Old World, Old People, New Problems

The New York Times has an interesting article on the effects of Europe’s aging population. By the year 2050, it is expected that the median age in Europe will be 52.3, compared to 35.4 in the United States. The effects of this demographic shift don’t bode well for Europe.

The most visible sign is in pensions, which are becoming economically unsustainable as there are fewer workers to pay into the system while more are taking from it. The problem is exacerbated by the many Europeans who retire before 60 or 65. As one Austrian economist put it:

…the system works "to give every Austrian the right to retire in midlife with what is internationally a particularly high pension, so that he can waste an ever increasing portion of his lengthening life expectancy in unemployment."

The problems with Europe stem partly from the low birthrate, but also from a culture that has essentially punished success. Confiscatory tax rates in many Western European countries, along with legal rules limiting work hours and investment have created a culture where work is looked down upon. Unlike the United States or Asia, Europeans tend to work less, retire early, and invest less. These factors don’t make for a strong economy. Societies must balance the need to advance society through science and industry with the need for leisure. In Europe, this balance is tilted much farther to the latter.

Immigration is not a viable solution for Europe either. Already there are deep tensions over the immigrant populations in Western Europe. Arab immigrants are forming their own Islamic-based societies rather than strengthening European civil society. This means that cities like Hamburg have become centers of al-Qaeda activity, and Paris must deal with riots by Algerian gangs. Unless there is an effort to help assimilate immigrants in European society, these divisions will only grow.

The phrase "Old Europe" is increasingly accurate. As the population of Europe continues to age, the ongoing economic and political decline of the continent will likely continue. The addition of the Eastern European nations to the EU may help to slow this overal process, but only a fundamental change to the economic and social systems in these countries can begin to change the demographic shift towards building a stronger future for Europe. However, with trade unions and other special interests opposing such changes and the traditionally low European birthrate, such changes seem unlikely in the near future.

16 thoughts on “Old World, Old People, New Problems

  1. Your continued attempts to portray Europe’s impending financial woes as somehow different than America’s is selective finger-wagging at its most clueless. As it stands now, the numbers look slightly worse for Europe than America, but Europe doesn’t have George W. Bush borrow-and-spending them deeper and deeper into a hole before the retirement crunch even happens. Bush’s neoconservative war-for-every-occasion diplomacy, endless expansion of federal spending on Pentagon payolas, and a new budget-busting tax cut for the wealthy every year is likely to put our deficit at near 10% of GDP in the coming years. We were in an economic situation considerably better than Europe was three years, but Bush has tried his damndest to make sure our situation is as desperate as theirs…and appears to be succeeding.

    Beyond that, civilized nations’ attempt to compete with the third world as far as hours on the job is as futile as the popular conservative notion that American and European workers need to take a pay cut to compete in the global economy. In both cases, the nature of civilized economies will be wholly sacrificed attempting to compete. Unless these economies and their people are willing to put in 120 hours a week on the sweatshop floor like the nine-year-old starving Chinese girl does in the Nike factory, countries like France and the United States will never be as attractive to business in the new global economy as China. Obviously though, we will try. Companies will cut wages, extend work hours, reduce the quality of life, all while conservative ideologues will wag their righteous fingers about the moral decline of the younger generation who are not being properly raised by the parents who they insist work more hours per week for less money.

  2. Also interesting is your statement about attempts to make overtime unattractive in France isn’t countered with what the sleazy Bush administration is on the verge of doing here in America, eliminating overtime for anyone who earns more than $22,000 a year, allowing their employers to declare them “executives”. From a political standpoint, one would think Bush could at least wait until 2005 before destroying decades of work to establish overtime laws with one stroke of the pen, but this administration’s unquenchable thirst for the blood of the American working class apparently can’t wait two years.

  3. Read the article – the demographic shift is clear. The current system is not maintainable, and it’s not going to be all that much better in the US if things aren’t changed. You can spew as much blather as you like about workers, overtime, and how bad you think Bush is, but none of that changes the basic economics of the system. Complaining about such things is like yelling at the Weather Channel for creating a thunderstorm. Politicians in the US and Europe have to realize that a system that attempts to bribe voters with lavish social benefits is a system that cannot be maintained over the long term. There is no such thing as a free lunch, and someone has to pay for all these benefits. When there aren’t enough people working to pay for the all the retirees, the system will collapse unless something is done to strengthen the pension system for the future.

