The ills of old age have always interested poets and philosophers, but until quite recently they did not interest governments. For most of human history, the elderly have comprised only a tiny share of the population. In the days of Hammurabi, Julius Caesar, or Thomas Jefferson, the odds of a random encounter with a person aged 65 or over were about one in 40. Older people mostly lived with their extended families, where they were integrated seamlessly into the economic and social life of the community. This pattern began to change during the 19th century, starting in the developed world. The growth in the number of elderly--together with industrialization, urbanization, and the breakdown of the extended family--turned "old-age dependence" into a social problem. Governments responded by establishing old-age benefit programs that, over time, were supplanted by universal social insurance for the aged. Meanwhile, society came to regard aging as a health problem, a progressive decline in function analogous to a debilitating and ultimately fatal disease. It is this view that justifies the elderly's claim to a large portion of government budgets, and it explains why voters in most countries believe that all benefits to the elderly are as sacrosanct as national health insurance. Most gerontologists reject this view, however, arguing that health is an age-related norm. But, this idea no longer has much popular appeal in the now-affluent developed world. Societies in which old people seek hip replacements and organ transplants and spend freely on Viagra and human growth hormone are not societies that accept declining biological capacity as natural and inevitable.

Very soon, however, most societies will have to change course. The world now stands on the threshold of a great demographic transformation with few parallels in human history. When this transition is complete, our children and grandchildren will live in societies demographically older than any we have ever known. The odds of meeting a person over age 65, once one in 40 and today one in seven, will climb to one in four in the developed countries by the year 2030. If fertility rates do not rise again, the median age in these countries will reach 51 by 2050. In Germany, the median age is projected to reach 53; in Japan, 54; and in Italy, 57. By way of comparison, the median age in Europe today is 38; and in Africa, it is 18.

Demographic aging is the most economically consequential health issue the world will face over the next century. National budgets and economies will come under pressure as growing numbers of aged persons must be supported by relatively fewer younger persons. How can the developed countries prepare for this challenge? At the most fundamental level, there are only two options. Societies can reduce the future old-age dependency burden by increasing available resources--that is, by pursuing policies that increase the size and productivity of tomorrow's working-age population. Or they can rethink the private attitudes and public policies that now equate old age with a loss of health that somehow entitles the elderly to government spending.

The Challenge of Global Aging

While the whole world is aging, some countries will grow older much sooner than others. In the developed countries of Western Europe, North America, Japan, and Australia, the elderly already comprise 15 percent of the population; the former Soviet bloc countries of Eastern Europe are just as old. By the year 2030, the proportion of the elderly in the developed world's population will near 25 percent and in some countries will be closing in on 30 percent.

In the developing world, the urgency of the aging challenge differs greatly among regions. In Africa, the Middle East, and Central Asia, aging poses few direct challenges for the foreseeable future. These countries have the world's highest fertility rate, at just over five lifetime births per woman, and the lowest life expectancy, at about 50 years for sub-Saharan Africa. Overall, fewer than one in 20 inhabitants are elderly, and of these fewer than one in ten are covered by any formal pension system. The great majority remain semi-employed in traditional kinship groups. Even in the more affluent Islamic societies, large and loyal families are still the primary old-age insurance policy.

The rest of the developing world--South and East Asia and Latin America--includes some 3.5 billion persons, or 60 percent of the world's population. Unlike Africa, these countries have experienced swiftly growing life spans and astonishing fertility-rate declines over the past few decades. Since the late 1960s, the fertility rate in Mexico has dropped from 6.8 to 2.8; in India, from 5.7 to 3.1; and in China (with its one-child-per-family policy), from 6.1 to 1.8.

Although these countries will remain much younger than the developed countries for decades to come, their populations are actually aging faster. In France, for example, it took over a century for the elderly to grow from seven to 14 percent of the population. South Korea, Taiwan, Singapore, and China are projected to traverse this distance in only about 25 years. This rapid aging is already preoccupying leaders, who realize that they will have to face developed-world dependency levels without developed-world affluence.

Timely reform will also not be easy in developed countries where demographic aging is already so advanced and where government old-age programs are so large and well established. How these countries confront this problem will have vast implications not only for their own futures, but also for those of developing countries. Any reform approach must overcome widespread public denial. In Europe, where the welfare state is more comprehensive, the public regards generous old-age benefits as the very cornerstone of social democracy. In the United States, the problem is not so much welfare-state dependence as the peculiar American notion that every citizen has personally earned and therefore is entitled to whatever benefits the government happens to have promised. A successful reform approach must therefore go beyond fiscal sacrifice and adopt an entirely new paradigm of aging that is adequate, affordable, and politically realistic in a rapidly graying world.

Unsustainable Projections

Graying means paying. According to the Organization for Economic Cooperation and Development (OECD), between 1995 and 2030 the average bill for public pensions in the developed world will grow by over four percent of gross domestic product (GDP). In nations that have the most generous pension systems or that are aging the most rapidly--for example, Japan and the countries of continental Europe--the extra cost will amount to over six percent of GDP. In the United States, the extra cost will be less, at about 2.5 percent of GDP. Britain and Australia face no significant cost growth, in part due to their modest pension benefit formulas and to new, personally owned savings programs that allow future public benefits to shrink as a share of average wages.