Demographic decline and the economics of longevity

In 1927, in a speech in the Roman piazza Venezia, Benito Mussolini warned that if demographic growth – “destiny of the race” – stopped, Italy would not be an empire, but a “mere colony”. Since 1922, his regime took pains to raise the birth rate to reach 60 million in 1950, compared to 40 million then, insufficient according to the Duce to rebuild the ancient Roman empire. His obsession with solving what he called “the problem of national problems” meant that Italian women, for the first time, had maternity leave. The ignominious end of Mussolini and fascism discredited his public policies to promote birth rates, which explains, among other factors, why Italy today has an average age four years older than the European Union as a whole.

With 1.3 children per woman of childbearing age –a birth rate that is far from replacement (2.1)–, the Italian is a paradigmatic case of a global trend from which, for now, only Africa has escaped, which in 2050 it will have 2,500 million inhabitants and 4,000 million in 2100, according to UN projections. In 2019, one in seven human beings lived south of the Sahara. In 2030 they will be one in six. And in 2100 it will be one in three. Even if only a fraction moved –voluntarily or not–, it would be one of the great transformations of the 21st century.

Years before arriving at the Chigi palace, Giorgia Meloni claimed to believe in the “great replacement”, a conspiracy theory about an alleged plan to replace the original European populations with peoples of other religions and skin color. According to Meloni, if the trend is not reversed, Italy “will disappear.” The problem is that rich countries can produce or buy almost everything except people.

Italy is an extreme case, but not very different from other developed countries. Emmanuel Macron’s attempts to raise the retirement age from 62 to 64 have hit a wall: 68% of the French oppose this reform that seeks to reduce 14% of GDP that goes into pensions. If the system is not reformed, Macron warns, the deficit will be around 150,000 million euros in the next decade. His government has ruled out, however, a tax on large fortunes such as that of Bernard Arnault, owner of the LVMH, who in 2022 paid 4.5 billion euros in taxes to the treasury.

This argument, however, does not convince Oxfam, which maintains that if the richest are taxed with an additional 2%, the 12,000 million euros needed to cover the deficit of the pension system would be collected.

the new normal

In 1898, Knut Wicksell, one of the precursor economists of Keynesianism, wrote that economics should always begin with the study of demography because its figures served as a framework for all other matters.

Between 1950 and 2022, the world population went from 2,500 to 8,000 million, among other things due to advances in medicine, the green revolution, and fewer wars and famines. Around the same time, between 1960 and 2020, the global birth rate fell from 5.0 to 2.3. In 1960 the average life expectancy was 51 years. In 2019, 73.

In 2022, the Gerontology Research Group counted some 593,000 centenarians worldwide. In 2050 there will be 3.7 million. In The New York Times, Wang Feng argues that the effects will be mostly beneficial, including a smaller ecological footprint.

«According to Dubravka Suica, European Commissioner for Democracy and Demography, the demographic transition is as –or more– important than the green or digital ones»

With a birth rate of 1.6, the median age for Europeans today is 43, four years older than North America. In the OECD, the minimum average retirement age is 62.5 years. In the US it is 67.

According to Dubravka Suica, European Commissioner for Democracy and Demography, a position created in 2019, the demographic transition is as – or more – important than the green or digital transition. The Commission forecasts that in 2070 the ratio between the active population between 20 and 64 years and those over 65 will fall to less than two to one compared to the current three to one. Germany (1.6) has been able to avoid the worst scenarios due to immigration, first from the Balkans and then from Syria and the Ukraine. The great German advantage is its dense industrial fabric and its need for skilled labor. According to a 2016 McKinsey study, migrants represent only 3.4% of the world’s population, but generate almost 10% of GDP.

In the US, 60% support the immigration of qualified people or those with higher education. It is not weird. Thanks to its ability to attract talent, since 1980 its economy has only been in recession 10% of the time, compared to 20% between 1945 and 1980 and more than 40% between 1870 and 1945. Between 2000 and 2019 its economy grew by 46 %. The Japanese – which hardly receives immigrants outside of nikkeis, descendants of Japanese, Brazilian and Peruvian for the most part – only 26%.

