Today's date:
Spring 2001

Global Aging, Depopulation and Virtual Work

I.K. Gujral is the former prime minister of India. His comments are adapted from a talk in Zurich on "global aging" at a conference organized by the Center for Strategic and International Studies (CSIS).

New Delhi - The crisis of global aging is entirely new and unprecedented. There are no pointers from the past, no lessons from history, no premonitions from the collective memory of mankind. In the late 18th century, economist Thomas Malthus had predicted that natural population growth would outrun the carrying capacity of the earth, a dismal scenario in which human life could only be nasty, brutish and short.
That has been the conventional wisdom ever since. In 1994, at the Third UN Conference on Population and Development, held in Cairo, the entire attention of the world community was focussed on such a prospect. Leader of the US delegation, then-Vice President Al Gore's view was seconded and reiterated by distinguished speakers from all over the world. He had said:

"We would not be here today if we were not convinced that rapid and unsustainable growth of human population was an issue of the utmost urgency. It took ten thousand generations for the world's population to reach two billion people. Yet over the past fifty years we have gone from two billion to more than Úve and a half billion. And we are on the path to increase to nine or ten billion over the next fifty years."
That was just seven years ago. It now transpires that the real threat to the demographic balance of the developed countries was coming from the opposite direction. The term "global aging" covers diverse trends, some that are good and beneficial; others that are not. Increases in average human life spans that we are privileged to witness must count as one of the great boons of the 20th century. In India, apart from the fact that average life expectancy has gone up from 32 years in 1947 to 62 years today, the number of people aged 60 years or more has increased from 19 million in 1951 to 72 million today, and is estimated to rise further to 177 million by the year 2025.

Yet the requirements of the elderly have never really been the focus of our public policy, the unstated assumption being that their numbers would remain small and providing care and support for the elderly is the liability of their families, not of the state. The unfortunate fact is that paucity of resources and tremendous growth of population would not permit us to build a credible social security network. As a result, most of aged people today are either destitute or dependent on the younger family members for such care as they obtain.

There is a growing chasm between requirements of the South Asian senior citizens and the support available to them, one that may soon reach critical proportions unless greater public attention is focused on their needs. Indian public policy will no doubt need to devote considerable resources to this area in the years to come. At the same time no one would seriously argue that there is an "aging crisis" in India. To us the aging, in the sense of a growing percentage of the population surviving to late middle age and beyond, can only be a vital sign of civility and progress. It is something to applaud and not fear. It could become a crisis, as in the industrialized world, if it were accompanied by depletions in the ranks of the young and the vigorous. That is, if the classic population pyramid gets inverted.

In this sense, the so-called aging crisis is only a convenient short-hand term that partly describes but also partly obscures what in actual fact is a depopulation crisis, the problem of societies which have fewer and fewer younger people to carry on the burden of life's work. In India, an ancient land and with a long civilizational experience, the derived wisdom has been that joint families were essential for maintaining the security of its aged members. Such wisdom was scorned and seemed outmoded before the invincible economic juggernaut of the industrial society and the growing power and reach of the modern welfare state, where the cost of raising families was individualized and immediate, while the benefits were socialized and remote.

It is clear that the aging crisis in the industrialized countries will begin to manifest itself in a few short years, making the current "pay as you go" pension systems unviable. As old age dependency ratios steadily worsen over the ensuing decades, the fiscal deficits will swell while private savings tumble, and the labor pool declines. Both labor and capital, the two main ingredients of all economic models, will be in shorter supply and the consequent distress will most likely be aggravated by declining innovation and slowing of technological growth.

Of all these factors perhaps it is the potential slowdown of innovations which most seriously threatens the global economy. The entire material world of today is the product of the laboratories and research institutions of the Western world, and the breakthroughs of its young scientific revolutionaries. It is rightly said that most Nobel Prizes have been awarded for work done by people before the age of thirty two. The Internet revolution, which has been propelled by people in, or just out of, college is a classic example of the power of young minds and fresh thinking.

An aging world will be a world in slow and protracted economic decline. Diminishing labor, diminishing capital and slowing innovations taken together more or less guarantee such an outcome. Nor will the consequences of such a decline remain confined to the industrial world alone. Developing countries, still free of the aging crisis, will also feel the cold wind from the North. After all, their markets, their main sources of aid and investment and, perhaps most critically, new skills and technologies, are located almost entirely in the industrial world.

Where do we go from here? Will regression afflict the developing countries as aging weakens the industrial world? Is there no escape from such a bleak scenario?
OLD-YOUNG COMPLEMENTARITY | Mere description of the bleak scene would not help. As we know, the aging crisis is not universal.

The total fertility rate at the global level is 2.7 births per woman, which is still well above replacement needs. The world as a whole retains the traditional broad-based population pyramid.

