Gray Dawn : How the Coming Age Wave Will Transform America--And the World

by Peterson, Peter G.

• ISBN13: 9780812931952
• ISBN10: 0812931955
• Format: Hardcover
• Copyright: 1999-01-01
• Publisher: Crown

Summary

The major economies of the world are on a collision course toward a huge, as-yet-unseen iceberg: global aging. Increased longevity is a blessing, but it carries with it costs and questions few countries wish to deal with. This looming demographic challenge may become the transcendent issue of the twenty-first century, affecting not just our economies but our political systems, our lifestyles, our ethics, and even our military security. InGray Dawn, Peter G. Peterson, the respected statesman of Washington and Wall Street, sounds the warning bell and prescribes a set of detailed solutions which, if implemented early, will prevent the need for Draconian measures later. In today's developed world, people aged 65 and over represent 14 percent of the total population. That share will almost double by 2030. In the United States, the 85-and-over set will more than triple. And fertility rates are so low in many developed nations that populations may actually fall to half of today's size before the end of the next century, causing a huge imbalance between the young and the old. Within the next thirty years, the official projections suggest that governments would have to spend an extra 9 to 16 percent of GDP annually simply to fulfill their old-age benefit promises. The developed world, taken collectively, has already promised future retirees some $35 trillion in public pension benefits--and much more including health benefits--for which no money has been set aside. How countries choose to deal with these mega unfunded liabilities will become the most expensive economic question in world history. As populations age and decline, will economies decline as well? Will youth remain apathetic in the face of the unthinkable tax bills they will soon be paying, or does generational war loom in our future? What happens as medical progress inevitably confronts increasingly scarce resources? Who lives? Who dies? Who decides? And if older developed countries try to depend on the savings of younger developing countries, how will this change the global balance of power? For business readers, Peterson also discusses where the greatest challenges and specific business opportunities may be had in the economic equation of aging societies. Passionately pro-youth--Peterson wants future young people to have the same kind of opportunities past generations have enjoyed--and passionately pro-senior ("At 72, I'm a geezer myself") Peterson not only writes about the problem but also provides reforms that would allow us to adapt to these profound changes as humanely as possible.Gray Dawnis an eloquent alarm bell rung in the hope of turning the wheel of mighty economies before it is too late.

Author Biography

<b>Peter G. Peterson </b>is chairman of The Blackstone Group, a leading investment bank. He chairs the Council on Foreign Relations and the Institute for International Economics. He is also a director of the Federal Reserve Bank of New York and is one of the founders of The Concord Coalition. A former secretary of commerce, Peterson has advised presidents from Richard Nixon to Bill Clinton. He is married to Joan Ganz Cooney, founder of Children's Television Workshop.

Table of Contents

1. Gray Dawn	3	(24)
Whose Watch Is It, Anyway?	7	(2)
Living Hand to Mouth	9	(2)
Overpopulation or Shrinking Population?	11	(1)
Gray Dawn	12	(4)
Unprecedented Questions	16	(1)
Graying Means Paying: The "$64 Trillion Question"	17	(2)
Visionaries Don't Always See Clearly	19	(2)
Strategies for an Aging World	21	(1)
Will It Take Another Pearl Harbor?	22	(2)
Confessions of a Geezer	24	(3)
2. Is Demography Destiny?	27	(38)
The Shape of Things to Come	28	(37)
3. Fiscal Realities	65	(30)
Unsustainable Long-Term Projections	66	(6)
Japan: First to Encounter the "Aging Society Problem"	72	(4)
Italy: The World's Worst-Case Pension Scenario	76	(3)
America: Land of the Health Cost Explosion	79	(5)
The Developing World: A Look at Two Extremes	84	(2)
Latin America and Asia: Countries at the Crossroads of Reform	86	(9)
4. No Easy Choices	95	(32)
The Hoax of Faster Economic Growth	95	(4)
Unfunded Privatization--Just Another Free-Lunch Fantasy	99	(4)
Spending Less on Doctors: Not as Easy as It Looks	103	(3)
The "Total Dependency" Fallacy	106	(5)
Letting Deficits Grow: The Road to Global Financial Meltdown	111	(6)
Raising Taxes: How Much Higher Can We Go?	117	(4)
Facing Up to Fiscal and Economic Reality	121	(6)
5. New Strategies	127	(52)
Encourage Longer Work Lives	127	(12)
Increase the Size of the Working-Age Labor Force	139	(6)
Raise More--and More Productive--Children	145	(6)
Stress Filial Obligation	151	(4)
Target Benefits on the Basis of Need	155	(5)
Require People to Save for Their Own Old Age	160	(14)
Embarking on Reform--What, Where, and When	174	(5)
6. Asking the Right Questions	179	(51)
How Will Global Aging Transform the Structure of Our Economies?	180	(3)
What Will It Mean if GDP Does the Unthinkable--and Steadily Shrinks?	183	(2)
Where Will Aging Make the Deepest Economic Impact?	185	(9)
Is Population Decline Economically Good or Bad?	194	(4)
Is Health Care a Maximum Right?	198	(4)
What Happens to Families?	202	(1)
The Politics of Old Versus Young: Does Intergenerational Warfare Lie Ahead?	203	(10)
Does an Aging Society Mean an Aging Culture?	213	(4)
Will Global Aging Overwhelm Capital Markets?	217	(4)
Will the EMU Run Aground on Demographics?	221	(2)
Will Trade and Immigration Become Political Flashpoints in an Aging World?	223	(2)
Will Young/Old Become the Next North/South Faultline in Global Politics?	225	(5)
7. Toward Global Solutions to a Global Problem: An Open Letter	230	(9)
Acknowledgments	239	(2)
Notes on Sources	241	(3)
Notes	244	(17)
Index	261

Excerpts

The challenge of global aging, like a massive iceberg, looms ahead in the future of the largest and most affluent economies of the world. Visible above the waterline are the unprecedented growth in the number of elderly and the unprecedented decline in the number of youth over the next several decades. Lurking beneath the waves, and not yet widely understood, are the wrenching economic and social costs that will accompany this demographic transformation-costs that threaten to bankrupt even the greatest of powers, the United States included, unless they take action in time. Those who are most aware of the implications of this extraordinary demographic shift will best be able to prepare themselves for it, and even profit from the many opportunities it will leave in its wake.

