Sunday, 11 October 2015

More Weekend Reading, or: Malthus shrugged

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. 


Anonymous said...

Ooooh - Gaia!

Electro-Kevin said...

Then there is the march of the robots to consider.

I don't know why economies are run on growth rather than balance. We seem obsessed with GDP.

MyTwiceANightName said...

Kill the pensioners.

Its the obvious solution.

Cue CU channeling his sainted mothers opinions from 1961 dressed up as politics.........

Nick Drew said...

Kev, growth is the panacea of choice, it works so well, allows all boats to float & best chance of avoiding the rocks

the rocks that are so jagged and ugly when revealed by low tide

since in the real world there is no such thing as equilibrium (dynamic or otherwise), the alternative - ultimately - is what the swampies would be happy with: precarious life in a cave

"civilisation is energy-intensive" - and not just energy

so - growth it is

Sebastian Weetabix said...

Growth is the unavoidable consequence of scientific & technical advance, not a "choice". At the most basic level, golden rice = higher crop yields = agricultural surplus = wealth...

Of course we could return to the stone age, as the Greens appear to wish, if for no other reason than other species are 'part of nature' and humans apparently aren't. Malthus was wrong, has been demonstrably seen to be wrong, yet his thinking persists.

andrew said...

There are many types of growth
- adding extra value per person - good
- adding more (working) people - not so sure, but what we have done
- using up limited resources - not good in the long term
- adding more factories - possibly good
- better organisation - good

The one that gives me hope is the rise of uber.
It uses technology to organise people and capital (cars) better.
Not so keen on the company itself, but there was a bit of a gap between invention of steam engines and the pumps that made deep mines and factories possible

Jan said...

More not so good growth is the increase in fortunes of the 1% at the expense of the rest of us....we are nearly back to the levels for the landed gentry in Jane Austen's time according to Piketty. How are we going to get a more even spread of wealth?

CityUnslicker said...

the comments on that article are bizarre. The BBC is read by some proper half-wits.

andrew said...

That the richest 1% are very much more rich than me and increasingly so is not of great concern at the moment.

Right now you can only live in one nice house / wear one nice wristwatch etc at a time, and so that gap is not really that wide.

Fast forward 40 years - at that point the richest 1% may have access to technology that means they can travel to the moon etc and live there and/or live forever.

At that point if I am stuck down here due to die between 90-100, I may well do more than look up at the new gods and have a moan.