Global Aging 2013: Rising To The Challenge … Since October 2010, when Standard & Poor's Ratings Services published our last update on the implications of population aging on sovereign credit ratings, the continuing economic and financial difficulties, especially in Europe, have accelerated efforts to improve the sustainability of public finances. The rapid buildup of government debt since 2007-2008–and the resulting large, albeit now mostly shrinking, general government deficits–have focused increasing attention on age-related spending, particularly in advanced economies. Consequently, a number of sovereigns have adopted budget-restraint strategies that include overhauls of public pension or health care systems–the two largest components of age-related programs that typically account for about 40% of government spending. – Standard and Poor's
Dominant Social Theme: Old people are an impossible crisis to handle and the emergency of old-ism is very grave.
Free-Market Analysis: This is a terrific analysis provided by Standard and Poor's about the problems caused by old people and how leaders will struggle with this grave crisis.
Of course, in writing the above sentence, we are being somewhat sarcastic. This is, in reality, just one more scarcity-based dominant social theme creating an artificial problem and then proposing an equally artificial and flawed solution.
The solution in this case is that government itself must solve the problem of too many old people. And as Standard and Poor's points out in this March 2013 analysis (that has steadily been gaining publicity) the ability of government to deal with this upcoming crisis is constrained.
Oh, the gravity of it all! Here's more on this unsolvable problem of old people:
This may be just the start of a decades-long period of rising tension between two seemingly conflicting priorities: the need to sustain public spending on pensions and health care for aging populations versus the need to hold down or reduce government budget deficits and debt. Complicating the effort to achieve these twin goals, at least for now, is the loss of output many economies suffered from the global financial crisis–which has led to lower employment, higher unemployment, and severe strains on both budgets and social safety nets.
… Having identified a range of potential gaps and what we believe to be their causes, we can consider the possible policy implications. Based on our framework, we believe that governments can deal with the future imbalances in two main ways (besides structural reforms aimed at raising employment for older workers and boosting economic growth): through a sustained consolidation in budgetary positions, or changes to social security and publicly-funded health care systems.
… Containing the risks to the sustainability of public finances is an important policy issue–and not just from the standpoint of maintaining sovereigns' creditworthiness. As critical, in our view, is that sustainable government budgets and safety nets may be vital to maintaining social stability, by ensuring adequate social transfers to reduce the risk of poverty, which has been on the rise in the sovereigns most legislative developments affecting rating agencies and S&P's efforts to enhance our policies and procedures.
However, if the experience of Europe and North America over the past century is any guide, rising prosperity is also likely to increase domestic pressures on emerging market sovereigns to provide more generous social security provisions in the future. These governments may have more time to consider their policy options than today's more economically advanced sovereigns, but we expect they will still need to design programs that are fiscally sustainable as their populations continue to age. Already, our analysis suggests that the need to tackle demographically driven budget deficits is almost as pressing for some emerging market sovereigns as it is for the sovereigns in advanced economies.
Did you understand all that? It's pretty serious, this problem of old people. And yet … for thousands of years human beings dealt with aging without such analyses. And let us keep in mind that Standard and Poor's, along with other ratings agencies employing thousands of people, totally missed the emergence of the economic crisis of the past five years.
That's right. This agency that has as its sole function analyzing creditworthiness went into 2007 with generally high marks offered to governments and corporations around the world. A year later, most of those corporations and governments were technically bankrupt.
There was some talk at the time that ratings agencies were about as good at their jobs as, well … monopoly central banks. Which would mean … not very.
And this analysis of old people does nothing to increase our confidence in S&P research. They don't even mention the real causation, in our humble view. By nationalizing health care and working hard to atomize the family, the modern state has done two things: It has created an intractable problem and guaranteed there is no solution to it short of what has been called euphemistically in the US "death panels."
The problem of growing old was dealt with efficiently in human society for tens of thousands of years simply by incorporating older people into the family unit. When people got older they took care of the children while mothers and fathers hunted, gathered, etc. Later on, the solution was updated as societies modernized but the basics remained the same. The family unit remained intact and people aged within familial situations.
It is only in the past century or so that a determined effort has been made to remove aging parents from the home under the guise that the "state" will care for them. This has caused a demographic and financial crisis that shows no signs of ending.
The S&P analysis deals with this wholly artificial crisis by recommending more of the same. The complexity that has been introduced into family life is to be rectified by yet further complexity.
The scarcity of resources caused by these false solutions is to be reinvigorated by yet more uncontrolled spending aimed at supporting solutions for problems that are not meant to be solved.
It is a form of controlled chaos aimed at expanding the influence of the state and then further expanding it as the prophylactic itself proves insufficient. Surprised? We're not.