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The Cost of the World's Long Senior Moment

Interviewee: Michael W. Hodin, CFR Adjunct Senior Fellow
Interviewer: Deborah Jerome, Deputy Editor, CFR.org
December 23, 2010

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While several decades ago experts feared overpopulation as a demographic time bomb, a newer concern is the world's aging population. The number of people over sixty globally is expected to exceed the number of children for the first time in 2045; in some developed countries, that shift happened over a decade ago. This reflects lower fertility rates and a surge in lifespan in the course of the twentieth century, says CFR's Michael Hodin. Public policies however, have not adapted, says Hodin. He recommends greater advocacy on health issues linked to aging--such as Alzheimer's disease, which carries devastating social costs--as well as measures that will allow more physically fit elderly to work longer. "There are some who would argue that the debt and deficit challenges we have today are child's play compared to what we will see over the next decade or two if we don't begin to realign our social policy, social welfare and health policy," says Hodin.

Paul Ehrlich in his 1968 book "The Population Bomb" sounded dire warnings about overpopulation, and many other experts took up his cause. But now there seems to be a concern with low birth rates and aging populations in both the rich and poor worlds. Give me a guide to the issues here.

The first point, which is not at all uncommon, is the way you frame the question: Namely, we now have this aging population's problem or challenge. It is a great challenge with the demographic shift, but I look at it as truly an enormous opportunity that's based on probably the greatest achievement of humankind, certainly over the last hundred years or more.

Extending the lifespan?

Extending the lifespan.  At the beginning of the twentieth century, in the rich countries we lived roughly to age forty-seven. We're now [averaging lifespans of] over eighty and counting. That's extending to the developing world.

Global aging will be the single largest driver of the fiscal challenges that we are going to face over the next two to three decades.

The second part of the demographic challenge is more particular to the developed world, the OECD countries. The ideological position of several decades ago was reflected in what was commonly referred to as ZPG [Zero Population Growth]. Unfortunately, a lot of people, for a variety of reasons, actually took that seriously. So the demographic challenges in society are not only around how do we manage a society which has people living three--and  soon it will be four--decades longer  than we had organized for in the last century. But it's also the issue of the number of people who are traditionally working, and the number of people who are traditionally retired.

As the proportion shifts, it is fiscally unsustainable to have the traditional model. Part of the reason for this shift is longevity. But another reason is low fertility rates. In America, we're better off than most of our OECD or G20 counterparts. But certainly in Europe, for example, and Japan, South Korea, and others, they're way below the replacement rate. Global aging will be the single largest driver for the fiscal challenges that we are going to face over the next two to three decades.

Is this as an issue that is newly cropping up on the policy radar, or has it been around awhile?

If you go back to the nineties, you will see that no fewer than three times, the G8 actually had references in their communiqués to what was referred to as active aging and the need for changes in our policy approaches to be aligned to this demographic reality. The problem is that nothing really happened from that. There's been a certain amount of rhetoric, but nothing has really shifted.

Let's take, for example, the basic social welfare programs in the United States, the UK, France, Japan, South Korea. These are systems that are basically modeled after the Bismarck approach invented at the end of the nineteenth century, which basically presumed that we would work into our mid- to late-fifties, leave the workforce, retire, and die a couple years later. And we could afford that model. But that model was not true by the latter part of the twentieth century, and certainly is not applicable to the twenty-first century. There are some who would argue that the debt and deficit challenges we have today are child's play compared to what we will see over the next decade or two if we don't begin to realign our social and health policies to this new reality.

How do we begin to do that?

The basic challenge is that we need to look at it with a new storyline: That you have a framework of people living longer. Inside that, you have people having a life course of work that is different from the one that we traditionally thought of. To do that, you need to have at least two components that are shifted. One is health, and the other is education. If we don't have healthy aging, the new model doesn't work.

Some people at seventy are robust and hearty; some are ailing or frail.  How do you bring up the level of health for everyone so that they can continue to be productive and so that the healthcare costs are driven down?

This is a twenty-first century challenge. Let's take a good example. Unfortunately, you have non-communicable diseases that are age-related : diabetes, Alzheimer's, heart disease, cancer, just to name a few. [A recent report] sponsored by Alzheimer's International found that currently, the cost of Alzheimer's is $ 640 billion or something like 1percent of GDP worldwide. One of the enormous challenges of Alzheimer's is that you don't die quickly. Therefore, the care is critical. The other thing about Alzheimer's is that it is absolutely age-related. If you're over sixty-five, there's a one in three chance you'll have it. If you're over eighty-five, there's a one in two chance. So, with longevity, the prevalence of Alzheimer's becomes stunning. It will derail the twenty-first century.

If you go back to the nineties, you will see that no fewer than three times, the G8 actually had references in their communiqués to what was referred to as active aging and the need for changes in our social and policy...The problem is that nothing really happened.

There are similar kinds of numbers for cardiovascular disease, for diabetes. They're not all as explosive as Alzheimer's, and also, to be very blunt about it, you die more quickly oftentimes with certain cardiovascular disease, [or] cancer. So it's a horrible way to talk about it, but in terms of the reality of the cost to society, Alzheimer's is probably the first among equals.

So the question is: what we do about this? If you think about HIV/AIDS, in twenty short years it went from a death sentence to a manageable illness. Now there are many around the world, living in very poor countries in Africa, who may not think that. But the fact is that we have medicine that can treat HIV/AIDS as a manageable illness. One of the reasons we got to that was because of political commitment and global funding. Government, the research community, and the private sector worked together to find innovative solutions. So, with Alzheimer's, I am convinced that we can be successful if we apply similar global research incentives, [along with] the regulatory approach that you would want.

What about the education component?

A second element to this storyline is if we're living longer, how do we have a different life course of work? So the second part is education, learning, skill development. If we started thinking of this as a transformational change for society--that people today in their twenties and thirties, and behind them, were going to be living in their nineties--we would be thinking about living and working in a different way.

If we're living and working in different ways into our eighties, you need to have the possibilities of different skills and different learning. So [there has to be] an education policy applied to that. The aging population's challenge is not just about taking care of old people in long-term care.

Do we need to encourage people to have families, so that it's not just a question of dealing with an aging population but also creating a younger population?

Well, that is a clear recognition, particularly in the countries that are in the worst shape. Right now, the oldest population --as a percentage of their total population--is Japan. And over the next decade, South Korea will overtake them by a large margin. Right behind them are Italy, Germany and a couple others. They are addressing that.

What about in the United States?

In the United States, we have two components that put the United States, among all of the G20 countries, in better shape, from that proportion point of view, than any of the others. One is that we're making more babies, relatively speaking. So we're about a little over 2. 1[babies per woman], which is obviously a little above replacement rate.

And the second is immigration. Now, everyone can't rely on immigration, because the world only has so many people. So, it's beggar thy neighbor policy in that sense.

What will help drive the kinds of changes you think are necessary?

I'm hoping that, given the political milestone of the first baby boomer turning sixty-five in January, maybe President Obama will make some recognition of this, even in his State of the Union address. The UN in November passed a resolution on aging populations and called for greater attention. There's a certain line of rhetorical flare around things in speeches, in resolutions, but in the world of politics, it matters.  You begin to put it on the agenda.

There are many who have noticed that in the Millennium Development Goals aging's not there. It's quite stunning. Let's make it one of the goals.

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