The list of great hazards in the next century is long and generally familiar. It includes proliferation of nuclear, chemical, and biological weapons; high-tech terrorism; deadly superviruses; extreme climate change; the financial, economic, and political aftershocks of globalization; and the ethnic and military explosions waiting to be detonated by today's unsteady new democracies. Yet there is a less-understood challenge-the graying of the developed world's population-that may actually do more to reshape our collective future than any of the above.
        
This demographic shift cannot be avoided. It is inevitable. The timing and magnitude of the coming transformation is virtually locked in. The elderly of the first half of the next century have already been born and can be counted-and the retirement benefit systems on which they will depend are already in place. The future costs can therefore be projected with a fair degree of certainty. Unlike global warming, for example, there can be little theoretical debate over whether global aging will manifest itself-or when. And unlike other challenges, such as financial support for new democracies, the cost of global aging will be far beyond our means-even the collective means of all the world's wealthy nations. How we confront global aging will have direct economic implications-measurable, over the next century, in the quadrillions of dollars-that will likely dwarf the other challenges. Indeed, it will greatly influence how the other challenges ultimately play out.
        
Societies in the developed world-by which I mean primarily the countries of North America, Western Europe, Japan, and Australia-are aging for three major reasons:
        
  Medical advances, along with increased affluence and  improvement in public health, nutrition, and safety, are raising average life expectancy dramatically.
        
  A huge outsized baby boom generation in the United States and several other countries is now making its way through middle age.
        
  Fertility rates have fallen, and in Japan and a number of European countries are now running far beneath the "replacement rate" necessary to replace today's population. The impact of so few young people entering tomorrow's tax-paying workforce, while so many are entering benefit-receiving elderhood, is of profound consequence.

As a result, I believe that global aging will become the transcendent political and economic issue of the twenty-first century. I will argue that-like it or not, and there's every reason to believe we won't like it-renegotiating the established social contract in response to global aging will soon dominate and daunt the public policy agendas of all the developed countries.
        
By the 2030s, these countries will be much older than they are today. Some of them may exceed a median age of 55, twenty years older than the oldest median age (35) of any country on earth as recently as 1970. Over half of the adult population of today's developed countries and perhaps two-thirds of their voters will be near or beyond today's eligibility age for publicly financed retirement. So we have to ask: When that time comes, who will be doing the work, paying the taxes, saving for the future, and raising the next generation? Can even the wealthiest of nations afford to pay for such a vast number of senior citizens living a third or more of their adult lives in what are now commonly thought of as the retirement years? Or will many of those future elderly have to do without the retirement benefits they are now promised? And what happens then?
        
This is not the first time I have spoken out on demographic trends and the clash between popular expectations and fiscal realities. In 1982, I began writing on the long-term challenges facing the U.S. Social Security system-a concern that is now, at last, moving onto the center stage of national discussion where it should have been long ago. After studying the early Reagan budgets, I spoke out against the danger of ballooning federal budget deficits, and began organizing national bipartisan efforts to control and reduce them. In the 1980s, five former Secretaries of Treasury and I founded the Bi-Partisan Budget Appeal, made up of 500 former public officials and business CEOs. In 1992, with Senators Warren Rudman and Paul Tsongas, I cofounded The Concord Coalition. This organization was devoted originally to balancing the budget. With the short-term budget outlook improving, it is now focusing on the long-term impact of ballooning spending on federal entitlement programs, which threatens to unbalance the budget again early in the next century, and on the great advantage of acting to reform them sooner rather than later. (It was in that context that the White House asked The Concord Coalition in 1998 to cohost a series of televised national conferences on the future of Social Security with an unlikely bedfellow, the American Association of Retired Persons.)
        
In 1996, I presented my views about the aging of America and the impending crisis in U.S. retirement programs in my book, Will America Grow Up Before It Grows Old? So, one might ask, why write another book on what sounds like the same subject? The answer is, it's not the same subject. My last book focused on America's own domestic problem. But while writing that book, I became aware that, imposing as the challenge of an aging society is in the United States, it is even more serious in Japan and much of Europe. In most of the other developed countries, populations are aging faster, birthrates are lower, the influx of younger immigrants from developing countries is smaller, public pension benefits for senior citizens are more generous, and private pension systems are weaker. Most of the other leading economies therefore face far worse fiscal fundamentals than we do. Even some major developing countries-China, for example-face serious aging challenges in the next century.
        
Given the instant and sometimes painful interactions within global capital markets and the likelihood of varying national responses to the coming fiscal challenge, I can easily envision that sometime in the next decade or two demographic aging will trigger unprecedented financial pressures, both on fragile regional economic arrangements such as the European Economic and Monetary Union and on the world economy as a whole. The economic and political outcome could make today's Asian or Russian crisis look like child's play.
        
Demographic aging is, at bottom, a global challenge that cries out for a global solution. That is why I have written this book.

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Excerpted from Gray Dawn: How the Coming Age Wave Will Transform America--And the World by Peter G. Peterson
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