The century leading up to the Baby Boom enervation saw an explosion in population stemming largely from medical and nutritional Improvements. While birthrates during this period remained fairly constant, and even declined in the latter part of the century, life expectancy doubled.
This meant an increasingly younger and more innovative work-force that fueled one of the most economically prosperous periods In history, However, by the advent of the Baby Boom generation in the US, widespread use of increasingly more effective forms of birth control and later the increased use and cultural acceptability of fetid fueled a global, sustained fertility rate decline. What Is striking about the global decline in fertility rates is that they are not confined to the developed world.
While virtually the entire developed world has fertility rates that are at or below replacement levels, this accounts for less than 20% of the world’s population. The vast majority of countries with sub-replacement fertility rates are in low-income countries such as China. This lack of socioeconomic correlation with fertility rates makes it difficult to predict when a country will enter such a state and how long It will last.
This lack of socioeconomic correlation may be due to the developed world’s intervention in low-income and third world nations, both culturally and in the subsidized distribution of birth-control, abortiveness, and abortion services. A shrinking population due to reduced fertility rates invariably means an aging population. These two factors adumbrate a host of problems. An older workforce generally means a less healthy, less educated, and less tech-sway workforce.
Additionally, a dwindling working age population will mean that inefficiencies in the use of human capital will be more keenly felt as human capital growth will no longer pressure on successive generations and their governments to keep in place entitlement programs and tend to the needs of the aging. Raiment and Its Role International Business Environments Breasted states that the economic profile of the world will depend largely on the economies of the six major economies: China, India, Japan, Russia, Western Europe, and the United States.
Each of these countries faces unique demographic challenges. China is particularly affected by demographic changes because it has such a large population, is a allowance country, and its coercive population-control measures have exacerbated their demographic problems, both in terms of an aging population ND skewed male/female ratios. Since 1992, Russian’s deaths have outnumbered its births by 50% and average life expectancy is less now than it was half a century ago.
Additionally, the surplus of moralities that it is experiencing seems concentrated in its working-age population (20-50 year olds). Indian’s population is set to grow by 1% per year over the next 20 years, but regional disparities mean that its surplus population will be located in the rural, less educated north where it is less likely to fuel economic prosperity for the country. Currently, India lacks the educational infrastructure necessary to take full advantage of this population boon in the north. Pan stands to be one of the most heavily burdened countries by the demographic shift. It has the steepest and longest fertility rate decline in modern history and the longest life-spans of any country. This amounts to a perfect storm for burdening the working age population in the coming years. Western Europe can anticipate population stagnation. Currently the culture appears resistant to both assimilating immigrants and prolonging individual’s working lives: the two most obvious solutions o a stagnating and graying workforce.
The US is the demographic exception in the developed world. It possesses a fertility rate that is close to replacement level and will likely continue to see an influx of immigrants. However, there are elements which may yet hamper its growth. Firstly, results of its education system are not consistent. Also, an inability or unwillingness to assimilate new immigrants into the workforce may mean inefficient use of its human capital. Finally, a problem the US shares with both Japan and Western Europe is its public debt obligations.
In reticular, the entitlements it has promised for its retirees, but has failed to fund for the last half-century. Breasted does offer some suggestions for curbing these demographic issues, but offers little in the way of specifics. To wit, he suggests increasing the quality and availability of educational opportunities and tending to the health of individuals to increase the span of their working lives. Finally, he suggests that the indefatigable spirit of human innovation in the realms of knowledge production and technological improvement will be the world’s saving attribute.
Government and Its Role: Recommendations Vertebrate’s facts are not in dispute and his analysis is preponderantly correct: the coming demographic crisis will herald a series of difficult economic, political, and social problems. While the particulars of each country’s demographic situation are ‘ aired, in all cases the pervading problems can be distilled into two questions: how to make the most efficient use of available human capital and how to manage government entitlements without sinking the public sector into onerous debt.
