Sent: 16-09-2008 13:09:01
In this issue:
Return to full article list
HomeFree weekly newsletterSelf Managed Super Fund ArticlesCustomer surveysSelf Managed Super Fund Book storeContact usATC in the pressLogin
The World is Going Grey
I was recently researching material about the impact ageing is having on societies and came across some interesting material including a very interesting report from Center for Strategic & International Studies (CSIS) entitled "The Greying of the Great Powers". I ended up using this as the basis for two articles that will be appearing in the ATC Digest in the near future. Here is a brief summary of those articles:
Whilst we may all have some idea that this demographic shift is significant, the report's author claimed that this transformation is not a transitory wave like the baby boom many affluent countries experienced in the 1950s or the baby bust experienced in the 1930s. Instead he referred to it as a fundamental shift with no parallel in the history of humanity.
In 1950, no nation on earth had a median age higher than 36. Today, 8 countries in Western Europe have a median age of 40 or higher and by 2050, 6 Western European countries will have a median age of 50 or higher.
Ageing will also affect the size of populations. According to the report, there are already 18 countries in the world with contracting populations, by 2050, there will be 44.
Given that we are talking about global ageing, it will affect everyone on the planet but different countries will experience the shift toward slower population growth and a higher median age at different rates. It seems that most of today's youngest countries (such as those in sub-Saharan Africa) are likely to undergo the slowest aging whilst most of the world's oldest countries (such as those in Western Europe) are likely to experience the most rapid ageing.
A major effect of this demographic shift is that the growth rates of the working-age population, and most likely as a result, GDP growth, will fall far beneath historical trends.
What are the consequences of this?
The CSIS suggest that in slowing and aging economies, the shift toward services will accelerate, employees will become less adaptable and mobile, innovation and entrepreneurship will decline, rates of investment and savings will fall, public-sector deficits will rise, current account balances will turn negative, and arguments over immigration (both for and against) will intensify.
The world's most powerful economy is currently that of the US although some have forecast this will change. The analysis of the CSIS suggests otherwise, at least for a little while yet. Over the last two hundred years the U.S. share of the developed world's population has risen almost continuously, from a mere 6% in 1820 to more than 30% today. Due to higher rates of fertility and immigration, the U.S. share will continue to grow to more than 40% by 2050.
Consequently the strength of the US economic position is expected to grow. As recently as the early 1980s, the GDPs of Western Europe and the United States (in purchasing power parity dollars) were about the same, each at 37% of total developed-world GDP. However by 2050, the U.S. share will rise to over 50% whilst the Western European share will shrink to less than 25%. The Japanese share will also decline from just under 15% to around 8%.
The report also states that the 2020s is likely to be a decade where breaking population trends come to play an important role in world affairs. By 2025, China's economy is likely to be four times larger than Japan's and three times larger than India's. At the same time, however, China will be grappling with a sudden rise in its ageing burden and a sudden decline in its workforce.
Needless to say, no one really knows just how this will all pan out.
The ATC Digest articles obviously go into more detail on these issues. They will be published in the coming months.
This email is general in nature only and does not constitute or convey specific or professional advice. Legislation changes may occur quickly. Formal advice should be sought before acting in any of the areas discussed. Be aware that the information in these articles may become innaccurate with time. Responsibility is disclaimed for any inaccuracies, errors or omissions. Particular investments are neither invited nor recommended and hence this publication is not "financial product advice" as defined in Section 766B of the above legislation. All expressions of opinion by contributors are published on the basis that they are not to be regarded as expressing the official opinion of any other person or entity unless expressly stated. No responsibility for the accuracy of the opinions or information contained in the contributor's articles is accepted by any other person or entity. Copyright: This publication is copyright. If you wish to reproduce this article you require a license, which can be purchased here, to do so.