The Global Baby Bust

Phillip Longman

From Foreign Affairs, May/June 2004

Summary:  Most people think overpopulation is one of the worst dangers facing the globe. In fact, the opposite is true. As countries get richer, their populations age and their birthrates plummet. And this is not just a problem of rich countries: the developing world is also getting older fast. Falling birthrates might seem beneficial, but the economic and social price is too steep to pay. The right policies could help turn the tide, but only if enacted before it's too late.

Phillip Longman is Senior Fellow at the New America Foundation and author of the forthcoming The Empty Cradle (Basic Books, 2004), from which this article is adapted.

Population aging also depresses the growth of government revenues. Population growth is a major source of economic growth: more people create more demand for the products capitalists sell, and more supply of the labor capitalists buy. Economists may be able to construct models of how economies could grow amid a shrinking population, but in the real world, it has never happened. A nation's GDP is literally the sum of its labor force times average output per worker. Thus a decline in the number of workers implies a decline in an economy's growth potential. When the size of the work force falls, economic growth can occur only if productivity increases enough to compensate. And these increases would have to be substantial to offset the impact of aging. Italy, for example, expects its working-age population to plunge 41 percent by 2050 -- meaning that output per worker would have to increase by at least that amount just to keep Italy's economic growth rate from falling below zero. With a shrinking labor supply, Europe's future economic growth will therefore depend entirely on getting more out of each remaining worker (many of them unskilled, recently arrived immigrants), even as it has to tax them at higher and higher rates to pay for old-age pensions and health care.

Theoretically, raising the retirement age could help to ease the burden of unfunded old-age benefits. But declining fitness among the general population is making this tactic less feasible. In the United States, for example, the dramatic increases in obesity and sedentary lifestyles are already causing disability rates to rise among the population 59 and younger. Researchers estimate that this trend will cause a 10-20 percent increase in the demand for nursing homes over what would otherwise occur from mere population aging, and a 10-15 percent increase in Medicare expenditures on top of the program's already exploding costs. Meanwhile, despite the much ballyhooed "longevity revolution," life expectancy among the elderly in the United States is hardly improving. Indeed, due to changing lifestyle factors, life expectancy among American women aged 65 was actually lower in 2002 than it was in 1990, according to the Social Security Administration.

The same declines in population fitness can now be seen in many other nations and are likely to overwhelm any public health benefits achieved through medical technology. According to the International Association for the Study of Obesity, an "alarming rise in obesity presents a pan-European epidemic." A full 35 percent of Italian children are now overweight. In the case of European men, the percentage who are overweight or obese ranges from over 40 percent in France to 70 percent in Germany. And as Western lifestyles spread throughout the developing world so do Western ways of dying. According to the World Health Organization, half of all deaths in places such as Mexico, China, and the Middle East are now caused by noncommunicable diseases related to Western lifestyle, such as cancers and heart attacks induced by smoking and obesity.

GLOBAL AGING AND GLOBAL POWER

Current population trends are likely to have another major impact: they will make military actions increasingly difficult for most nations. One reason for this change will be psychological. In countries where parents generally have only one or two children, every soldier becomes a "Private Ryan" -- a soldier whose loss would mean overwhelming devastation to his or her family. In the later years of the Soviet Union, for example, collapsing birthrates in the Russian core meant that by 1990, the number of Russians aged 15-24 had shrunk by 5.2 million from 25 years before. Given their few sons, it is hardly surprising that Russian mothers for the first time in the nation's history organized an antiwar movement, and that Soviet society decided that its casualties in Afghanistan were unacceptable.

Another reason for the shift will be financial. Today, Americans consider the United States as the world's sole remaining superpower, which it is. As the cost of pensions and health care consume more and more of the nation's wealth, however, and as the labor force stops growing, it will become more and more difficult for Washington to sustain current levels of military spending or the number of men and women in uniform. Even within the U.S. military budget, the competition between guns and canes is already intense. The Pentagon today spends 84 cents on pensions for every dollar it spends on basic pay. Indeed, except during wartime, pensions are already one of the Pentagon's largest budget categories. In 2000, the cost of military pensions amounted to 12 times what the military spent on ammunition, nearly 5 times what the Navy spent on new ships, and more than 5 times what the Air Force spent on new planes and missiles.

Of course, the U.S. military is also more technically sophisticated than ever before, meaning that national power today is much less dependent on the ability to raise large armies. But the technologies the United States currently uses to project its power -- laser-guided bombs, stealth aircraft, navigation assisted by the space-based Global Positioning System, nuclear aircraft carriers -- are all products of the sort of expensive research and development that the United States will have difficulty affording if the cost of old-age entitlements continues to rise.

The same point applies to the U.S. ability to sustain, or increase, its levels of foreign aid. Although the United States faces less population aging than any other industrialized nation, the extremely high cost of its health care system, combined with its underfunded pension system, means that it still faces staggering liabilities. According to the International Monetary Fund (IMF), the imbalance between what the U.S. federal government will collect in future taxes under current law and what it has promised to pay in future benefits now exceeds 500 percent of GDP. To close that gap, the IMF warns, "would require an immediate and permanent 60 percent hike in the federal income tax yield, or a 50 percent cut in Social Security and Medicare benefits." Neither is likely. Accordingly, in another 20 years, the United States will be no more able to afford the role of world policeman than Europe or Japan can today. Nor will China be able to assume the job, since it will soon start to suffer from the kind of hyper-aging that Japan is already experiencing.