Government is in a unique position to tackle these issues or at least give strong assistance, but in addressing them there are also several pitfalls that it must be wary of. In light of these concerns, five suggestions are submitted: 1. Encourage the aging Norfolk to keep contributing/working. 2. Gradually move to eliminate defined benefit plans in favor of defined contribution plans for retirement, especially in the public sector. 3. Move away from state capitalism. 4. Work to achieve a commonsense, progressive tax code. 5. Invest in infrastructure, not cronyism.
This list is by no means exhaustive nor will all of the nuances of each item be discussed, as both of these would be beyond the scope of this paper. Government and Its Role 3 Keep Working, Keep Contributing Encouraging an aging workforce to continue Morning and/or contributing has a myriad of benefits. It decreases the support ratio, increases the labor participation rate, and mitigates the effects of “ brain drain” (I. E. The loss of knowledge that occurs when an experienced worker retires). Government can encourage this by removing incentives to retire early and providing incentives to keep working.
Examples include raising the retirement age and providing additional tax breaks or benefits to those who continue to work into their twilight years. Currently the support ratios for most of the developed world hover between 3. 0 and 5. 0, but with the impending demographic crisis, those numbers will shrink to between 1. 0 and 3. 0 by 20502. This means that by 2050, every couple will be supporting a retired individual. This is unsustainable, especially when the after-tax care of children and the elderly many families face are factored in.
Indeed, a cogent argument could be made that this is an incentive to limit one’s number of children – the root of this crisis. With the declining number of children, there are two logical laces to seek out additional labor within a country’s native population: younger and older. Going younger has obvious drawbacks as it limits educational opportunities for those individuals and there are many Jobs that require maturity and experience that simply cannot be had in members of a society under a certain age. On the other hand, convincing older members of a society to continue working has several advantages.
They generally will have already achieved the necessary level of education for a given occupation and will have a lifetime of experience to bring to their chosen vocation. Additionally, the longer an individual works, the fewer years he/she will spend in idle retirement: draining their own and potentially the taxpayers’ resources. Finally, if a country is to vest its hopes in the knowledge production that Breasted advocates, part of that must be preserving and passing on the knowledge already obtained.
Keeping those members of a society with the most experience in a contributory role, whether that be working, mentoring, or publishing papers/books to pass on their knowledge, is invaluable for harnessing innovation. Government and Its Role 4 International Business Environments Defined Benefit versus Defined Contribution In the United States GAP standards regarding defined benefit pensions were changed in the sass’s and companies began to open their eyes to the unsuitability of such plans.
As a consequence, the private sector abandoned such plans in droves and now only 7% offer such plans. However, government has failed to follow suit and it has put an unnecessary and cumbersome burden on the taxpayer, particularly the younger generations. Because government made promises to Baby Boomers that were quixotic – in hindsight Mould have revealed the absurdity of its projections – and because a tech boom in he sass’s and some accounting voodoo (e. G. Using bogus discount rates) concealed the issue, Baby Boomers failed to take responsibility for their own retirements.
As a result, an entire generation is in its twilight years with little to no savings and a sense of entitlement for those same unrealistic promises. Generations X and Y can either bear the burden of their retirement and their parents’ or postpone in the hopes that the Millennial will be willing to fund their retirement. Government is in a position to stop handing out empty defined benefit pensions both in terms of its employees and orgasm like social security. It is clear that government cannot be trusted to manage these benefits and moving to defined contribution plans has several advantages.
By forcing individuals to take responsibility for their own retirement, the government Mould be growing personal freedom, encouraging the population to educate themselves in matters of personal finance and economics, encouraging them to reinvest their money back into the economy (as opposed to only fueling it through ever-increasing consumption), and (hopefully) beginning to change the culture of entitlement that was so prevalent in the Baby Boom generation (referred to more apropos in this context as Generation Jones).
Government will need to provide strong incentives or even punitive measures to ensure that its citizens save enough. Additionally, those in the lowest income brackets, the disabled, and the unemployed may still need to be subsidized. But as Schumacher so aptly stated, “ The real tragedy is not unemployment itself, but unemployment Government and Its Role 5 accompanying the impossibility of sufficiently providing for the unemployed without impairing the conditions of further economic developments. Schumacher spoke only of the unemployed, but his analysis is equally valid for other classes in need of support.
