The paper observed that projections of health care spending are considerably more uncertain than for pensions. On average, current public health spending is around 6% of GDP. The average increase over the 2000-2050 period for the 14 countries where this information is available is 3% to 3.5% of GDP. But for five countries (Australia, Canada, the Netherlands, New Zealand and the United States) increases of 4% or more are projected.

Overall, the OECD estimates that aging will lead to a decline in a government fiscal surplus, or an increase in its deficit, equivalent to 6% to 7% of GDP over the period 2000-2050.

Notably, these calculations are based on the assumption that fertility rates will rise in developed countries from their current average of around 1.5 children per woman to 1.8 by 2050. Some countries, such as France and the United States, have seen fertility increases in recent years. But many other developed nations still show no signs of a recovery.

The just-published study of the Center for Strategic and International Studies, “The Fiscal Challenge of an Aging Industrial World,” carries more information on the costs of aging. The working-age population — those available to pay for the pensions and health care of the elderly — will drop dramatically in coming years. In Italy, by 2050 those of working-age will plummet by no less than 43%. Steep decreases will also occur in Japan (34%) and Germany (23%).

The study warns that the future imbalance between workers and retirees could lead to a crisis in pensions. Rising expenditures could lead to steep increases in debt, which would destabilize financial markets, or lead to large tax increases, which would dampen economic growth.

So the “population bomb” turns out to be a pensions bomb, caused by plunging birthrates. By focusing too much on a make-believe problem, nations may have set themselves up for a real calamity.

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