Too often in recent years, economic debates in the United States have focused on (often self-created) short-term crises rather than the big picture. One such big picture issue is the economics of demographics. According to conventional wisdom, an aging population is a recipe for financial shortfall. However, Fareed Zakaria GPS recently discussed a study that found that Japan’s aging population may be beneficial for its fiscal health.
Here is how this “What In The World?” segment began:
We were struck by some startling data this past week. Last year saw Japan’s population fall by 244,000 people – the largest natural decline in that country’s history. It’s a trend that’s getting worse. By 2060, Japan projects that its population will have fallen by a third; 40 percent of Japanese will be retirees. It sounds like a recipe for disaster. Imagine a United States where half the population is over the age of 65: Social Security would collapse, health care costs will explode.
So, we were surprised to see a headline in the latest edition of The New Scientis claiming “Japan’s aging population could actually be good news.”
How on earth is that possible? After all, China relaxed its “one-child” policy last month precisely so it could avoid the fate of Japan. And that fate, if you go by conventional wisdom, seems to be slowing growth, and leading to unsustainable debt. Why? Because our entire system is based on having enough young workers to pay for pensions and government services.
Well, according to The New Scientist, perhaps we’ve been looking at the wrong data. . . .