How much effect does domestic policy really have? Some would argue: quite a lot. Governments and regulators can certainly influence inflation, productivity, how much is spent on public services vs left in our pockets to consume, and so on. Duncan Weldon discusses the bigger picture.
The working-age share [of the population] rose strongly for the 40 years to 2012 and the fact it is now falling (a fall driven by both rising longevity and the past impact of a falling birth rate) could have a major impact on the shape of the global economy.In the long run, demographics matter hugely to the economy and that long run may arrive quicker than we think it will.The 1970s and 1980s saw the advanced economies enter what demographers have called a "sweet spot" as the post-war baby boomers entered the workforce and declining fertility rate reduced the number of dependent children. The working-age share of the population rose strongly.That trend was then turbo-charged by the entry of China and the former Soviet bloc into the world economy. The global workforce available to firms roughly doubled in two decades.In other words, for roughly four decades (and especially so in the last two) "labour" has been in broad supply. But if the global glut of workers is set to end - driven by both slowing population growth and a falling working-age share - then that could have major impact on global economics.
In January this year, the final report of the Commission on Inclusive Prosperity (ran by the Center for American Progress and chaired by Ed Balls and Larry Summers) found that low and middle-income workers in countries has diverse as Australia, Canada, France, Japan, Sweden, the UK and the US had all seen a multi-decade wage growth slowdown.These are countries with vastly different tax laws, vastly different financial industries (in terms of their size and structures) and radically different trade unions (in terms of laws, coverage and raw size).All have seen the same broad trend and that perhaps is a clue that something bigger has been going on in the background.
Do read the whole thing.