THE BLOG

Longevity Changes Everything...or Should

06/25/2015 06:34 pm ET | Updated Jun 25, 2016

As the 2016 American presidential campaign gets rolling, it will be interesting to see how the candidates outline their strategies for population aging. The candidate who gets it right will not talk about "how to deal with more old people," but how to drive economic growth as aging demographics shape productivity, labor participation, and financial planning.

Indeed, America's aging population -- triggered by longer lives, lower birth rates, and the graying of 78 million baby boomers -- is a question of how to manage a society with as many "old" as "young." This is fundamentally a question of economics.

The U.S. is hardly alone. The question is begging for an answer far more urgently in Europe, Japan, and the rest of the highly industrialized world. And in the emerging markets, population aging is striking like lightning. The ratios of old-to-young that took three or four generations to evolve in G7 nations are unfolding in a matter of decades in China, Brazil, India, Turkey, and elsewhere. The question for all of us is how to square 21st century aging populations with misaligned 20th century policies.

Enter Blackrock. Their new white paper -- and an accompanying roundtable to launch it in New York last week -- brings a compelling set of new ideas to the table. Blackrock joins other leading businesses who have been shaping this debate for years, ranging from Bank of America Merrill Lynch and Aegon, to Nestle Skin Health and Pfizer, to Home Instead Senior Care and Intel. But make no mistake: Blackrock's entry is no small matter.

Because if there's one group out there that knows a little something about investing, saving retirement, and, economic growth, it's Blackrock - who manages $4.77 trillion in assets (a trillion more than its nearest competitor), who serves 89 percent of the largest US retirement plans, 80 percent of the largest US endowments and foundations, and 94 percent of Fortune 100 companies.

When they have something to say about population aging, we should pay attention.

The most remarkable thing about the new Blackrock white paper, "Unlocking the Longevity Dividend: How Longer Lives Are Changing Retirement, Investing and the Economy," is that it's not another woe-is-us lamentation on how demographics are going to doom America and the world. Instead - and quite rightly - the white paper notes that, if we get things right, longevity and population aging can be a lever for growth for individuals, families, businesses, nations, and the world at large.

Blackrock gets it exactly right by pointing us to the fundamentals of human capital: "Longer lives have created a vast pool of experience, capability and wealth that can become a driver for 21st century economic growth. Indeed, the transformative power of the generation now entering retirement should come as no surprise: Baby Boomers, born in the two decades following World War II, have reinvented every phase of life they have entered, often by design and sometimes through sheer force of numbers and economic clout."

A few decades hence, we will look back at 2015 as the year that changed the conversation and ushered in a new idea that shaped how people behaved - and how the economy found a new source of human capital to launch into an era of economic growth. Policymakers, politicians and corporate decision makers ought to take note.

It wouldn't be the first time this happened. Over the past half-century, one can see other similar sea change moments that had huge impact on investment decisions and growth.

Women enter the workforce. While women's equality was certainly the "right thing to do," there is no arguing that it has also had incredible economic benefit for all. When women entered the formal workforce, they ignited an economic boom. Today, women contribute nearly $3 trillion to the American economy, and women-owned businesses employ nearly 16 percent of the workforce. If businesses owned by U.S. women accounted for their own economy, it would have the fifth-largest GDP in the world. The parallel to population aging is clear. Enfranchising older adults as workers, investors, and customers will enable the economy to grow at its full capacity.

From "third world" to "emerging markets." In 1981, a World Bank economist, Antoine van Agtmael, coined the term "emerging market" to better signify the opportunities for investment in countries outside the OECD insider's club, a relatively small group of industrial democracies. Agtmael, with a financier's boldness, eschewed the finance industry's then-common designation of "third world" to connote potential and opportunity. Twenty years later, Goldman Sachs chief economist Jim O'Neill coined the term BRICS to the same end. What's significant about this terminological history is that the language focused our thinking around new opportunities for economic growth and wealth creation. Just like "old people" in the conventional sense, these non OECD countries were seen as worthy places to invest as they were not considered engines for corporate strategic growth. If we consider that by 2020 there will be a billion people over 60 or that there are already more over 60 than under 15 in the OECD countries, this is at least as interesting a growth opportunity.

Like it or not, the 2016 presidential campaign is now with us and candidates are scrambling to find their positions on the "issues." A seminal topic, if under-appreciated and misunderstood, is the relationship and impact longevity and population aging can have on economic growth. Blackrock's strategic thinking demonstrates leadership that will shake things up. It will, indeed, be interesting to see how their ideas on savings, investment, retirement and economic growth resonate with the White House hopefuls.