The European Crisis and Aging Populations

Many people argue that an aging population (one where older people are a higher percentage of the population) leads to lower economic growth. George Friedman of Stratfor.com disagrees. He says there’s no reason an aging or shrinking population has to lead to lower growth. As long as technology and capital are available to adjust, growth can continue with a slowly, growing population.

There are those who foresee economic disaster in this process. As someone who was raised in a world that saw the population explosion as leading to economic disaster, I would think that the end of the population boom would be greeted with celebration. But the argument is that the contraction of the population, particularly during the transitional period before the older generations die off, will leave a relatively small number of workers supporting a very large group of retirees, particularly as life expectancy in advanced industrial countries increases. In addition, the debts incurred by the older generation would be left to the smaller, younger generation to pay off. Given this, the expectation is major economic dislocation. In addition, there is the view that a country’s political power will contract with the population, based on the assumption that the military force that could be deployed — and paid for — with a smaller population would contract.