GLOBAL AGING, NOT OVERPOPULATION, WILL SHAPE FUTURE
OF WORLD ECONOMY
By I.K. Gujaral
I.K. Gujaral is the former prime minister of India.
NEW DELHI -- The crisis of global aging is entirely new and unprecedented.
There are no pointers from the past, no lessons from history, no premonitions
from the collective memory of mankind. In the late 18th century, economist
Thomas Malthus had predicted that natural population growth would outrun
the carrying capacity of the Earth, a dismal scenario in which human life
could only be nasty, brutish and short.
That has been the conventional wisdom ever since. In 1994, at the Third
U.N. Conference on Population and Development, held in Cairo, the entire
attention of the world community was focused on such a prospect. Leader
of the U.S. delegation, then-Vice President Al Gore's view was seconded
and reiterated by distinguished speakers from all over the world. He had
"We would not be here today if we were not convinced that rapid and
unsustainable growth of human population was an issue of the utmost urgency.
It took 10,000 generations for the world's population to reach 2 billion
people. Yet over the past 50 years we have gone from 2 billion to more
than 5.5 and a half billion. And we are on the path to increase to 9 or
10 billion over the next 50 years."
That was just seven years ago. It now transpires that the real threat
to the demographic balance of the developed countries was coming from
the opposite direction. The term "global aging" covers diverse
trends, some that are good and beneficial; others that are not. Increases
in average human life spans that we are privileged to witness must count
as one of the great boons of the 20th century. In India, apart from the
fact that average life expectancy has gone up from 32 years in 1947 to
62 years today, the number of people aged 60 years or more has increased
from 19 million in 1951 to 72 million today, and is estimated to rise
further to 177 million by the year 2025.
Yet the requirements of the elderly have never really been the focus of
our public policy, the unstated assumption being that their numbers would
remain small and providing care and support for the elderly is the liability
of their families, not of the state. The unfortunate fact is that paucity
of resources and tremendous growth of population would not permit us to
build a credible social security network. As a result, most of aged people
today are either destitute or dependent on the younger family members
for such care as they obtain.
There is a growing chasm between requirements of the South Asian senior
citizens and the support available to them, one that may soon reach critical
proportions unless greater public attention is focused on their needs.
Indian public policy will no doubt need to devote considerable resources
to this area in the years to come. At the same time no one would seriously
argue that there is an "aging crisis" in India. To us the aging,
in the sense of a growing percentage of the population surviving to late
middle age and beyond, can only be a vital sign of civility and progress.
It is something to applaud and not fear. It could become a crisis, as
in the industrialized world, if it were accompanied by depletions in the
ranks of the young and the vigorous. That is, if the classic population
pyramid gets inverted.
In this sense, the so-called aging crisis is only a convenient shorthand
term that partly describes but also partly obscures what in actual fact
is a depopulation crisis, the problem of societies which have fewer and
fewer younger people to carry on the burden of life's work. In India,
an ancient land and with a long civilizational experience, the derived
wisdom has been that joint families were essential for maintaining the
security of its aged members. Such wisdom was scorned and seemed outmoded
before the invincible economic juggernaut of the industrial society and
the growing power and reach of the modern welfare state, where the cost
of raising families was individualized and immediate, while the benefits
were socialized and remote.
It is clear that the aging crisis in the industrialized countries will
begin to manifest itself in a few short years, making the current "pay
as you go" pension systems unviable. As old age dependency ratios
steadily worsen over the ensuing decades, the fiscal deficits will swell
while private savings tumble, and the labor pool declines. Both labor
and capital, the two main ingredients of all economic models, will be
in shorter supply and the consequent distress will most likely be aggravated
by declining innovation and slowing of technological growth.
Of all these factors perhaps it is the potential slowdown of innovations
that most seriously threatens the global economy. The entire material
world of today is the product of the laboratories and research institutions
of the Western world and the breakthroughs of its young scientific revolutionaries.
It is rightly said that most Nobel prizes have been awarded for work done
by people before the age of 32. The Internet revolution, which has been
propelled by people in, or just out of, college is a classic example of
the power of young minds and fresh thinking.
An aging world will be a world in slow and protracted economic decline.
Diminishing labor, diminishing capital and slowing innovations taken together
more or less guarantee such an outcome. Nor will the consequences of such
a decline remain confined to the industrial world alone. Developing countries,
still free of the aging crisis, will also feel the cold wind from the
North. After all, their markets, their main sources of aid and investment
and, perhaps most critically, new skills and technologies, are located
almost entirely in the industrial world.
Where do we go from here? Will regression afflict the developing countries
as aging weakens the industrial world? Is there no escape from such a
Mere description of the bleak scene would not help. As we know, the aging
crisis is not universal.
The total fertility rate at the global level is 2.7 births per woman,
which is still well above replacement needs. The world as a whole retains
the traditional broad-based population pyramid.
