Things will be very different in 2015. By then, for example, the
median age in Northeast Asia will be about 37-several years older
than the current American level, and similar to levels in today's
"gray" northern Europe. Though population growth rates throughout
East Asia will be slowing over the next two decades, the pace of
growth for each country's elderly age groups will be accelerating.
Thus, the share of the older groups will increase, and the ratio of
children to older persons will fall. In 2015, Southeast Asia will
have not ten children under the age of 15 for every person 65 or
older-as is now the case-but only four; and Northeast Asia will have
fewer than two.

Regional averages, however, obscure the disparate impact that aging
will have on local populations. Some East Asian countries will remain
youthful: for example, in 2015 the median age in the Philippines will
be about 26, and in Cambodia under 25. Estimated median ages in
Thailand (about 35) and China (36) will be comparable to those in
today's graying OECD countries. Other East Asian locales, however,
will contain populations grayer than any yet witnessed in human
history. Barring radically changed migration trends, for example,
Singapore's median age in 2015 will be about 41, Hong Kong's 44, and
Japan's nearly 45. The United Nations defines an aging society as one
in which 7 percent or more of the population is 65 or older. In 2015,
that age grouping is likely to account for about 8--9 percent of the
population in Thailand and China, about 10 percent in South Korea,
over 11 percent in Taiwan, around 15 percent in Hong Kong, and an
amazing 24 percent in Japan.

Due to the magnitude of their sudden longevity explosions and the
precipitous nature of their fertility declines, many parts of East
Asia will also experience a much more rapid process of population
aging in the decades ahead than was recorded in developed regions in
the recent past. It took forty years (1955--95) for the median age of
the world's predominantly European "more developed regions" to rise
from 28 to 36; Northeast Asia will make the same transition in less
than twenty years (1995--2015), and some of its countries will grow
old even more rapidly. And although Southeast Asia will stay
relatively youthful in 2015, given an anticipated median age of about
28, that median age will jump nearly five years between the turn of
the coming century and 2015; in those fifteen years, Southeast Asia
will age as much, in absolute terms, as the more developed regions
did in thirty (1955--85). East Asian societies and governments thus
have less time than their industrial European predecessors to prepare
for the challenges that aging will inevitably pose.

What challenges? Rapid population aging will have profound social and
economic consequences. From Singapore to Northeast Asia, for example,
the neo--Confucian social order will be tested by a proliferation of
the elderly and, presumably, a vast concomitant increase in the
number of infirm and aged dependents.

For thousands of years an East Asian tradition that venerates age and
emphasizes the hierarchical obligations of children to their parents
was reinforced by prevailing demographic trends-that is to say, very
old people were rare and children were plentiful. By 2015, however,
in Japan, Hong Kong, and possibly Singapore, grandparents will
outnumber their grandchildren. In many other places (China, Taiwan,
Thailand, Korea), that momentous generational reversal will be fast
approaching.

In a high--tech twenty--first century, furthermore, the ancient
Confucian presumption that the elderly should be honored for the
special knowledge and wisdom they possess will surely look distinctly
less self--evident than in earlier days. And peoples long inculcated
in the virtues of filial piety may have an especially difficult time
coping with the prospect of huge inter--generational resource
transfers, as parents and other older relatives emerge as pervasive,
and possibly major, financial burdens upon the able--bodied.

In particular, rapid population aging heralds the advent of truly
imposing pension obligations. The most extreme squeeze will be felt
in Japan. By 2015, for every Japanese 65 or older there will only be
2.5 people of "working age" (15--64)-and not all of those will
actually be working. The budgetary implications of such a
metamorphosis are arresting. In the United States, the unfunded
liabilities of the social security system are enormous; yet Japan's
relative liabilities are already over three times greater, amounting
today to an estimated 70 percent of current GDP. On this budgetary
path, Japan's net public debt burden would rise from the 11 percent
of GDP recorded in 1995-one of the OECD's lowest-to a projected 102
percent of GDP in 2015-which would be very nearly the OECD's
projected highest. (By way of comparison, America's level of net
public debt, widely regarded as disturbingly high, will amount to a
bit under 50 percent of GDP in the year 2000.) If Japan's elderly are
to enjoy in 2015 the paid retirement they are promised today, the
nation will have to manage a much higher burden of debt and taxes
than it copes with now. Indeed, to maintain solvency on its current
outlay path, the Japanese national pension system would have to raise
pension taxes on basic wages from an already high 17.4 percent level
to a staggering 34 percent by 2025. And none of these pension
calculations takes into account the implications of financing health
or home care for a more aged citizenry. Contemplating this prospect,
one is tempted to invert Churchill: never before will so few have
owed so much to so many.

