Demography is not destiny. As the debate over aging gets under way around the world, it would be wise to keep that in mind. In the U.S., President George W. Bush is making reform of Social Security a key goal of his second administration. In Germany and most of Europe, there is angst over how to pay growing numbers of pensioners. In Asia, there is apprehension about aging populations in Japan and China. At the upcoming World Economic Forum in Davos, Switzerland, global aging will be high on the agenda. The big fear is that aging populations will bankrupt governments, erode economic vitality, and even harm geopolitical strength. Such a fear is wildly exaggerated.
The truth is that relatively small changes in the rates of growth for productivity and immigration can sharply reduce the impact of demographics on a country's economy. Small extensions of the working life by two or three years can significantly reduce the huge expense of retirement.
The real problem with aging is politics, not demographics. How do ethnically homogeneous countries such as Germany or Japan open themselves to immigrants? How do the French and Italians, who expect to retire in their fifties, accept years of additional work? How do Americans agree to cut or delay the benefits from Social Security and Medicare?
Countries face difficult choices ahead as they navigate the aging of their populations. But there is nothing in their future to stop them from succeeding, except the lack of political will.