Even after annexing Crimea, Russia (1.3) has not been able to avoid depopulation: today it has fewer inhabitants than in 1991. In 2010, General Vladimir Shamanov, then commander of the air force, said that the low birth rate was a “great danger” that the country could not afford to ignore, a problem that Vladimir Putin may have wanted to solve by invading and annexing Ukraine.

The relationship between demographic and economic trends is more complex than the statistics suggest. Many times xenophobia has little to do with economic rationality and much to do with fear of the unknown, ethnocentric impulses or the conviction that those who come from abroad take jobs and depress wages.

Colombia, on the other hand, has granted 10-year residence permits, access to health and education services, and the labor market to the almost 1.7 million Venezuelans it has welcomed since 2014. And it has done so despite the fact that it has less than two hospital beds for every 1,000 people, compared to 6.4 in Poland, which has received almost half of the 5.3 million Ukrainian refugees, most of them women and children.

In Asia, Hong Kong, Singapore, South Korea, and Taiwan are only slightly above 1.0. The South Korean rate is 0.81. In 2022, China, for centuries the world’s most populous country, recorded its first population decline in 60 years.

The Chinese birth rate is 1.2, compared to 5.8 in 1970 and 2.7 in 1978. If the trend is not reversed, the UN estimates that by 2100 it will have half its current population. In 1978, the median age was 21.5 years. In 2021, 38.4. The Asian giant doubled its population between 1949 and 1979, from 540 to 969 million, but if it follows in the footsteps of Japan and South Korea, in 2050 its average age will be 50 years.

In 2022, Japan (1.37) broke its record for low births, with only 811,622 children. A 2021 survey found that more than half of couples did not have more children due to lack of money. And nothing governments can offer convinces them otherwise.

the fountain of youth

In the end, the most viable solution for the sustainability of pension systems is to extend the working life of the contributors. In this field, the most important thing is not to add years to life, but life to years so that they may be useful, which in turn depends on advances in medicine.

According to Jay Olshansky, a professor of public health at the University of Illinois, the main factor in longevity is random: the genetic lottery. In general, he remembers, the children of long-lived parents are, too. According to statistical data from the National Institute on Aging (NIA) of the USA, the children of centennial parents live an average of 10 years longer than the rest of the members of their generation. Current scientific research is therefore focused on identifying the genes that determine longevity. Some of the most recent have discovered that the biological clock of cells can be reversed so that they spend more energy staying alive and not dividing (mitosis) to form new ones.

“Luigi Ferrucci, director of the NIA, plans to use artificial intelligence to identify longevity genes and develop drugs from them”

Luigi Ferrucci, director of the NIA, plans to use artificial intelligence to identify longevity genes and develop drugs from them. The impact of it, he says, may be similar to what antibiotics and vaccines had in their day. Nir Barzilai, director of the Institute for Aging Research in New York, hopes to soon test in the US metformin, a generic diabetes drug that can extend life and delay or prevent heart attacks, cancer and dementia. If regulators approve its use, Barzilai believes big pharma and biotech will take an interest in its potential therapeutic applications.

Governments tend to prioritize treatment of existing pathologies and diseases and not the development of preventive drugs. According to Financial Timesthat vacuum is being filled by big-tech moguls like Jeff Bezos, Israeli Yuri Milner and, through Alphabet, Google founders Larry Page and Sergey Brin.

Alphabet, which is worth 1.2 trillion dollars in the stock market, and the pharmaceutical company AbbVie, 292,000 million, are going to invest 3,500 million dollars in R&D of longevity. Christopher Wareham, professor of bioethics at the University of Utrecht, warns that the problem is that these drugs and treatments may end up being accessible only to elites, including dictators and autocrats, exacerbating multiple inequalities – in health, money, power… – already existing.