Yet however ominous its impending fiscal burdens may appear, Japan is
already an affluent country with an established system of universal
retirement benefits. Apart from Hong Kong, no other East Asian locale
can be similarly described. Thus, the combination of relatively low
levels of per capita income, incomplete pension coverage, and rapid
population aging promises to produce economic and social troubles
throughout the region.

China's prospective pension problem deserves special attention. By
2015, upwards of 120 million Chinese will be 65 or older, their
numbers growing by roughly 7 percent (about 9 million persons) each
year. Despite recent economic advances, China remains a low--income
country afflicted by widespread poverty. According to World Bank
estimates, China's real purchasing--power adjusted level of per
capita output is lower than Sri Lanka's, and its distribution of
income is less equal. Under any plausible pace of intervening
material advance, hundreds of millions of Chinese will still live in
crushing poverty in the year 2015. As one Chinese writer has
observed, "Whereas the now--developed countries first [got] rich and
then [got] old, China will first get old."

China still lacks any comprehensive official mechanism to provide for
the needs of its oldest and most impoverished senior citizens. While
China does manage several separate public pension schemes, nearly all
of them are actuarially unsound. Worse, they cover only a small
minority of China's populace-and generally skirt the remote, rural
regions that constitute the heartland of China's poverty problem. How
China will deal with this huge, rapidly growing, vulnerable, and
currently unprotected sub--population is a grave, and as yet
unanswered, question.

Rapid aging in East Asia is not only certain to create or exacerbate
domestic tensions, but may also have far--reaching international
consequences. Some recent studies have suggested that East Asia's
remarkable savings boom during the past generation depended in part
on demographic forces: rapid fertility declines among still--youthful
populations permitted massive accumulations of surplus that fueled
local engines of growth (which in turn helped transform the
international economy as a whole). Conversely, some OECD modeling
exercises indicate that, other things being equal, aging could drive
down Japan's national savings rate by 8 or 9 percentage points
between the turn of the century and the year 2030.

Demographic trends, of course, are not the only influence on a
phenomenon as complex as national savings behavior, but they can be a
big factor. In East Asia population trends will exert downward
pressure on savings levels in coming decades, and the implications
could be profound. By definition, a country's volume of savings
equals domestic investment plus its international current account
balance. If savings fall significantly and investment does not, a
country can lurch from being a net exporter of capital to a net
importer (as the United States did in the 1980s). As fate would have
it, East Asia's two major economies-Japan and China-are both net
exporters of capital today; both will face increasingly heavy
demographic pressures on their savings rates in the years immediately
ahead. Crude calculations illustrate the potential magnitude of the
forces at play. Against current Japanese GDP, the OECD model's
hypothetical 8 percentage point drop in the Japanese savings rate
would make for about a $400 billion shift in domestic investment fund
availability. But Japan's current account balance averaged just over
an estimated $100 billion a year between 1991--96.

Do demographic trends therefore portend an inexorable reversal in
Japanese and Chinese international capital positions, and increasing
demands upon world capital markets by other aging East Asian
populations? Not necessarily. Slower population growth might
simultaneously reduce the demand for domestic investment. Some
economists believe that demographic forces will depress East Asia's
investment rates faster than its savings rates, thus freeing up
capital funds for the rest of the world. This, however, remains a
point of speculation. But all observers agree on two things: that
absent macroeconomic policy changes and other domestic adjustments,
rapid population aging in East Asia will have a major impact on
international capital markets; and that such an impact could affect
global interest rates, trade openness, and hence the outlook for the
entire global economy.

Essay Types: Essay