12jul22 – Alexandria, VA Thanks, Chas, for disseminating this important report by the UN on global population trends. This is one area where we economists rarely make mistakes because the forces underpinning demographics are so slow to change and long-lasting. The UN projection that the world population will peak around 10.4 billion by 2080s is worrisome indeed for our grandchildren. But there is, in my opinion, a greater short-term challenge for us and our children: ageing populations in Europe, the U.S., Japan and now China. The rapid net decline in Europe’s population (744,000 in 2020 and 1.4 million in 2021), follows Japan’s demographic decline since the 1990s. Even U.S. population growth, excluding net immigration, is below the ZPG (zero population growth) rate of 2.1 children per family. In Europe, the U.S. and Japan, the demographic trends mean slowing growth of the labor force and, very importantly, slowing potential, non-inflationary (rpt non-inflationary) GDP growth over the medium term. Currently, that means real GDP cannot grow faster than two percent in the U.S. and Europe over the medium term without triggering inflation. Given the huge amount of fiscal and monetary stimulus injected into the U.S., European and Japanese economies since the financial crisis and, especially, since the onset of the Covid pandemic; and the breakdown of global supply chains, this limitation on non-inflationary growth is a real challenge for policy makers, especially at the Fed and ECB. The only ways the speed limit on GDP growth can be increased is to : 1) improve demographics by raising the birthrate or increasing net immigration; 2) to improve total factor productivity growth by improving education and job skills to boost labor productivity (lamentably slow in Europe and the U.S.) and capital productivity by increasing capital spending in the private sector and education and infrastructure in the public sector. Since U.S. political leaders and the public seem biased against boosting net immigration, that is not a likely solution to the demographic brake on economic growth. As for productivity growth, politicians prefer tax cuts to increasing sensible public investment in education and infrastructure. The general public prefers consumption to saving which means we have a chronic imbalance in our saving-investment equilibrium that must be balanced by foreign capital inflows. These trends mean our productivity growth rate has trended lower for a long time. Currently, the capital flowing to the U.S. has accelerated because of the Russian war on Ukraine, inflation and political/economic fragility in Europe and Japan. As a result, the dollar has appreciated to parity against the euro, a 20-year high; and the yen is weaker than at any time since the late 1990s.. This shift in FX relationships will lower U.S. import prices but penalize net exports’ contribution to GDP growth. In Europe, the weak euro will aggravate the inflation challenge for the ECB. Bottom line: current demographic trends are and will continue to be a major challenge to policy makers on both sides of the Atlantic. Paul From: Salon <salon-bounces@listserve.com> On Behalf Of Chas Freeman via Salon Sent: Tuesday, July 12, 2022 12:28 PM To: [Salon] <salon@committeefortherepublic.org> Subject: [Salon] World Population Prospects 2022 “More than half of the projected increase in global population up to 2050 will be concentrated in just eight countries: the Democratic Republic of the Congo, Egypt, Ethiopia, India, Nigeria, Pakistan, the Philippines and the United Republic of Tanzania. Disparate growth rates among the world’s largest countries will re-order their ranking by size.”
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