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Thursday, November 21, 2019 ARCHIVES  |  SEARCH  |  POST ADS  |  ADVERTISE  |  SUBSCRIBE   |  LOGIN   |  CONTACT US

Need for a new economic system

Comment
By Gordon Boyle


Investors are increasingly becoming concerned and some are putting their money into government bonds that in many cases are delivering negative returns. It appears bonds are appealing due to their perceived safety. Investors are anxious particularly the concern that the rich world is slowly becoming a Japan with feeble economies tapping their reserves as they support an ageing population.

Population trends are a key feature today and we need to understand where we have come from before trying to work out where we will be in the future. Between year 1 and 1700 the human population went from 200 million to 600m and it was not until the early part of the 19th century before it reached one billion. In the next 100 years the population doubled to 2bn and by 1975 it had again doubled to 4bn. The recent population growth has been greatly influenced by the industrial revolution, improved health, reduced child mortality and improved longevity.

There are now widespread shrinking populations due to fertility rates falling below replacement levels. In Europe there is a need to have birth rates of 2.1 births per woman, but birth rates have fallen to 1.5. Europe in the decades to come will get older like the trend already in place in Japan where over one third of the population are above 60 years of age. Replacement levels are falling across the world from the Americas through Russia to South East Asia and it is only a matter of time before the Middle East and the Indian Sub-Continent catch up. Africa remains an exception due to the youth bulge of today that will take decades to resolve if fertility rates decline.

Some experts think the UN prediction of a world population of 10bn in 2050 is too high. Experts explain that the UN is using a faulty model based upon assumptions in the past. If we are about to witness a demographic collapse this will be good news when it comes to climate change, fewer people would need and demand less. Additionally, we will have more elderly who consume less.

All of this could cause capitalism to break down as it works on the presumption of economic growth and a shrinking population could result in there being negative economic growth. We could have a situation where enough food and abundant material goods are in place relative to the population.

As economic growth slows and stalls there will be demands for a new and different economic system. We will also witness many jobs being made redundant due to advances in technology with millions becoming unemployed.

Today, in countries with shrinking populations the shortfall can be offset with increased immigration. This is happening in many of the rich economies but often immigrants from different cultures find it hard to be accepted by the indigenous population.

In poor countries without the financial resources to look after a growing elderly population they will experience increasing difficulties and problems. African countries will be the most exposed and we will increasingly witness growing number of migrants on the move.

Is the glass half full or half empty? One thing we need to do is become more prepared for this potential new population trend.

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