G20 finance ministers meeting this weekend in Washington on global economic imbalances have focused on the right question, a “framework for growth,” as highlighted by French finance minister Christine LaGarde. It’s the details that are less reassuring. Missing in the discussions was the most profound structural issue today and in the coming decades of any serious growth framework: how to turn the G20 countries’ aging populations into an economic driver.
The underlying demographic shift of our 21st century is actually leading to the debt and deficit spiral that is concerning G20 leaders. The facts are stunningly obvious: Over the next three decades, the number of older people globally will almost quadruple to two billion. By 2050, half the EU-25 population will be over age fifty. G20 countries are at the center of these changes. In China, Korea, and Japan, as well as in Germany, France, and the U.K., over 30 percent of the population – and in some cases closer to 40 percent – will be over age 60, which will fundamentally challenge the 20th century assumptions of work and retirement balance. Moreover, China, the object of much of the G20’s weekend missives, will see 397 million citizens of its country turn 60 and older. It’s an exploding elderly population that is considerably larger than our total U.S. population today.
What is puzzling is the lack of attention to these underlying facts, already underscored by the seminal S&P Global Aging Report. The steady march of budget breakdowns – in Greece, Portugal and Ireland, as well as in Wisconsin and Ohio, to name a few of the more visible locales – should not be surprising to the ministers, who also missed the population aging topic at their annual meeting last fall in Seoul.
Here’s the good news: The G20 leaders still have time to add to their summit agenda in November the fiscal crisis staring at us from aging populations. With the French as hosts, one might expect President Nicolas Sarkozy to demonstrate leadership on this critical budget issue, given his progressive stance on pensions and health care, although he’s already taken political heat on that inside France. Even more than the environment, HIV/AIDs, or “poor country poverty” – all expected topics in November – the issue of the aging of the population would directly connect to the group’s overarching goal of addressing debt and deficit drags on economic growth.
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