Western politicians have failed to take responsibility for managing the Crisis. And so, as the blog noted last week, policy is instead being made by unelected central bankers – principally Ben Bernanke at the US Federal Reserve, and Mario Draghi at the European Central Bank.
They are clearly well-meaning, and in normal times might do little harm. The problem, however, is that their analysis ignores one super-critical issue, the ageing of the Western population. 272m of them, 29%, are now in the New Old 55+ age group. This means that GDP growth will be much slower, just as in Japan over the past decade:
• The kids have grown up and left home, so people don’t need to keep buying bigger houses or new cars
• They have to save more to finance their extra decade of life expectancy
Growth might not be quite so slow, if companies woke up to the opportunity staring them in the face. But they persist in targeting the youth market, which has gone ex-growth. And they instead assume the New Old need only walking frames and sanitary equipment.
The chart shows the key dimensions of the issue by country:
• The green circle is the relative size of their economy versus the US
• The vertical axis shows GDP/capita in each country
• The horizontal axis shows the median age
Almost all can be described as ‘Rich but Ageing’. Their GDP/capita is relatively high, often ~$40k. But most now have a median age around 40 years, with Japan and Germany near 45 years.
Politicians and company Boards need to wake up this changed demographic reality, as we note in ‘Boom, Gloom and the New Normal’. Yesterday’s policies are useless in today’s environment.