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1 - Arrived, but haven't noticed
2 - Too Right
3 - The children's renaissance
4 - The future shape of business
5 - Old men don't regret

Old men don't regret

BETWEEN 1946 and some time in 1964-68 a record number of babies were born in almost all the rich countries. These “baby-boomers” are now aged 20 to 42, and have decided to give their parents and grandparents an unexpectedly high standard of living during their retirement. For this, as a grandfather born in 1923, I thank them very much. In the United States the over-65s now have the highest household net worth, the highest after-tax income per head, the lowest poverty rate of any age group in the country.

The kindly baby-boomers then did not breed enough babies to start similarly looking after them in their own retirements.

At the baby-boom peak in 1957 the fertility rate for American women was at a very high 3.68—i.e., it looked as if the average American woman would have 3.68 babies in her lifetime (or, better, that each group of 100 American women would have 368 babies). Since a population naturally increases exponentially when the average woman has much more than two babies in her lifetime, especially now that infant mortality is so low, this brought together all sorts of learned conferences about a supposedly impossible future excess of world population over food and all other resources.

Most of these conferences were held in the 1 970s, when the problems had already disappeared: partly because of the arrival of the oral contraceptive. Regrettably, a high proportion of people born before 1968 were births that their parents originally did not want, although they decently did not say so.

By 1976 the fertility rate in the United States was down to 1.74 (far below its previous low in the baby-bust 1 930s). In some West European countries like West Germany and even Italy it is now below 1.60. The poor two-thirds of the world went on having too many babies longer, especially as medical advances made far more of them survive, but in Asia it has started sharply to drop.

In rich countries the best experts expect births will be sent still further down by: later age at marriage, higher divorce, the rush of women into full-time work. This is a subject on which the best experts are nearly always wrong. The growth of family telecommuting businesses will probably (and happily) lead to more children instead, but fertility rates in rich countries are still unlikely to rise above two.

A big temporary problem will therefore come when, between about 2006 and 2035, all those babies born in 1946-68 will be flowing into retirement. The chart shows that Japan will experience a quick aging of its population because all the people born in the 1 920s (who then had a life expectancy around 50 years) are bursting past age 60 now. Japan has not previously had too many grandparents still alive, so perhaps it will devise new cost-effective ways of looking after or disposing of them. In America and Britain the population of wrinklies stays fairly stable until just before 2010, then rises as the baby-boomers retire. As the old may, in the 2030s, be 30-40% of the declining proportion of the electorate that bothers to go to the polls (indeed close to 50% in West Germany), they may well vote that present support-the-old arrangements be democratically continued. They will then be told undemocratically not to be silly. America can serve as an example.

Expensive old

At present the United States has some 30m retired old people, each of them supported by four people in the labour force of about 1 20m. By around 2030, each of the bigger number of the retired will probably be supported by only about 2.3 people in the workforce. Even this assumes no sudden breakthrough in microbiology which makes it possible for more of us to live to age 130 or something. Such a breakthrough is entirely possible at exactly this wrong time.

What are the present and prospective costs of supporting grandpa? Today in America, if you include all non-medical-care payments from the taxpayer to the old, the costs probably amount to 15-16% of payroll. With only 2.3 workers to support each pensioner, costs could rise to rise to 25-30% of payroll by around 2030. This is calculated before the medical costs of the old are added on top.

Those medical costs look like being enormous. While the number of Americans aged over 65 may double by 2035, the number of octogenarians will probably triple—and health care of an octogenarian costs more than twice that of a 65-75 year-old. Some of the rise in octogenarians will be the result of greater sense (less smoking, healthier diets), but some will be due to ever more expensive drug therapy, heart surgery and other things which at present cause medical costs to rise up to five times faster than the consumer-price index.

One of America’s best demographers, Mr Neil Howe [1] has calculated that

It's easy to see how current-law health benefits could cost 20% to 30% of payroll 40 years from now. Adding this to cash benefits, the total public transfer burden of aging could reach 50% to 60% of payroll, and this is before any other taxes. Just to mention such an absurd figure is to conclude, of course, that we will drastically change the system between now and then.

