Ageing, the not-so-secret weapon

China’s ageing population could work in our favour. All we need to do is to get through the next decade or so.

While there is every reason to celebrate these extra years of life, it comes at a cost, writes Bernard Salt.

Amid the calculations of military strategists in Canberra, the Pentagon and elsewhere, I wonder if due consideration is being given to factors others than the latest military hardware. By this I mean the effects of demographic change on various nations.

In 1990, at the end of the Cold War and at the beginning of the era of globalisation, about 11 per cent of the population both in Australia and the US was aged 65 and over. Today that proportion is 16 per cent for both nations; by 2040 it will be 22 per cent. In Australia the reason for this shift over half a century is the rise in life expectancy from 77 to 84.

While there is every reason to celebrate these extra years of life, it comes at a cost. By 2040, the Australian (and the US) workforce must become more productive (generate more output and tax per worker) and/or the services and concessions provided to the aged may be recalibrated (for example, the retirement age pushed out). Such changes to the “sacred” social contract between government and workers can be a source of painful social unrest, as is occurring in France.

Another nation at risk of social unrest caused by policies associated with ageing is China. Whereas in Australia and the US the proportion of the population aged 65-plus will double over the half-century to 2040, in China this proportion will increase five-fold, from 5 per cent to 26 per cent. The one-child policy was changed to two-child in 2015; since July 2021 all limits on family size have been removed.

The ageing of the population doesn’t so much affect a nation’s ability to field a military force. Even allowing for China’s population to contract over coming decades there’s more than enough young men to field an army of a million or more. The risk for China is that as the proportion of the population aged 65-plus rises, there will be a commensurate increase in pressure to divert funds to non-military purposes such as pensions and healthcare.

In China, a nation enriched by globalisation over 30 years, a burgeoning middle class has become used to a developed-world quality of life. And like much of the West, China’s middle class must also accommodate the painful but necessary choices required to manage an older population. Unlike the West, this transition must be accommodated rapidly across the 2030s as the pre-one-child-policy cohort pushes deeper into the retirement years.

From a demographic point of view, if China were to be involved in a conflict of some sort, the best window is the balance of the 2020s. Thereafter, too many people are pushing into retirement, taking with them big expectations of the services they think they’re entitled to.

While ageing is a factor that will certainly shape China in the future, it is also shaping Australia and the West more generally. It’s hard enough to fund and manage an external conflict without also navigating the choices that must be imposed on an older population to sustain let alone to win a conflict.

In some ways it could be that ageing is our secret weapon against a large-scale extended conflict. All we need to do is to get through the next decade or so. The longer the deferral, the greater the chance that local pressures will reprioritise official thinking.