There have been numerous stories about the Euro-crisis, a possible
Greek default and the PIIGs. However, there is another looming crisis on
the horizon for Europe, unless something changes drastically.
One of the biggest factors behind growth is; demographics,
demographics, demographics. Despite Japan having 10x the GDP per capita
of China; China is now the second largest economy of the world due to
their massive population of 1.3 billion people. India is also becoming a
super power due to the massive growth rate
of the population. India had the world's largest economy, with a 29%
share of world GDP in 1700 , when India numbered 180 million people and
represented 20% of the world's population. These are just a few statics
to show how important expanding populations are for economic growth and
[Related -The Soda Industry Is Dying - But PepsiCo Will Thrive]
However, Europe looks like it is in serious trouble.
The concern about the PIIGs is putting a veil on the real crisis that is spurring up in the European
nations. There is realization of the low fertility rate that is
prevalent in Europe, but not a lot of studies highlight the consequence
of this problem and the result of increasing aging population on the
European economy. The careless government spending is not the only
reason for the meltdown of the European economy; it has a lot to do with
the changing demographics of the nation and the need to pay for health
care and retirement benefits. This will lead to an exploding debt and
decreased economic growth.
[Related -Three Backward-Looking, Not-So-Predictive Valuations Are High]
The problem is that European countries still abide by the 19th
century policies and have for decades maintained an economic system
which supports and facilitates the satisfaction of the needs of the
senior citizens with high focus on provision of health, retirement and
old-age welfare. The debt crisis is merely a proxy for the crisis of the
aging population. It is estimated that over the next 40 years,
one-third of the total European population will be well over the age of
60 years. This demographic problem is similar to that prevalent in
countries like Japan.