  4. I don’t dispute the demographic problems or the need to make some changes to retirement entitlements. Such changes should have been made years ago and will be much more bruising now. That’s not to say I think privatization, at least as currently proposed, is the right approach. I also think we need to recognize that increasing the retirement age is not a realistic approach for a large percentage of workers. Perhaps raising Social Security eligibility to age 70 would be fine for me, since I sit behind a desk most of the day, but it’s not practical for someone like my dad who butchered hog carcasses in a slaughterhouse for 26 years before swinging a maul on the railroad for the last nine years. Even someone like my mom, who has stood on her feet in a service job for more than 25 years can’t expected to do so for another 17 years before being eligible for retirement. It’s easy for deskbound lawmakers (and deskbound constituents) to tell people who actually get off their chairs at their workplace that working an extra five or seven years before retirement qualification should be doable. Changes are needed, but something better than the flimsy plans currently under construction must arise first….and quickly.

    By focusing on declining birth rates and retirement entitlements, you effectively dodged the equally if not more serious issues I brought up such as debt growth, the call for limitless peasant sacrifice of quality of life and the double standard in which they’re expected to work more hours for less money yet still maintain an antiquated Norman Rockwell-style family values ethic, and the Bush scheme to give millions of working Americans a pay cut by revoking overtime laws. You dodged these issues in your retort with stealth precision, so I have to give you high points for evasiveness….but low points for content.

  5. “What about debt growth???” Maybe the fact that tax-cut and defense-boondoggle deficit spending threatens to bankrupt government before the retirement entitlements Jay is so worried about even come to pass.

  6. Wow, this is Pollyanna editorializing even by conservatives’ clunky standards. 28 percent of our current budget goes to financing interest on the existing national debt, mostly ran up during the Reagan and Bush, Sr. administrations. This is more than a quarter of our budget that simply finances profligate federal budgetting practices of previous generations, and the percentage of our budget going exclusively for national debt interest will continue to rise and rise and rise as Bush and the GOP Congress spend money faster and more wastefully than the most liberal Democrat could ever dream of spending, and as they continue to put new tax cut checks in your mailbox every year to buy your vote. Our current federal budget policy is tantamount to nailing our children and grandchildren to a financial crucifix.

  7. Germany and Japan’s share of debt to GDP is probably slightly higher than the US currently. Bush is working tirelessly to catch up to them though, and is likely to achieve it next year. It would surprise me if the 2004 deficit was less than $800 billion. Like anybody with a maxed-out Visa or MasterCard can tell you, deficit spending like that catches up to you damn fast.

  8. Not to mention- by 2050, I’m guessing that unemployment in the western world could easily be over 90%. If Hans Moravec and Ray Kurzweil are right, automated systems will do everything for us by that point. You’ll go on Social Security and Medicare as soon as you’re born, and you’ll have nothing to do but sip pina coladas until the heat death of the universe…

    In other words, technological change in the next century is going to change labor demographics dramatically. Europe and Japan won’t need a young population to remain competitive when factories only require one human employee and all our basic service industries are automated.

  9. I don’t see that happening any time soon. AI technology just isn’t good enough to take over the service industry, at least not in the near future. Plus, there’s always the cultural barrier that prefers working with humans over machines. If anything, technology will power job growth as there will always be people who are charged with repairing, programming, and designing those machines.

  10. The objective is not to take over the service industries but render the bulk of them irrelevant as I understood it.

  11. The only reason we prefer interacting with a human to interacting with a machine is that humans are flexible, intuitive, and can communicate with us in a way machines cannot. (In some cases, they’re better looking as well)

    If Moore’s Law doesn’t break down (none of the predicted “ends” have occured, and, in fact, the rate of microprocessor development has increased, and with optical computers and nanomaterials research continuing at such a quick pace, this will continue), computers will have the rough capabilities of monkeys by 2030. That is, they’ll be capable of helpful, creative, intuitive thought, just in a very limited fashion. However, this “limited fashion” will be sufficient to take the place of most service occupations in existence today. I can’t think of a single job I’ve worked, with the possible exception of my activist position last fall, that wouldn’t be better handled by such a specialized machine. Humans will still be needed as technicians, researchers, managers, and the like, but there will no longer be a need for a non-professional class of labor any more. The populations of Europe and Japan would be more than sufficient to run such an automated economy. In the US, we’d likely face mass unemployment, especially in the southwestern regions and the coasts, which will only exacerbate our crime and poverty problems. While “underpopulated” Japan and Europe will slide along with clean, efficient cities, with low crime rates and working education systems, while the US will struggle with massive crime problems, congested urban cesspools, and an ever-growing gap between the rich and the poor, exacerbated by a failed education system.

    The Japanese already have a significant edge on robotic and automation technology, which is a smart move on their part- they realize that they’re going to need it. They’ll probably have a much less labor intensive economy than ours much sooner, simply because they’ll need to have one in order to survive, whereas we can continue to call upon our reserves of cheap labor. And there won’t always be people reprogramming, building, and repairing the machines- sooner or later, they’ll be fixing, redesigning, and rewiring each other, much like their human parents.

    Let’s just hope they like us. (And let’s just hope that the defense department doesn’t break too many of Asimov’s laws…)

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