In South Asia our problems primarily pertain to eradication of poverty and unemployment of the growing number of young people who enter the job markets every year. The working-age population is growing faster than the general population, a trend which is the reverse of that prevailing in the developed countries.
Seen separately and in isolation the problems of an aging industrial world and a young developing world do seem stark and serious. But seen together, in the context of a globalized world economy, it would appear that the worst outcomes can be mitigated if not avoided altogether. Their differing age and demographic profiles, in this sense, are not problems but another complementarity to be harmonized through the conventional mechanisms of international trade, investment, technology and the movement of people towards a global optimum.

The "aging crisis" poses problems but global cooperation could convert it into opportunity. The complementarity between capital supply in the industrial countries and capital demand in the developing countries needs to be tapped. But this itself is not going to be easy.

One route to achieve it is through pension fund investments in the developing countries. In the wake of the Asian financial crisis and its socio-economic impact the need for putting in place prudential financial sector regulations has assumed added importance. Volatility of the short-term capital inflows in the developing countries do cause concern. The Indian experience suggests that the behavioral pattern of the foreign institutional investors has been quite volatile. Nevertheless, past behavior is no indication of the future trends.

We notice that investors today are displaying a positive shift in their attitudes as they improve the "quality" of investment by emphasizing the ethical, environmental and developmental dimensions. Attracting such responsible investments from the industrial countries combined with regional and national resources could help the countries of South Asia to take their economies to higher growth trajectories, and achieve developmental goals.

The absorption capacity of the South Asian region in terms of foreign investment and technology is a ray of hope in tackling global aging. This could be viewed as one of the merits of the globalization process which offers opportunities to both the developed and developing countries.

MIGRATION AND BRAIN DRAIN | Additionally there will be globalization through greater international migration. The beginnings of such a trend are already discernible. In Europe, for example, that was almost closed to immigrants, a number of countries are liberalizing work permits and residency requirements in order to encourage skilled and educated foreigners to come and work there. If history is any guide, fresh currents of international migrations give little cause for tensions or worries. I can think of no country that has not ultimately benefited from immigrants.
There is a related issue of concern. A recent study at Harvard University has estimated that the temporary migrant labor to the US from India with h1-b visas contribute about US $22 billion per year in the form of direct taxes and social security payments. This amount is not repaid to the h1-b visas holders when they return to India. This is clearly an unfair situation.

The Indian exchequer makes hefty investments in education and training these highly skilled migrants. The Harvard study suggests that it would be just if the US administration were to repatriate a third or so of the social security funds collected from h1-b visa holders to their home governments. For India this would amount to about seven billion dollars. This is more than the entire annual assistance that India receives from the World Bank and other bilateral donors. Such repatriation would go a long way to strengthen the third world's faith in globalization.

THE INTERNET AND VIRTUAL WORKERS | What is likely to be more helpful is globalization through technology. The Internet has led to a true revolution in this area, by eliminating conventional barriers of time and distance, as a result of which a global industry has come up, one which for want of a better word is called "Internet enabled services" whereby all labor intensive work is relayed back and forth via the Internet medium. Technology is facilitating millions of "virtual workers" to join the labor pool of the North, without ever leaving their homes. In India, it is estimated that this sector will generate earnings of 50 billion dollars per annum, while employing two million people, by the year 2008. This field is still in its infancy, it is growing exponentially and there is no obvious limit to the numbers that it can employ.

The threat to globalization comes from elsewhere. It is very difficult to reconcile the problems of global aging with the position taken by the developed nations in the World Trade Organization (WTO). Their principle seems to be that every domestic lobby and vested interest must be appeased even if this means that the dwindling labor resources of the industrial world remain locked in low skilled and unproductive jobs. World trade in textiles and agriculture, the main areas in which the developing countries retain a comparative advantage, have been kept out of the disciplines of the world trading system. There is a double injury in this, for quite apart from the welfare loss to the developed countries themselves, the result has been to keep most developing countries locked out of the world economy. This is hardly a happy augury for the globalized future.

HUMAN BEINGS ARE AN ASSET, NOT A BURDEN | Human beings, wherever they reside, are far from being a burden on society. They are its core and fundamental strength. This is what the post-Malthusian world must learn. No worldly resource is as valuable and more creative than the liberated human mind.

Globalization cannot be a success if it remains confined to preaching the virtues of liberal economics to the South, and poaching from them their best educated and skilled people without any compensation of rewards. There has to be a parallel effort, such as envisaged at the Copenhagen World Summit in 1995, to advance the work of social development in the South through education, through transfer of skills and technology, through fulfilling some basic needs programs-in sum, by providing the basic infrastructure to enable the people of the South to stand on their own two feet.
In the so-called era of aging, the dispossessed of the world are actually its potential resource. Let us always remember this.

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