Edward@A Fistful of Euros looks into that place others cannot bear to look.
[B]oth [S&P and Frances Cairncross] share one common rather re-assuring conclusion: acting in time can make the transition painless. Hear I am afraid I cannot be so anodyne: I think this is all going to be incredibly traumatic, and disturbing. As to acting in time, not only am I unsure whether our political systems allow for this, I am not even sure we know what we should be doing....We simply don't know whether the tendency towards increasing longevity which we have enjoyed over the last century or so will continue, or whether the rate of increase in life expectancy will accelerate or decline - and these details are pretty important if you want to get down to it and do the calculations. In fact what can be said is that most of the 'reassuring' scenarios tend to assume a 'favourable' evolution in life expectancy (in actuarial terms) and a recovery of fertility, neither of which may be justified: that is to say we are assuming the most favourable of scenarios....[J]ust as the average age of our EU societies edges gently up and away from the decining optimum, many newly developing societies will have average ages which are steadily approaching it from below. So the balance must inevitably shift. In fact as the more mobile information type work moves steadily away we may become a highly polarised zone with a few extremely highly talented and rewarded young people, and an ever growing pole of 'the rest' accumulating in pretty low-end economic activities (the ones it is impossible to move) with a proportionately lower relative standard of living. Which brings us back to the government debt, it's ever growing real value, and our ever diminishing ability to repay it.
I can understand why S&P and Cairncross hold fast to the tenuous possibility of a painless transition. The rapidly shrinking possibility of a painless transition creates a sense of urgency. If the transition will be traumatic and disturbing no matter what, it reduces the incentive to act at all, let alone in time. The 11,000 mostly elderly deaths from the August 2003 French heatwave look more and more like a dark harbinger than an isolated yet terrible aberration.