Older people make up an increasing proportion of European electorates. Tim Vlandas writes that this ageing population is putting European economies on a path toward “gerontonomia”, characterised by democratically sustained economic stagnation.
In many democracies, the elderly are becoming a larger part of the electorate. This electoral transformation stems from one of the great demographic successes of advanced capitalism, combining economic dynamism and developed welfare states with effective health care systems.
Yet, this fundamental restructuring of our societies also presents a challenge for democracies, which are becoming increasingly dominated by grey voters putting us at risk of becoming gerontocracies. As a result of this growing grey power, democracies are reorganising their economies and government policies to cater to grey voters’ economic and policy priorities: low inflation and good pensions, often at the expense of economic growth, high employment and social investments.
Grey democracies are increasingly stagnating economically. In a recent study, I call the resulting political economy a “gerontonomia”, combining the Greek words for old “γέρων” and for economy “οἰκονομία”. In this post, I discuss several key features of a gerontonomia.
From gerontocracy to gerontonomia
Compared to young and middle-aged individuals, retired voters have a distinct position in advanced economies: they tend to draw most of their incomes from public or private pensions as well as financial and housing assets, rather than their continued labour market participation. Whereas younger voters can have a collective interest to sacrifice current consumption to promote public and social investments for long term economic gain, grey voters have a more limited time horizon to beneﬁt from these investments in the economy.
This distinct position in turn explains why grey voters have different economic priorities as well as policy preferences: they have strong incentives to prioritise and expand pension beneﬁts, social care and (parts of) healthcare. By contrast, younger and middle-aged voters have much more to gain from well-designed and generous education, childcare and labour market policies, while their economic priorities in the present mostly concern their working conditions, wages and employment security.
Moreover, grey voters should be particularly concerned about inﬂation, whereas unemployment is less of a direct threat to their economic well-being, since labour market earnings are less important to them than the value of their savings, house prices and other assets. Elderly individuals are also less instantaneously and less strongly affected by economic stagnation and recession, unlike younger voters whose income depends primarily on work-related earnings that tend to more closely track economic growth.
Differences in the economic policy preferences and priorities of different age groups matter as the demographic structure of electorates in advanced democracies altered profoundly over the course of the 20th century. Grey voters are not just more numerous, they also have substantial political inﬂuence, not least given their often higher voting participation. For example, in the US up to 22 per cent of voters in the 2012 presidential election were over the age of 60.
Recent comparative political economy scholarship stresses the crucial role of welfare state policies and demand side factors for economic performance. The greying of the electorate has important political economy consequences for advanced democracies because it leads governments to increase expenditures on public policies with lower (and sometimes more negative) effects on economic growth. At the same time, it constrains spending on public policies that are crucial for growth, for instance social investments in education and childcare policies.
In parallel to this social policy reallocation, governments focus their efforts on keeping inﬂation low, sometimes at excessively high costs, pushed by an ageing electorate intent on protecting the real value of their pensions, and many governments have delegated monetary policy to independent central banks, in no small part because of ageing electorates. Conversely, ageing makes governments more electorally insulated from the electoral costs of neglecting to fully address unemployment, with negative consequences for aggregate demand in the economy.
Economic stagnation in ageing democracies
Previous studies of economic voting show that voters penalise governments for poor economic performance. However, grey power changes the economic voting dynamics for governments facing an ageing electorate. As elderly voters are less likely to vote against ruling incumbents for high unemployment and low growth than for excessive inflation or insufficient pensions, governments facing ageing electorates have an incentive to under-invest in social and human capital, as well as to keep aggregate demand at suboptimal levels, while focusing their efforts on maintaining generous pensions and keeping inflation low, sometimes at excessive costs for wages and unemployment.
This dynamic is partly exemplified by the UK’s recent trajectory, which has been economically disappointing, yet electorally stable: social investments have been insufﬁcient and wage growth has been limited, whereas pensions have been protected and house prices have been booming. Thus, while many younger and middle-aged voters have fared poorly, large numbers of grey voters have benefited from (or at least been less badly affected by) government policy choices. As a result, the Conservative Party has been able to rely on grey voters to maintain control of the government. For instance, while 56% of those aged 18-24 voted for Labour in the 2019 general election, close to 70% of those aged 70+ voted for the Conservative Party.
A new phase for advanced capitalist democracies
In the long run, slow-moving demographic transformations in the composition of electorates therefore shape the long-term economic development of democracies. Over the last 50 years, ageing has altered the relationship between democracy and advanced capitalism: a gerontocracy characterised by growing grey power has brought about a gerontonomia, a stagnating political economy that focuses on the socioeconomic needs of the elderly while neglecting future economic performance.
Ageing is restructuring welfare state policies and institutions: by reducing the taxable base from which to fund welfare states, just as pension expenditures rise, grey power undercuts the investments and policies needed to improve the long run sustainability of the welfare state.
In this new phase for advanced capitalist democracies, the previously symbiotic relationship between advanced capitalism and democracy becomes replaced by the emergence of democratically sustained economic stagnation. However, this new phase is unstable because large parts of the (non-grey) electorate over time stop trusting democratic governments’ ability to address their grievances. With the growing distrust of democracy and rising support for far right parties, gerontonomias may end up undermining the stability of both democracy and capitalism as democratically sustained economic stagnation is rejected by more and more younger and middle aged voters.
For more information, see the author’s accompanying paper at The Political Quarterly