All this will be happening at about the same time (2030 or so) as ethnic-minority youngsters, mainly Hispanics and blacks, are expected to be 40% of all young adults entering the American labour force. And at a time when richer Americans can flee abroad from any high tax rates, and telecommute as tax exiles.

Any saving points of hope? Yes, loads of them. Total incomes should simultaneously be rising fast. In the information age it should be easier for old people to work longer. A main reason why they have had to retire hitherto is to make way for young and more modern people within hierarchical structures, but the information age is not going to be hierarchical. Work will not be physically as hard, won’t require so much travelling, more can be done from home at a leisurely (instead of office-driven) pace.

But it is clear, first, that there will have to be reform of the ways of paying for medical care. The move will probably be towards Health Maintenance Organisations, and away both from the American private medicine system which gives each doctor the incentive to treat you in the most expensive possible way after you become ill, and from the British National Health system which makes price to the customer nil and therefore makes demand infinite and supply inefficient in poor places with too many sick. There will need to be recognition that it is a dreadful waste of resources for either the state or insurers to spend $20,000 on keeping an old man alive and in pain for a few extra weeks.

America, in particular, will have to move quickly to put competition into educating its underclass, so that the country is not split into a Hawaii of telecommuters and crumbling urban areas of young blacks and old whites. The old will have to come. down from being the most favoured age group in any country, even if their numbers seem to give them political power.

It is odd that this will be happening first to the generation born in and just after 1946—to the beautiful Berkeley University people of 1968. To quote Mr Howe again: “Baby-boomers will have to confront choices involving aging, death and economic self-denial. These are hardly the sorts of issues their Woodstock rite of passage has prepared them for”. But he finds comfort in the fact that the generation immediately behind the baby-boomers (i.e., the group born from 1965 to now) “is just the type for working, saving and striving”. These are the group that swung more than any other to Reagan-Bush. They are not yet the chaste and Puritan generation, but their younger sisters may be.


Some will say this survey has been too optimistic. That is what a 65-year-old like me finds it natural to be, and it is fair to end by explaining why. For the first 25 years after my birth in 1923 everything seemed to be going wrong for suffering humanity, and for the next 40 years most things have gone unbelievably right. Perhaps I had an odd adolescence. My father was British consul in Moscow in 1935-38. I had summer holidays from school there at the height of Stalin’s purges. Russian members of the embassy staff, including fellow teenagers like some of the maids, were disappearing, probably to be shot.

On either side of Moscow in 1935-38 my father had posts in Nazi-dominated Europe. Because the family’s interests were literary, many of our friends were Jews. The same terror stalked.

Then when I left school in 1941 my first job was a public-sector one, with public-sector productivity, as a teenager supposed to throw bombs about as an navigator, creating a slum in the heart of our continent. By the time I briefly got there, the Russians were coming in from the other side. All the politicians, including Churchill and Roosevelt, told us these were fine liberating democrats, And of course I knew from those school summer holidays so briefly before that those were astonishing lies. That has given me one advantage in my 40 years as a newspaperman. I have never since then believed a word either politicians or public-relations officers have said.

Then back from war’s mess to the supposedly more intellectual atmosphere of Cambridge University in 1945. More intellectual, my left foot. Much of Cambridge’s intellectual atmosphere then was of sub-polytechnic Marxism. Some people at that time, from my own university and out of genuine idealism, were giving the secret of how to make an atom bomb to Marshal Stalin—a Stalin whose suitability to be told how to destroy the planet did not seem well advertised in 1948 by his desire to execute his doctors, because they did not make him feel better on the increasingly frequent occasions when he went to bed mad, roaring drunk.

That was our 1948. I don’t know what I expected for the next 40 years. When I joined The Economist in 1949 it seemed unlikely the world would last that long. But here we stand, 40 memory-sodden years on, and what have we done?

What we have done, largely because the poorest two-thirds of people are living much longer, is approximately to octuple real gross world product. During the brief civilian working lives of us returning soldiers from the second world war, we have added seven times as much to the world’s producing power as was added during all the previous millennia of homo sapiens‘s existence. That may help explain why some of us sound and write rather tired. It does not explain why anybody in the next generation, to whom we gladly vacate our posts, can dare to sound pessimistic.

[1] See “America in the year 2007” by Neil Howe. The American Spectator, December 1987.