China's recent relaxation of its one child policy is to counter the problem of a declining population (which it was designed in 1979 to achieve in the first place) and more critically of the working-age group (as to be expected). If this line of reasoning is correct, then I think we have a problem in thinking about how to take care of the future of the human beings on this earth.
The issue of the so-called aging population is in almost all developed or even developing countries but more pronounced in Japan. Not only is a fallen birth rate the issue - which could also be due to the rising and high cost of living in the world today - as well as to the improvement in human life longevity, I presume as medicine and diet improve. I am sure there are also other factors that lengthens the life of human beings, but there are not the critical issues for us here.
I wish to suggest, from the macro perspective, that we seem to have our thinking a bit twisted as we worry about escalating population growth, dwindling natural resources and environment, as well as economics of growing old. We want to slow down the population growth and ease off the pressures on the natural environment while at the same time we are arguing for a rise in the working population to get the economy to grow and to feed the old.
I think we have a problem with the concept of economic growth.
Bear in mind that the current concept of the GDP was invented by Keynes (and translated into the national accounts by Richard Stone in Cambridge in 1941, who gave, for me, his famous quote: "Data, unanalysed, are dead as mutton") on the fundamental idea that there is a direct and positive correlation between income or output produced and labour employed. It is this simple idea that keeps economists and politicians today pushing for GDP growth at all cost and as fast as possible - with not entirely positive results.
Instead of the increase in output resulting in higher wages, the rise in output leads to higher profits and often at the expense of wages. There is a disproportionate distribution of income between corporations and people, and this seems to be justified on the basis that corporations need to make huge profits in order to keep investing. While the rise in investment creates more jobs, the tendency for governments to give tax concessions to corporations (often foreign ones) ostensibly to induce investments has led to a disaster in the management of the government budget, especially when too the government is getting into the act of investment in the hope of raising those jobs that do not seem to benefit the local population.
The budget deficit now being the scourge of government, the fall of the knife is often on those "unnecessary" operating expenditures which deal with the welfare of people including pensions and retirement benefits. At the same time, to encourage work and income (which means to cut income taxes) and to reduce consumption, the now ubiquitous goods and services tax or the value-added tax is now proposed to be the panacea of all human material problems on earth.
But in the original conceptualisation of indirect taxes such as the GST or the VAT, the notion is that income which is not consumed is invested, by definition. This is true in agrarian economies where the rice that is not consumed today is saved for consumption tomorrow or as seeds for planting in the next season. In the heavily monetised world of today, that which is not consumed is considered as unsold goods or redundant labour and the resultant action by investors is to abandon the old investments and find new ones. There is a constant search for new ideas and new skills which calls for a certain degree of agility and hence "disloyalty" though not necessarily loss of "integrity" especially to one's own confidence in one's own skills and ability (without which they cannot survive).
As such, therefore, safety net for these workers probably relatively young ones is not there as they jump from one new opportunity to the next. It would seem that that safety net can probably best be provided by the extended family (if it is capable) for the state fears that the provision of an unemployment benefit or support of in-between jobs will lead to universal laziness. The systematic pressures that are being put to the working individual to work hard in order to keep up with the rising cost of living in order to keep the GDP growing is, I think, the biggest error in policy making today - for they lead to what governments are also worrying, which is the lack of sufficient energetic workers to support the workers who have grown too old to be productive in contributing to the concept of sustained GDP growth.
(There is currently an attempt to rethink on the concept of poverty for the urban poor.)
The problem economic policy is that there seems to be a believe that the printing of money by fiat is the only way to stimulate economic growth. This is the tail wagging the dog. The growth of an economy will result in the rise of the money supply, either in the monetary base or the velocity of the circulation of money through the economy. Attempts to increase the money supply to increase the economic growth runs the risk of throwing good money after bad investment ideas with the cost of the loss being borne by the general population which can be made to bear these systematic losses with too violent a struggle is through persistent rise in prices for all commodities and services. It is without doubt that, at the end of the day, the economic battle is fought over who gets to consume what and how much and for how long. The almost universal application of the GST (a fact that is now being touted as the rationale for its introduction in this country!) is testimony to the loss of general human welfare from the abuse and mismanagement of the money supply or rather of the international reserves by the reserve issuer.
I think the future direction of the world economy is to reduce the family size and hence slow down the world population, to reduce the overproduction of physical goods in order to slow down the utilisation of real resources, to reduce income growth and consumption growth, with poverty due to incapacity and old age being handled by direct transfers by governments through welfare programmes. I don't think we can salvage the self-destruction of the earth in its ultimate eventuality, or are human beings likely to be the last life on this earth; at the very least, we should moderate our wants and leave rooms for those less fortunate than us in this space and time.