A Geriatric Peace?
The Future of U.S. Power in a World of Aging PopulationsOriginal Article By: Mark L. Hass
International Security Summer 2008 vol 32 no 1
Major Topic: Politics
Minor Topic: Security
Précis:
All major countries are getting older. This is a central fact that the world needs to consider and deal with. The author makes five claims about the future based on this fact.
1. This fact will likely help relative U.S. power both economically and militarily.
2. This fact will make peaceful relation more likely between all the great powers.
3. This fact will aggravate U.S. unilateralism.
4. This fact will lower U.S. ability to deal with non-great powers.
5. This fact will increase the U.S.'s isolationist tendencies.
The fact that major countries are getting older is the result of decreasing fertility rates and increasing life expectancies. Only extreme and unlikely measures can change this fact. This fact has two major economic repercussions: 1. Aging is going to slow economic and productivity growth. 2. Governments will have to spend considerably more on aging services – likely many times more than they currently spend on their militaries.
The author considers four ways to finance the new spending (these four ways all have similar drawbacks). First, increased taxation, which will reduce growth and productivity and is politically difficult to implement. Second, deficit spending which could lead to hyper-inflation or to high interest rates which would then crowd out investment and economic growth. Third, benefit reduction which is not likely to be supported by the highest and most politically active segment of the population: the aged. There is some possibilities in this third suggestion, however the author believes that any attempts would have marginal contributions at best. Fourth, government spending cuts in other areas. The author believes this to be the most realistic way to help pay for age related services.
There are three reasons for why the fact that all major countries are getting older is better for American dominance. First, the massive fiscal costs will prevent other states from matching, let alone exceeding, U.S. military spending. Second, future military spending all over the world will need to increase the amount spent on pensions verses hardware and technology procurement. Third, the American population is aging at a slower rate and to a lesser extent than the other great powers.
Since the U.S. already spends almost as much as all the other great powers, the chances of this gap being closed is low.
The author believes that the greater the aging burden the lower the future military expenditures.
The author asks eight questions which he uses as the criteria to determine the presence and extent of an aging crisis: First, is fertility below replacement? Second, will one quarter or more of the population be above the retirement age by 2050? Third, will the labor pool shrink by 2050? Fourth, are seniors highly dependent on the state? Fifth, will old age benefits increase? Sixth, does the state have high levels of debt? Seventh, is the current tax collected greater than 30% of GDP? And eighth, is the country poor?
By this criteria the author claims that six of the eight great powers (China, India, Russia, France, Germany and Japan) are facing or will face a huge and serious challenge. The other two (the USA and the UK) will only face a serious challenge.
China will start to face its problems between 2017 and 2023. this means that china will grow old before it gets rich. The author claims that the Chinese are not well prepared for retirement and will depend heavily on the government. Therefore, china face a choice: let poverty develop among the largest segment of the population or re-prioritize spending.
India will face the same problems as China around 2047. India is the youngest great power but also the fastest aging.
The idea that China and/or India have time to balance against the U.S. before they get old seems unlikely because in order to balance their militaries to the U.S.'s they will have to spend more for a considerable period of time than the U.S. does currently. Every year that they spend less on their militaries than the U.S. further closes the window of opportunity to balance.
France, Germany, Japan and Russia are in a crisis now. Japan, being the oldest is the furthest into its crisis. Japan's only saving grace is that their senior citizens rely the least on their government.
France and Germany are somewhat younger than Japan, therefore their aging crises are not as acute. However, their citizens do rely significantly on their governments to take care of them in their old age.
Russia has all the problems of this group, no clear advantage and one more problem to boot: Russia's population has shown a protracted degeneration in its general health. Resulting in a greater need of medical services per person than in other countries.
The aging problem has already forced some, although small, defense budget cuts in all of these counties except Russia. Nevertheless even in Russia, spending on military retirees is the single biggest outlay in their defense budget.
Britain is similar to all in that it has a low fertility rate and an increasing proportion of seniors, however, its working age population is expected to be larger in 2050 than today. This means that Britain will likely escape a geriatric driven economic contraction.
Britain is in a much better position to face the aging crisis than the nations mentioned so far. Britain's expected outlays are expected to grow the least among all the the great powers. It has the lowest national debt to GDP ratio. In terms of military spending, Britain spends a comparable amount to the other great powers as a percentage of GDP, on the other hand its military budget's personnel cost is far lower than in France or Germany. It seems that Britain has much more capital intensive armed forces.
America has an aging problem but it appears better than all the rest in its ability to cope. America is the second youngest and second most fertile (just behind India). America's immigration rate is the highest in the world and its labor force is growing and will be quite larger in 2050 than it is now. Welfare costs are relatively low; its citizens work longer per year and over a lifetime; its tax rate is relatively low. The author believes that these benefits will not save America from its aging crisis but they will make it easier for America to deal with the crisis.
The major consequence for military budgets of the aging crisis is two fold: (1) there will be an increase in the allotment of funds for personnel and (2) a reduction in system procurement and research and development.
There are two reasons for the increase in spending on personnel: First, a smaller workforce will lead to a scarcity of labor therefore there will be more competition to hire skilled workers in all sectors of the economy including the military. This competition will induce higher wages. Second, pension commitments will increase in proportion to overall spending. Increased pensions are important considerations because they are payments that will last years but do nothing to further power projection capabilities.
America's most likely military competitors, Russia and China, are far worse off than America. Russia spends 50% more of its military budget on pensions than the U.S. The U.S. has a smaller military than China therefore pensions will be a smaller proportion of the total budget in America than in China.
On the plus side, the security benefit for the U.S. is in the relative decrease in power of the other great powers.
On the negative side, the detriments to America are that (1) fewer states will be able to help the U.S. solve common military threats so America will have to shoulder more of the responsibility of securing international peace. And (2) the U.S. may have less actual power projection capabilities than it does now. This suggests that the U.S. may find it easier to become more isolationist.
The author believes that this trend will make nation building, humanitarian intervention, conflict resolution and prevention and initiatives against WMD proliferation less effective. This suggests a rather dangerous 21st century for U.S. interests. Additionally, many small powers face similar aging problems which, if they become failed states, could lead to a surge in international piracy and terrorism.
This is a unique time in history where the rising cost of health and welfare can threaten national security.
Added on: 2009-05-11 05:33:22
Précis by: James McLaren
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