A useful article from The Economist to consider when looking at the big picture of global economics in the long term. And food for thought over what this may mean for global commodity markets.
Shifting demographics have had a profoundly positive effect on the global economic environment since the Second World War. As the article indicates, a booming young population helped to spur inflation, rising real incomes and a greater propensity to take on debt.
That trend began to reverse in Japan during the 1990s and will hit much of the rest of the world in the near future. The current backdrop of low interest rates, low inflation and a diminished propensity to invest is likely to be here to stay.
In a world of sluggish growth, low inflation and stagnant house prices, debts become much harder to pay off…
…as workers age, they are less likely to want to take on debt. And if an ageing workforce means slower growth, companies won’t want to borrow to invest.
To generate growth in our ageing world may require a big improvement in productivity, or a sharp jump in labour-force participation among older workers. To date, the signs on productivity are not encouraging and elderly employment ratios have a lot further to go.