Ageing Economics: Facts, Fantasies and Trojan Horses

By Jamie Doughney

The economic ageing crisis is a myth. It can be regarded as a "Trojan horse" because it allows governments to justify moving responsibility for retirement incomes on to the individual, away from state provision, and thus reduces welfare budgets.

The fund management industry is a powerful lobby group, and it is certainly in its interest to encourage concern and "investment by citizens in retirement, so they can continue to milk the margins.

The arguments are based around claims of the ratio of workers to non-workers worsening and the depressing effect this will have on living standards, and the increased call on tax dollars. Doughney shows clearly that it is easy to make sound economic models of the opposite scenario, that an ageing population will not constitute a social burden. Using conservative estimates of the impact of the ageing population on GDP, he shows that productivity will grow more than dependency, that GDP per capita and labour earnings will more than double in real terms to 2050. If government spending rose in line with the proportion of the population older than 65 (ie 1.8% per annum), the ratio of government spending to GDP would only grow by 1.6%. Doughney also shows that the dependency ration would be lower than through the 1950s, 1960s and 1970s. Privatised ageing is the agenda, as there are dollars to be made by the finance industry.

(Seeing Red; issue 2, September 2004)