Who Will Pay for Longer Lives?

Across Western economies, the math no longer adds up.

As populations age and life expectancy rises, nations face a shared dilemma: how to sustain longer lives and rising healthcare and pension costs amid shrinking workforces. In France, protests erupt over retirement reform. In Germany, once Europe’s powerhouse, growth has slowed to its weakest pace in decades. In the United States, Social Security and Medicare already consume more than half of federal spending.

This challenge is universal: it is a demographic transformation rather than a temporary strain. The social model that sustained prosperity throughout the 20th century is now collapsing under the weight of its own success: people are living longer than ever before.

To sustain that success, we don’t need austerity but acceleration. Innovation must replace retrenchment as the engine of future security - unlocking productivity, rethinking care, and imagining new ways to create value over a longer lifespan.

This year’s Nobel Prize in Economics, honoring Joel Mokyr, Philippe Aghion, and Peter Howitt, offers both perspective and hope. Their message is clear: societies that invest in innovation sustain prosperity; those that resist it, decline.

Growth Is Not a Birthright

For most of human history, growth barely existed. As Nobel laureate Joel Mokyr reminds us, progress was an exception until the Industrial Revolution. Innovation - not labor or capital - turned stagnation into sustained growth. But progress, Mokyr warns, cannot be taken for granted.

Aghion and Howitt expanded that lesson through their model of creative destruction [On creative destruction: “The best way to predict the future is to invent it.”– Peter Drucker]: economies advance when new ideas displace old ones, increasing productivity even as they unsettle the status quo. Yet this process brings turbulence. Without social safety nets, it breeds backlash; without openness to competition, incumbents strangle progress.

As Aghion puts it, “Societies that fear innovation end up protecting the past instead of financing the future.” The challenge now is to keep that cycle alive in an aging world.

Innovation Is the Only Sustainable Path

Here’s the hard truth: no country can tax or borrow its way out of demographic decline. The only lasting solution is to grow the pie and innovation is how we do it. It makes workers more productive, economies more resilient, and governments more solvent.

Consider Germany: despite economic slowdown, it’s leading Europe’s push into defense technology and green energy - dual-use innovation that fuels both security and growth. France’s Choose France initiative is drawing investment into semiconductors, AI, and biotech, reversing decades of industrial retreat.

In the United States, productivity growth driven by AI and advanced manufacturing has begun to rebound to early-2000s levels. And in Asia, Japan - the world’s oldest society - is using robotics to maintain its workforce, while South Korea and Singapore are turning longevity into an industry. Both countries have launched national strategies to grow longevity biotech sectors - researching therapies that extend healthy lifespan and reduce the cost of aging itself.

Each of these regions shares a pattern: governments and industries trying to transform demographic pressure into innovation pressure. The goal is not just to save existing systems, but to reinvent them.

Managing the Disruption

Creative destruction sounds elegant in theory. In practice, it’s messy. Technological shifts displace workers, reshape industries, and demand new skills. As the Nobel Committee noted, “Progress must be managed. Safety nets are essential so that conflict does not stifle growth.”

That means re-imagining not only pensions, but also education and labor markets. The next social contract must help people ride the wave of innovation, not be overwhelmed by it. Lifelong learning, portable benefits, and smart reskilling systems will help them to adapt to change.

The best policy isn’t to slow disruption - it’s to teach citizens surf it.

What This Means for the Next Generation

For younger generations, this is more than an economic debate - it’s their future. The way societies respond to demographic and technological shifts will define the opportunities, jobs, and security of the decades ahead.

There is real reason for optimism. New technologies - from AI and synthetic biology to clean manufacturing - are expanding what one person can achieve. With the right policies, productivity gains can translate into shared prosperity without endless redistribution battles.

The next generation won’t finance social security only through taxes, but through ideas. Every innovation that saves energy, improves health, or raises efficiency strengthens the fiscal foundations of society. In that sense, invention itself becomes a form of contribution - a civic duty for the 21st century.

Final Thoughts: Financing the Future

In awarding Mokyr, Aghion, and Howitt, the Nobel Committee issued a quiet reminder: progress is never automatic - it is built, defended, and renewed.

If we retreat into protectionism, we risk another long stagnation. If we embrace innovation with fairness and foresight, we can fund longer lives without bankrupting the systems that support them.

In the end, one question will shape our century: will we let longevity drain our resources—or use innovation to make longer lives more enjoyable?

“Innovation is the central issue in economic prosperity.” — Michael Porter

‍