Facing Demographic Transition

1. Introduction

In his speech at the 2007 Annual Club of Rome conference R. Rato, managing director of IMF, listed three main problems facing us today: 1) financial instability, 2) climate change and 3) demographic transition. None of these problems will be solved by continuing business as usual. Actually, they will be augmented since they are the result of our current behaviour. the contemporary world is a mixture of successes (e.g. improvements in health and considerable increase in life expectancy, The Montreal treaty on the ozone layer, increasing democracy, and of course science — our most successful endeavour) and failures (e.g. over-use of non-renewable resources, increased ecological footprint, no progress on non-proliferation, increasing inequalities and political instabilities, climate warming, pollution). Rapid changes and globalisation1 are making the contemporary world very different from what it was barely a century ago. Tomorrow is always too late.
The ‘tools’ we currently employ in approaching problems, dangers and threats facing us are those developed when society was distinctly different from today: slowly changing and very weakly interconnected. Would the use of ‘new tools’ help us? What new tools? Can we invent new tools? Particularly in the last century humankind tried to use what it thought to be new tools, but it ended in catastrophes. The warning of F. von Hayek that we “should be mindful of our limitations so as not to become involved in an attempt to control the society that has been formed by the free efforts of millions throughout the ages”2 provides guidance. New tools should be developed by a bottom-up approach. Ideas, multitude of different and mainly independent ideas would form a web of new tools — carrots and not sticks. Information-communication technology is ideal for such an approach.
The main problems outlined by R. Rato and most of the dangers and threat facing us today are caused by us — human beings. It is appropriate, as suggested by P. Crutzen, that the present epoch is labelled Anthropocene epoch3. Ever since the agricultural revolution humans have been more and more dominant. Today, humans are significantly influencing the environment and evolution itself. Human beings are the threat and dangers, but also the most important resource, and an underused resource
Continental Europe, however, largely did not act on pension reform in the 1980s, as the constituencies in favour of large, state-based systems opposed strenuously any retrenchment of their hard-earned pension rights. At the same time, Japan’s strong economic performance and overly optimistic population assumptions masked the need for prompt attention to its pension crisis.

2. People are the Real Wealth
In 1991, with the country in a deep recession, the Social Democratic Government in Sweden was defeated and replaced by a multi-party, centre-right minority coalition that placed pension reform high on the agenda. The coalition Government established a small working group to negotiate the pension reform framework that was headed by the minister of social policy. The group included representatives from each of the five political parties supporting the reform process, including the Social Democrats, the Moderates, the Liberal Party, the Centre Party,
The State of Human Development of 2004 quotes: “People are the real wealth of nations. The basic aim of development is to enlarge human freedom and choices so that people live full and creative lives. This must benefit everybody equitably.”4 The emphasis is on the words ‘everybody’ and ‘equitably’. Not just a few, or a specific class, or a race, or a nation, but everybody regardless of sex, age, both healthy and disabled. The word ‘equitably’ does not imply redistribution of wealth, nor does ‘equitably’ imply that everybody is equally adequate for all tasks. Everybody is important, equally important for an almost unique job that person can and does do – and that job is primarily creativity, but again different creativities.
Therefore, the primary resource and the primary aim are human beings: healthy, educated, active and happy, living in a society of social justice and social cohesion in a healthy environment assuring sustainable development. There is evidence that globalisation reduced inequalities among countries, increased them within some countries resulting in overall increased inequalities5 and consequently, in the destruction of human capital.
All our old and new tools should be modified so as to serve the people, to ensure constant increase in the human capital. Since the human capital is threatened by pollution, by overused resources, by loss of biological diversity and by global warming, obviously ‘tools’ have to be modified to ensure sustainable development. For instance, an old tool ‘sovereign state’ has to be modified — not necessarily obliterated — to ensure that it serves the people, rather than using them to achieve goals that are not primarily aimed at increase human freedom and wellbeing. For instance, war cannot be a ‘tool’ employed by sovereign states since war leads to the destruction of environment and of people. Similarly, two old tools implicit in Rato’s problems: ‘money’ and ‘employment’ have to be modified again to serve the people. It should not be overlooked that money has been with us for only a few thousand years, and that the current concept of employment is even much more recent. Both of them are also connected to the current demographic transition.
Demographic transition has been properly studied by Kapitza and coworkers6. It is a unique phenomenon that has not occurred previously. We will concentrate on one aspect of the demographic transition: it has resulted in a large percentage of persons older than 65. In most developed countries this percentage is about 20% and within less than a few decades will reach over 25% (see Table 1). This is an enormous resource that cannot be and should not be neglected. Of course, it cannot be and should not be treated mainly as a burden that causes a large retirement load on government budget and on corporations and individuals, and extra expenses due to increased health costs. It is argued that demographic transition is causing labour shortages and declines in GDP/capita. This is certainly true as long as we are in the ‘old paradigm’, but is that paradigm still valid? Do we need that kind of work? Can the generation of those over 65 be an asset rather than a burden and how?

Table 1: Persons over the age of 65 in Europe

Ivo Šlaus: President, south East European Division of the World Academy of Art and Science, Zagreb, Croatia.
1 Anderson, W. T. (2004): All Connected Now: Life in the First Global Civilization, Westview Press, Boulder, Colorado; Foreign Policy and Kearney, A. T. (2005): Measuring Globalization, May/June,; see also Globalisation Index, 2007.
2 von Hayek, F. (1979): Unemployment and Monetary Policy, Cato Institute, San Francisco.
3 Crutzen, P. J. (2002): Nature, 415 (Jan 3) 23.
4 The State of Human Development (2004): Human Development Indicators, p. 127, UNDP, New York.
5 WIDER World Income Inequalities Database (2007): World Development Indicators, X. Sala-i-Martin, Global Inequalities Fades as Global Economy Growth.
6 Kapitza, S. P. (2006): Global Population Blow-up and After — The Demographic Revolution and Information Society, Global Marshall Plan Initiativ, Hamburg.

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