A Developed Country, It Seems, Is a Country That Can No Longer Step Down From Prosperity

I heard news that riots had broken out in France over the country’s budget problems.

The French are as energetic as ever.

The story goes like this.

Finances are tight, so the government wants to cut spending.

But cut social security, and the public gets angry.

Raise taxes, and the public gets angry.

Do nothing, and the debt keeps growing.

A perfect stalemate.

At the root of it is a shrinking, aging population.

The number of elderly people who need support keeps rising, and social security costs just keep swelling on their own.

…This sounded familiar, and then I realized: it is Japan.

Generous Welfare or Thin Welfare, It Ends Up the Same

What is interesting is that this is not just a French problem.

Almost all so-called developed countries are struggling with similar fiscal problems.

It is understandable that France, with its generous welfare system, is struggling.

But even the United States, known as the land of “personal responsibility,” where welfare is supposed to be thin, is agonizing over a mountain of debt.

Make welfare generous or make it thin, and you still fall into the same hole.

When everyone ends up in the same place, it starts to look less like a design flaw in the system and more like a problem of human nature.

Nobody Can Say, “Let’s Go Back 200 Years”

In short, once people become prosperous, they cannot lower their standard of living.

Two hundred years ago, most people were poor, and if they got sick, it was normal to die without ever seeing a doctor.

So today, if someone said, “We don’t have the money, so let’s go back to living the way people did 200 years ago,” would anyone accept that?

No.

Any politician who said that would be history by the next election.

Meanwhile, the pension and healthcare systems that support this prosperity were built on the assumption that populations would keep growing and economies would keep expanding.

We can’t let go of prosperity. But without a growing population, we can’t sustain it.

France, the United States, and Japan, which is at the very front of population aging, may look different, but they are all in the same cage.

I once wrote that becoming a developed country apparently requires being “backed into a corner.”

It seems that even after a country becomes developed, it stays cornered, just in a different way.

People Are Tougher Than They Look

That said, looking back through history, no matter how severe the economic crisis, there has never been a country where the entire population starved to death.

Japan, too, lost World War II, and its property and infrastructure were burned to the ground.

Even so, most people stubbornly survived.

Seen that way, what we are really afraid of is not “being unable to survive,” but having to give up the way we live now.

People can go on living even after losing everything.

If we can accept that, this stalemate might feel a little less suffocating.

Still, I would rather not be the test subject for that experiment, so this month, too, I am diligently putting money into my index fund.