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For the first time in history, the elderly outnumber children under ﬁve in the world, and by 2050 they will outnumber both adolescent and youth between 15 and 24. This demographic transformation is one of the great successes of the twentieth century. Yet, this also represents a fundamental restructuring of our societies.
In a democracy dominated by grey voters (gerontocracy), electorally viable policies lead to an economy that is reorganised to prioritise the socioeconomic needs of the elderly, namely good pensions, and low inflation, over a commitment to economic growth and high employment. This has resulted in a stagnating political economy- or a ‘gerontonomia,’ which combines the Greek words for old ’γέρων’ and for economy ’οἰκονομία’- and has important consequences for our political and economic structures.
Grey voters: policy preferences and economic priorities
Grey voters can be deﬁned as individuals who are politically active as well as old and retired. They have a distinct position in the economic structure of advanced democracies. In contrast to young and middle-aged individuals, grey voters are out of the labour market, are mostly reliant on public pensions and/or income streams from assets, and they have a lower remaining lifespan to beneﬁt from public and social investments in the economy.
This leads them to have distinct policy preferences and economic priorities. Whereas the young care about education and labour market prospects, and middle-aged individuals care about wages, conditions, and job security, as well as childcare policies, the elderly prioritise pension beneﬁts, social care provisions and (parts of) healthcare.
They also have distinct economic priorities. Older people have an incentive to favour lower inﬂation, even at the expense of higher unemployment, because they derive income from savings, housing, or other ﬁnancial assets rather than labour income. In addition to favouring lower inﬂation, the elderly are also less directly affected by lower economic growth and recession, unlike younger and middle-aged individuals who rely on work-related earnings as their main source of income.
These preferences and priorities become especially important when we recognise that older people have significant political inﬂuence, because they are more likely than any other age group to vote. For instance, up to 22 per cent of voters in the 2012 presidential election in the US were over the age of 60. These grey voters shift the ‘electoral centre of gravity’ and can in turn be expected to have deleterious political effects on the economy.
From gerontocracy to gerontonomia
Indeed, ageing populations push governments to spend more on policies with low (or even negative) growth implications, while lowering expenditures on policies that have been shown to matter for growth, most notably social investments in education and family policies. Governments increasingly prioritise low inﬂation at the expense of containing unemployment, with deleterious effects for aggregate demand in the economy. Recent works on growth regime underline the importance of welfare state policies and demand side factors in shaping growth outcomes. Yet, many governments have delegated monetary policy to independent central banks, in no small part because of ageing electorates. The remaining ﬁscal policy lever to address output gaps is often limited by the excessive focus on low inﬂation generated by an ageing electorate intent on protecting the real value of their pensions.
The stagnating political economy of ageing democracies
Whereas a longstanding literature in economic voting suggests that electorates should penalise governments for poor economic performance, grey power creates an ‘electoral straightjacket’ for governments in ageing democracies. Faced with an ageing electorate, governments under-invest in social and human capital and keep aggregate demand at suboptimal levels while pursuing low inﬂation, sometimes at (unnecessarily) high costs in terms of stagnant wages and rising unemployment. Where labour markets become increasingly inefﬁcient and where governments fail to achieve economic growth, they are less likely to be voted out of ofﬁce by grey voters intent on protecting their pensions and keeping inﬂation low.
The experience of the UK in the last two decades partly illustrates this: economic performance has overall been disappointing and social investments insufﬁcient, but pensions have been protected and house prices are booming. The incumbent Conservative Party has maintained a strong hold on government, largely through a reliance on grey voters. While 56 per cent of those between 18 and 24 voted for Labour in the 2019 general election, nearly 70 per cent of people older than 70 voted for the Conservative Party, and this age-related partisan cleavage has been growing continuously in the last few years.
Gerontonomia and the politics of advanced capitalism
Ageing changes the nature of the relationship between democracy and the economy: a gerontocracy dominated by grey voters leads to a ‘gerontonomia’, understood as a stagnating political economy that increasingly prioritises the socioeconomic needs of the elderly at the expense of future economic performance.
This argument opens a substantial research agenda focused on a new era of democratic economic policy making in ageing democracies. Three wider implications can also be delineated.
First, linking ageing to democratic dynamics and economic performance over the longer run suggests that slow-moving transformations in the composition of electorates can shape the long-term economic development of democracies.
Second, ageing is fundamentally restructuring the welfare state: it raises pension expenditures and constrains social investment, just as it reduces the taxable base from which to fund welfare states. This problem is likely worse than anticipated since grey power also undermines the investments and policies needed to improve the long run sustainability of the welfare state.
Finally, we are witnessing the emergence of democratically sustained economic stagnation. This new equilibrium is unstable because it risks unravelling the symbiotic relationship between capitalism and democracy. When large parts of the electorates become disillusioned with the ability of democratic governments to address their concerns, their distrust of democracies grows. As a result, the slow transformation of gerontocracies into gerontonomias, characterised by democratically sustained economic stagnation, may end up undermining the stability of both democracy and capitalism.