The question now is whether the end might be near for Eastern Europe, demographically. …Of the 20 most rapidly shrinking countries in the world, 15 are erstwhile Warsaw Pact members, ex-Soviet republics or components of the former Yugoslavia (plus neighboring Albania). …Eastern Europe’s looming demographic crisis stems directly from its escaping the Soviet orbit in 1989. Freedom of movement, coupled with membership in the borderless European Union, enabled millions of working-age people to leave the former Soviet bloc for work in the more prosperous West. Emigration, plus low and declining birthrates — a characteristic of modern society that Eastern Europe shares with Western Europe and the United States — has resulted in whole villages hollowing out, with only pensioners left behind. …Demographic decline is extremely difficult to reverse, wherever it occurs. As experience has shown in various countries, governments cannot do much to raise birthrates, even with generous subsidies for families with children.

Needless to say, the situation has not improved. Though it will be interesting to see whether the huge baby subsidies in Hungary will make a difference.

But since I’m skeptical of that approach, I’ll close by noting that Eastern Europe’s demographic decline is a recipe for fiscal disaster because there won’t be enough future taxpayers to pay benefits that have been promised to the elderly.

This is a problem in many nations, of course, but it’s a crisis in Eastern Europe.

For what it’s worth, “pre-funding” is probably the only practical way of dealing with demographic decline, and this means big reforms such as personal retirement accounts.

This is feasible. Jurisdictions such as Hong Kong and Singapore also are facing demographic decline, but they are in a much stronger position because they don’t have tax-and-transfer welfare states. People are required to save for their own retirement.

The bottom line is that Eastern European nations need to engage in a lot more reform (especially self-funding for things like Social Security and health care) if they want to continue to make economic progress.

P.S. Here’s one final excerpt, dealing with membership in the European Union, from the chapter that we discussed at the start of the column.