In South Asia our problems primarily pertain to eradication of poverty
and unemployment of the growing number of young people who enter the job
markets every year. The working-age population is growing faster than
the general population, a trend that is the reverse of that prevailing
in the developed countries. Seen separately and in isolation, the problems
of an aging industrial world and a young developing world do seem stark
and serious. But seen together, in the context of a globalized world economy,
it would appear that the worst outcomes can be mitigated if not avoided
altogether. Their differing age and demographic profiles, in this sense,
are not problems but another complementarity to be harmonized through
the conventional mechanisms of international trade, investment, technology
and the movement of people toward a global optimum.
The "aging crisis" poses problems, but global cooperation could
convert it into opportunity. The complementarity between capital supply
in the industrial countries and capital demand in the developing countries
needs to be tapped. But this itself is not going to be easy.
One route to achieve it is through pension fund investments in the developing
countries. In the wake of the Asian financial crisis and its socioeconomic
impact, the need for putting in place prudential financial sector regulations
has assumed added importance. Volatility of the short-term capital inflows
in the developing countries does cause concern. The Indian experience
suggests that the behavioral pattern of the foreign institutional investors
has been quite volatile. Nevertheless, past behavior is no indication
of the future trends.
We notice that investors today are displaying a positive shift in their
attitudes as they improve the "quality" of investment by emphasizing
the ethical, environmental and developmental dimensions. Attracting such
responsible investments from the industrial countries combined with regional
and national resources could help the countries of South Asia to take
their economies to higher growth trajectories and achieve developmental
The absorption capacity of the South Asian region in terms of foreign
investment and technology is a ray of hope in tackling global aging. This
could be viewed as one of the merits of the globalization process that
offers opportunities to both the developed and developing countries.
MIGRATION AND BRAIN DRAIN
Additionally there will be globalization through greater international
migration. The beginnings of such a trend are already discernible. In
Europe, for example, that was almost closed to immigrants, a number of
countries are liberalizing work permits and residency requirements in
order to encourage skilled and educated foreigners to come and work there.
If history is any guide, fresh currents of international migrations give
little cause for tensions or worries. I can think of no country that has
not ultimately benefited from immigrants. There is a related issue of
concern. A recent study at Harvard University has estimated that the temporary
migrant labor to the United States from India with h1-b visas contribute
about $22 billion per year in the form of direct taxes and Social Security
payments. This amount is not repaid to the h1-b visas holders when they
return to India. This is clearly an unfair situation.
The Indian exchequer makes hefty investments in education and training
these highly skilled migrants. The Harvard study suggests that it would
be just if the U.S. administration were to repatriate a third or so of
the Social Security funds collected from h1-b visa holders to their home
governments. For India this would amount to about $7 billion. This is
more than the entire annual assistance that India receives from the World
Bank and other bilateral donors. Such repatriation would go a long way
to strengthen the third world's faith in globalization.
THE INTERNET AND VIRTUAL WORKERS
What is likely to be more helpful is globalization through technology.
The Internet has led to a true revolution in this area, by eliminating
conventional barriers of time and distance, as a result of which a global
industry has come up, one which for want of a better word is called "Internet-enabled
services," whereby all labor-intensive work is relayed back and forth
via the Internet medium. Technology is facilitating millions of "virtual
workers" to join the labor pool of the North, without ever leaving
their homes. In India, it is estimated that this sector will generate
earnings of $50 billion per annum, while employing 2 million people, by
the year 2008. This field is still in its infancy, it is growing exponentially,
and there is no obvious limit to the numbers that it can employ.
WTO RULES KEEP INDUSTRIAL WORLD LOCKED IN LOW WAGES
The threat to globalization comes from elsewhere. It is very difficult
to reconcile the problems of global aging with the position taken by the
developed nations in the World Trade Organization (WTO). Their principle
seems to be that every domestic lobby and vested interest must be appeased
even if this means that the dwindling labor resources of the industrial
world remain locked in low-skilled and unproductive jobs. World trade
in textiles and agriculture, the main areas in which the developing countries
retain a comparative advantage, have been kept out of the disciplines
of the world trading system. There is a double injury in this, for quite
apart from the welfare loss to the developed countries themselves, the
result has been to keep most developing countries locked out of the world
economy. This is hardly a happy augury for the globalized future.
HUMAN BEINGS ARE AN ASSET, NOT A BURDEN
Human beings, wherever they reside, are far from being a burden on society.
They are its core and fundamental strength. This is what the post-Malthusian
world must learn. No worldly resource is as valuable and more creative
than the liberated human mind.
Globalization cannot be a success if it remains confined to preaching
the virtues of liberal economics to the South, and poaching from them
their best educated and skilled people without any compensation of rewards.
There has to be a parallel effort, such as envisaged at the Copenhagen
World Summit in 1995, to advance the work of social development in the
South through education, through transfer of skills and technology, through
fulfilling some basic-needs programs -- in sum, by providing the basic
infrastructure to enable the people of the South to stand on their own
two feet. In the so-called era of aging, the dispossessed of the world
are actually its potential resource. Let us always remember this.
(c) 2001, Global Economic Viewpoint. Distributed by the Los Angeles Times
Syndicate International, a division of Tribune Media services.
For immediate release (Distributed 12/11/01)