The blog’s latest post for the Financial Times FT Data blog is published today.
Guest post by Paul Hodges
The G20 group represents 79 per cent of global GDP. But when it comes to demographics, you can split its membership into three quite distinct groups.
The chart shows each country in terms of GDP per capita and median population age, with its economy’s size depicted by the bubble:
· Rich but old. These are wealthy western countries, with GDP per capita around $40,000 and median population age of 40 years
· Poor but young. These are emerging economies, with GDP per capita around $10,000 and median population ages of 25 to 30 years
· Poor and ageing. This group contains just China and Russia, who have GDP per capita around $10,000 but median population ages approaching 40 years
The first group is dominated by its ageing baby boomer population. Historically the over-55s have largely been ignored as a source of demand, but today this generation offers a major new growth opportunity. They will be over a third of the group’s total population by 2030, more than double the percentage in 1950.
The “poor but young” group has a different opportunity. Its populations have successfully escaped from poverty in recent decades, but now need to be supported as they seek to progress up the income ladder towards Western living standards. Sustained growth could therefore come from developing new products and services to meet the emerging needs of this generation, whose incomes currently still average less than $20 a day ($7,300/year).
The final group has a more complex challenge ahead. China’s one-child policy since 1978 means its population risks growing old before it gets rich. Russia’s population is also ageing fast, due to its fertility rates having halved since 1950 whilst life expectancy has hardly changed. Growth prospects in both countries therefore depend on their ability to support demand growth within on their own new poor generations, and move away from their current export-dependency.
The chart shows the urgent need to shift the economic debate away from the current “one size fits all” argument between advocates of stimulus or austerity. A more nuanced approach is instead required, as demographics are now taking demand patterns in completely new directions.
Sustaining future growth thus depends on the G20’s ability to successfully develop and implement new policies, focused on the opportunities offered by the emergence of the New Old and New Poor as major new demand sources for the first time in history.
Paul Hodges is the co-author of Boom, Gloom and the New Normal: How the Western Baby Boomers are Changing Demand Patterns, Again www.new-normal.com