A few months ago I posted about how demographic decline will affect Baby Boomers' retirements. I noted that Baby Boomers had fewer children per person than did their parents. Funds (both public and private) invested for retirement rely upon the producers in the economy. Smaller numbers of producers per retiree translate to less growth of those funds. This means retiring later and living more frugally in retirement than many had hoped.
This really doesn't sound so bad, especially when contrasted with the longer term outlook. Mark Steyn paints a dismal picture of the economic future of the Western world in this article. Steyn refutes the argument that the West's current economic woes are cyclical and of a shorter term. Rather, due to demographic shift, these problems are structural and long-term.
Among Americans that are not blissfully unaware of Europe's current economic crisis there seems to be an 'aren't you glad we're not Europe' attitude. Steyn challenges this notion, saying, "In the twilight of the West, America and Europe are still different but only to this extent: They’ve wound up taking separate paths to the same destination." All Western countries have created unsustainable situations.
I found this passage of Steyn's particularly poignant: "[T]he unsustainable “bubble” is not student debt or subprime mortgages or anything else. The bubble is us, and the assumptions of entitlement. Too many citizens of advanced Western democracies live a life they have not earned, and are not willing to earn."
Steyn complains that we have reduced productive working years by increasing the length of childhood and retirement. The trouble is that those reduced working years are supposed to pay for everything else. When they don't, we have little compunction about "running up debt that will have to be repaid by our shrunken progeny."
To provide some perspective, Steyn notes that 100 Greek grandparents today have only 42 grandchildren. He asks, "Is it likely that 42 Greeks can repay the debts run up by 100 Greeks?" The Greeks plan to push their debt onto "the thriftier Germans." But the Germans are no better off demographically. How likely it is that 42 Germans will be able to shoulder the debt that 100 Germans currently struggle to manage?
There is no quick fix to the root problem. Human capital is the ultimate asset, but we've bought into the lie that it is a liability. Even if we recognize this fact, it takes a long time to ramp up and produce more children that become productive adults, if you can even get people to do the hard work of child rearing. Steyn puts it more bluntly when he says, "Look around you. The late-20th-century Western lifestyle isn’t going to be around much longer."
To illustrate what to expect, Steyn writes, "In a few years’ time, our children will look at old TV commercials showing retirees dancing, golfing, cruising away their sixties and seventies, and wonder what alternative universe that came from." The following generation "will be amazed to discover that in the early 21st century the Western world thought it entirely normal that vast swathes of the citizenry should while away their youth enjoying" lives of luxury that were available only to the wealthiest elites "a mere hundred years earlier."
Steyn goes on to say, "In the world after Western prosperity, we will work till we’re older and we will start younger — and we will despise those who thought they could defy not just the rules of economic gravity but the basic human life cycle."
Given human nature, I expect that most of us will choose to take the three monkeys approach to this problem. We will simply ignore it. We will cast about for leaders that promise to address the various symptoms of the base issue, all the while continuing to insist that we are entitled to what we think we deserve.
In the end, future generations will end up getting what we really deserve. They will be right to despise the self absorbed, self indulgent generations that preceded them.