It is received wisdom now that over the last ten years while Westerners went on history's biggest ever spending spree, the Chinese and Asians saved. In the producing economies of the East workers saved between 25 to 40% of their incomes for a rainy date, while in the West (with the possible exception of Germany), most workers spent what they had and lived for the moment.

Part of the explanation for the difference lies in the fact that countries like China do not provide the kind of social safety net provided in the West. Even South Korea and Singapore €" both of which have some form of welfare €" have nothing touching the kind of benefits offered to Westerners.

Now of course over time the Chinese government may find themselves having to offer greater benefits for their citizens. In fact one of the reasons why China is now export-dependent is because it does not have as developed a consumer base as do advanced Western economies.

The main explanation for that is China's above-average savings rate, due to the lack of social security especially for rural migrants to the cities. In other words, the Chinese government may have to establish some limited social security in order to give their citizens more security and develop a better internal market. In other words, provide the Chinese people with benefits so that they can take the money they were saving and spend it.

But even if Beijing went down this road, can we really believe that they would want to establish the kind of 1940s-style welfare states which exist in Western Europe, but also North America and Australasia?

The Chinese are surely not blind to the financial wreckage of European countries right now. European economies had to borrow like crazy to bankroll their obese welfare commitments, especially to finance their ageing populations.

Now most Westerners have stopped having children on levels seen in the rest of the world. This means there are fewer and fewer people entering the labour markets to pay taxes for the benefits of the elderly, sick and unemployed. Mass emigration compounds the problem.

In Europe, this demographic time-bomb, when it hits, could make today's problems look like a test-run. In the United States, there is absolutely no way that the country can afford all of the social security and healthcare commitments it has made, especially to its elderly. And America has a growing population and a smaller welfare state.

The exception to the rule is Scandinavia, where big government has not led to big debt. But while the Nordic countries spend even more money than other Europeans in terms of welfare, they have not gone into as much debt because their tax rates are so high. Tax rates in the Nordic countries are far higher than most people in continental Europe would tolerate, never mind people in Anglo-Saxon countries.

But Scandinavia tells us the kind of taxes which need to be sustained to afford the healthcare and welfare costs which most Westerners now expect as a right. The Nordic countries have near-replacement level fertility, unlike Germany or Italy. This may indicate that welfare does not necessarily discourage women from having children.

Now China has below replacement-level fertility but three caveats should be added. Firstly the Chinese can and are attracting back a 60 million plus diaspora, spread across Asia and the Anglosphere. Secondly the reasons for this appear to be government-controlled not cultural (i.e. the one-child policy), which indicates that €" as with most things in China €" the government has more capacity to solve the problem than exists in the West. Thirdly the Chinese do not have a welfare state which requires an expanding tax base to bankroll it.

At the end of all of this, who will emerge stronger? Pensions and welfare generally are eating into Western government budgets. According to Patrick Nolan for the Spectator in London, €In 2009 the bill for [Britain's] social protection was around 199 billion. This has almost doubled in real terms over the last 20 years from 104 billion in 1989. Social protection now represents 32.5 percent of all government expenditure or 14.2 per cent of GDP.€

Many Britons believe that most of the welfare budget goes on the unemployed, however according to Nolan, €Only 12 per cent of welfare expenditure is spent on the major out of work benefits, while 42 percent (around 80 billion) is spent on the elderly and 21 percent (around 41 billion) is spent on working families. In 2008, 60 percent of households were in receipt of at least one benefit. This figure rises to 93 percent for households with children.€

Most welfare is money for the elderly and supplementary benefits for low income families. The breakdown for 2009-10 was as follows:

€ Basic State Pension €" 53.7 billion
€ Housing Benefit €" 19.5 billion
€ Child Tax Credit €" 16.2 billion
€ SERPS and Second State Pension €" 13.2 billion
€ Child Benefit €" 11.8 billion
€ Disability Living Allowance €" 11.4 billion
€ Pensions Credit (Savings and Guarantee) €" 8.3 billion
€ Income Support €" 8.2 billion

This is not untypical for the West, with benefits for the family and pensions eating into the government's coffers. Today we know, because of the debt, almost all Western governments have less to spend on the elderly. This is a crisis of elephantine proportions for countries in Europe with declining populations and tax bases.

Tomorrow's Western elderly could well be poorer than today's. When measured for the cost of living, they may end up being worse off than pensioners in the high-savings Asian economies like China, which also have extended families to fall back on (something lost in much of the West). Unless Westerners are willing to pay 50% or more in tax €" as they do in Scandinavia, which is a bit unique because of the small size and (historic) homogeneity of Nordic countries €" a bleak old age could be in store. If only we saved like the Chinese.