Opinion Pieces

Towards Gerontocracy?

In order to avoid a demographic “death trap” Western Europe must implement new and fair policies for both present and future generations. The SGI study suggests some radical solutions.

SGI’s study on "Intergenerational Justice in Aging Societies" shows a number of alarming developments. Today’s young people are saddled with a large debt burden, unsustainable economic practices, relative underinvestment in social programs, and poverty.

An indicator discussed, but not used, by the study is that of youth unemployment. This has been steadily increasing since the onset of the global economic crisis five years ago and particularly since the onset in earnest of the euro crisis since 2010. According to EU figures, youth unemployment has now reached 23.5% in the European Union, including 7.5% in Germany, 24.7% in the UK, 26.5% in France, 40.5% in Italy, and 56.4% in Spain. There are currently over 5.6 million unemployed Europeans. Even in developed countries this is often a traumatic experience entailing dependence on one’s parents, a failed transition from adolescence to adulthood, and the inability to acquire and maintain lifelong professional skills (a kind of premature hysteresis).

In Europe, gerontocracy has taken the form of a particular disdain for the problem of youth unemployment. This was particularly visible at the latest European summit in which leaders pledged before a skeptical European press €6 billion to create youth jobs. That may seem like a lot, but it makes up less than 0.05% of EU GDP, a sum completely marginal given the scale of the problem. By contrast, President Barack Obama’s 2009 stimulus package (which admittedly went beyond youth), for a comparable-sized economy, was worth $831 billion.

Chart 1: Youth (under-25s) unemployment rates in Europe (1990 – 2012)

Note: “J-90” refers to January 1990, “J-92” is January 1992, and so on.

Source: Zero Hedge

In fact, the problem is likely to prove a lasting one. It is well known that individuals, from adolescence to old age, tend to shift from left to right and from political radicalism to conservatism. We are now seeing this on a vast scale across the developed world, with politics often characterized by extreme timidity and conservatism despite the scale of the economic debacle.

The causes of these problems have, in part, been due to the demographic transition. The median age in the EU was 41.5 in 2012 and is projected to rise to 47.6 by 2060. This relatively slow rise masks a far faster change in Europe’s population structure, in particular a very rapid increase in the population (and therefore voting bloc) over-65.

Chart 2: Projected rise in over-65s as a percentage of overall population (2010 – 2040)

Source: Eurostat

In contrast, in most European countries, the size of younger cohorts has collapsed as a result of extremely low fertility. With a few notable exceptions – France, the UK, the Low and Nordic countries – women across Europe are on average having 1.3 children. Evidence suggests couples may be having even less children due to a "baby recession" caused by the crisis. This is on top of the generally low voter turnouts of younger voters (in France in 2012, 19% of under-25s didn’t vote in the presidential elections as against a 13% national average).

Would mandatory and proxy voting increase intergenerational fairness?

The solutions to this are difficult to identify. The Bertelsmann report suggests the controversial idea of Demeny voting, parents getting extra votes on behalf of their children and voting by proxy. The idea has notably been promoted by the ruling Fidesz party in Hungary.

An alternative option is compulsory voting, which in most countries would entail more votes from younger and poorer citizens. Countries with mandatory (more or less enforced) voting in Europe include Belgium, Italy and Greece, are all countries with traditionally high voter turnout (>90%). This has not translated however into either low youth unemployment or high marks for intergenerational justice according to the Bertelsmann report. All three have particularly high public debt.

In addition, it isn’t certain whether more voting power to younger people would lead to more sustainable policies. Thus in Europe, electorates even in the crisis countries have, broadly speaking, proven relatively conservative and particularly attached to the common currency. Older voters appear terrified at the thought of losing their pensions and savings to a devalued currency. Young people are traditionally more open to European cosmopolitanism and express relatively higher attachment to the euro in polls.

Notwithstanding this, there would be changes. So in Italy, 47.2% of young people voted for Beppe Grillo’s Movimento Cinque Stelle, whose policies (notably debt restructuring and self-financing via the central bank) may in fact improve one major intergenerational justice indicator. In contrast, over two-thirds of French youth voted for moderate center-left, center or center-right parties. Interestingly, people aged 25-59, the most likely to receive Demeny votes, were the most likely to vote for either the far-right Front National (19-23% as against a 17.9% national average) or the far-left Front de Gauche (11-13% as against an 11.1% national average).

Aging Japan has gone "radical"

In any event, the predominance of the older vote is going to increase massively across Europe in the coming years, with the partial exception of the northwestern Atlantic fringe.

There are no hard-and-fast policy solutions. Whatever one’s policy or framework, ultimately, a country at any given time is the individuals that make it up. If half the population is over 50 and a third over 65, the consequences will simply have to be managed and no economic or other policy can annul them.

Perhaps then the only "solution" for intergenerational justice in a context of massive aging is simply the awareness among the elderly that, ultimately, society as a whole (including themselves) will only be as well-off as the young workers who are supporting it.

Japan offers an interesting case of a very aged society, much of Europe will soon resemble it, which remained stuck in the same zero-growth policies for 20 years. Now Japan is experimenting in heterodox "Abenomics" and, whatever its outcome, further radical policy changes appear likely as the society fights against the demographic "death trap". Perhaps also in Europe, the pressures of aging will, in time and in themselves and despite the rise of conservatism, force through radical changes of policy at national and European level.

No one can say with certainty what policies would fully tackle the challenges of intergenerational fairness. Perhaps then Europe’s greatest asset is its diversity: the more different nations experiment with diverse policies, the higher is the chance that one will find policies that will work, which could then be emulated by others.