Also, some rules and regulations will need to be implemented so that reckless investment decisions by individuals are mitigated. But ultimately, a stronger, better educated population will be wrought and a fiscally healthier government will result. Move Away from State Capitalism While state capitalism is arguably an efficient method for playing catch-up, witness China and Russia, it is not the best method for ensuring continued dominance or pushing for continuous innovation. This is because when a country is attempting to mimic the success of another, the strategy is clear and the innovations already readily available to be copied.
A strong central authority can eliminate inefficiencies, focus capital, and take advantage of economies of scale more readily than an agglomeration of competitors can. However, a strong No it will support. Even in instances where the government backs national champions instead of owning the companies outright, it may still be stifling potentially more innovative upstarts. An agglomeration of competitors are not serially moving toward the same goal the way a centralized authority can, but they are harnessing their human capital in an effort to outdo one another, and that provides the greatest potential for innovation.
One need only examine how little has Changed in the US education system in the last 100 years to see how prolonged government involvement is stifling to innovation. An important caveat must be mentioned in advocating against state capitalism. In a government’s haste to not interfere with the market, the importance of national defense, compelling state interests, and commonsense regulation should not be overlooked. There are instances where government “ interference” can be Justified, such as the Jones Act to facilitate a strong Navy/Merchant Marine or requiring auto insurance to protect its human capital.
However, regulatory zeal may also transmute into protectionism, social engineering, or cronyism and it is therefore important that a balance be struck. Progressive, Commonsense Taxation While superficially the US appears to have one of the most progressive tax codes in the world, an examination of the nuances and complexities of the tax code reveal that this is far from the truths . Unfortunately, there is little incentive to change this. The wealthy, as all of us, prefer to pay as little tax as possible and eliminating the complexity of the tax code precludes the possibility of using tax law punitively by the political class.
However, simplification Mould ultimately make government leaner and therefore less burdensome on the taxpayer. Additionally, when the intent behind certain deductions is examined, it becomes clear that commonsense changes can be made without affecting intent or appreciably damaging the country’s economic prospects. For example, the intent of the mortgage interest deduction is to encourage home ownership and make it more affordable, but it would be difficult to argue that the affluent need this incentive to slowdowns in the economy , though one could always argue that growth may have been stronger had the tax rates been lower.
However, creating a more progressive tax system would help heal class division, would generate more tax revenue (though this increase would be more conciliatory than substantive), and mollify class-warfare political rhetoric. An increased partitioning of incomes for this purpose (which by Itself would blur the lines between class divisions) is assuredly necessary to preferential between the super-rich and the simply well-off, but with the reduction of loopholes and deductions, tax assessment could still be a simple and straightforward computation.
The caveat is that a progressive tax system should not be used for the purpose of income redistribution. This would discourage innovation and entrepreneurial risk-taking. Additionally, it has a high probability of instilling laziness and/or a sense of entitlement into the culture. Instead, policies should be engineered to provide a safety net for those who fall on hard times and to provide opportunity for those who come room more humble beginnings, I. E. The objective should be readily achievable class mobility, not class equality.
Infrastructure Sans Cronyism When the Eisenhower administration built the national highway system in the US, it not only had a compelling state interest to do so (recall that the highway system was built to facilitate military transport in the event the US Nas invaded), it also built it for use by all market participants. This is the difference between legitimate government infrastructure spending and state capitalism and a compelling initial litmus test for any government spending. Too often governments spend in an attempt to social engineer or for the benefit of one market segment or company.
This is crony capitalism and the results are comparative to state capitalism or worse. Either the political class is picking the winners or companies are competing in bribery and the legal arena rather than growing and developing their constituent businesses. Either scenario diverts resources and stifles innovation. Government spending as a percent of GAP has been steadily rising over the last 150 years in primarily on preserving individual rights, providing for the common defense, and roving infrastructure that fuels innovation and grows the economy.