Growing Old The Hard Way: China, Russia, India

Policy Review, Apr/May 2006 by Eberstadt, Nicholas

OVER THE PAST decade and a half, the phenomenon of population aging in the "traditional" or already affluent OECD societies has become a topic of sustained policy analysis and concern.1 The reasons for this growing attention - and apprehension - are clear enough.

By such metrics as median age or proportion of total population above the age of 65, virtually every developed society today is more elderly than practically any human society ever surveyed before the year 1950 - and every single currently developed society is slated to experience considerable further population aging in the decades immediately ahead. In all of the affluent OECD societies, the proportion of what is customarily called the "retirement age population" (65 years of age or older) will steadily swell, with the most rapid expansion occurring among those aged 80 or more. Simultaneously, the ratio of people of "working age" (the cohort, by arbitrary though not entirely unreasonable custom, designated at 15-64 years) to those of retirement age will relentlessly shrink - and within the working age grouping, more youthful adults will account for a steadily dwindling share of overall manpower.

Whether these impending revolutionary transformations of national population structure actually constitute a crisis for the economies and societies in the industrialized world is - let us emphasize - still a matter of dispute. To be sure: This literal upending of the familiar population pyramid (characteristic of all humanity until just yesterday) will surely have direct consequences for economic institutions and structures in the world's more affluent societies - and could have major reverberations on their macroeconomic performance. Left unaddressed, the mounting pressures that population aging would pose on pension outlays, health care expenditures, fiscal discipline, savings levels, manpower availability, and workforce attainment could only have adverse domestic implications for productivity and economic growth in today's affluent OECD societies (to say nothing of their impact on the global outlook for innovation, entrepreneurship, and competitiveness).

But a host of possible policy interventions and orderly changes in existing institutional arrangements offer the now-rich countries the possibility (to borrow a phrase from the OECD) of "maintaining prosperity in an aging society" - and in fact of steadily enhancing prosperity for graying populations. Today's rich countries may succeed in meeting the coming challenges (and grasping the potential opportunities) inherent in population aging - or then again, they may fail to do so. The point is that an aging crisis is theirs to avert - and they have considerable scope for so doing.

In contrast to the intense interest currently accorded the issue of population aging in developed countries, the topic of aging in low-income regions has as yet attracted relatively little examination. This neglect is somewhat surprising, for over the coming decades a parallel, dramatic "graying" of much of the Third World also lies in store. The burdens of pronounced population aging, furthermore, are unlikely to be born as easily by countries still poor as by countries already rich. Simply stated, societies and governments have fewer options for dealing with the problems imposed by population aging when income levels are low - and the options available are distinctly less attractive than they would be if income levels were higher.

Over the next generation, it seems entirely likely - indeed, all but inevitable - that a large fraction of humanity, peopling countries within the grouping often termed emerging market economies, will find themselves coping with the phenomenon of population aging on income levels far lower than those yet witnessed in any society with comparable degrees of graying. For such countries, the social and economic consequences of aging could be harsh - and the options for mitigating the adverse effects of population aging may be fairly limited. In some of these countries, population aging could potentially emerge as a factor appreciably constraining long-term growth and development.

As we will detail in the next few pages, rapid and pronounced population aging represents a highly uneven, largely unappreciated, and as yet almost entirely undiscounted long-term risk for the world's emerging markets.

Dynamics and dimensions

VENTURING PREDICTIONS ABOUT the world outlook 20 years hence is a hazardous enterprise. Nevertheless, we can state quite confidently that a tremendous wave of population aging is virtually certain to sweep through the developing regions between now and 2005. How can we talk so boldly - and so categorically - about events that have not yet unfolded? Over the course of two decades, a country's economic or political circumstances can change tremendously. By contrast, given the stubborn realities of population change - demographic evolution tends to be gradual, contingent on previous developments, and tightly bound by existing social tendencies - there is inherently less leeway among plausible alternative demographic scenarios 20 years hence.