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Page added on November 9, 2012
Slower Growth Seen in a Graying World
AS the world grows older in the coming decades, economic growth will slow.
That forecast was issued Friday by the Organization for Economic Cooperation and Development, a group of 34 countries that includes all of the major industrialized nations.
“Aging will be a drag on growth in many countries,” said the report, titled “Looking to 2060: Long-Term Global Growth Prospects.” It also projected that while the aging of the population would be offset to some extent by better education in many countries, global growth in gross domestic product, which averaged 3.5 percent a year from 1995 through 2011, would rise to 3.7 percent through 2030, but then fall to just 2.3 percent over the next three decades.
“The active share of the population has to finance the old population,” said Asa Johansson, a senior economist in the organization and the principal author of the report, explaining why the rising proportion of older people is expected to reduce growth.
The accompanying charts show the growth forecasts for the world and for nine major countries, as well as what is known as the old-age dependency ratio, defined as the number of people over the age of 65 for each 100 people ages 15 to 64, which defines the working-age population.
The process is expected to be particularly rapid in China. In 2010, that country had just 11.3 people over 65 for each 100 people in the working-age population, less than half of Britain’s 25.1 figure and well below the United States’s 19.9. But the United Nations estimates that by 2045, the dependency ratio in China will be 39, almost exactly the same as in Britain and well above the 34.6 figure forecast for the United States.
The O.E.C.D. report said that more rapid aging in China “partly explains why India and Indonesia will overtake China’s growth rate in less than a decade.” It forecast that China’s G.D.P. would grow at a rate of 2.3 percent a year from 2030 to 2060, little more than the 2 percent it forecast for the United States. But it projected growth of 3.3 percent in Indonesia and 4 percent in India.
The United Nations estimates reflect uncertainty about changes in fertility rates over the coming decades, and the charts show three forecasts based on assumptions of high, medium and low rates. The O.E.C.D. growth forecasts assume the medium fertility rates.
If the medium rates are correct, by 2060 Germany and Italy will each have old-age ratios above 55, while Britain and France will have ratios below 45.
Ms. Johansson said she expected that more countries would move to delay retirement age, and noted that some countries were considering indexing that number to life expectancy.
One thing that could render these forecasts wrong would be an increase in immigration. For South Korea, which now seems to be on course to rival Japan as one of the oldest — and slowest-growing — countries in the world by late in this century, an obvious source of new workers would be the much younger North Korea, if politics ever made that possible. For many other countries, a source would be less developed nations, something that is politically unpopular in both the United States and Western Europe, and all but anathema in Japan.
Perhaps the politics of that will change someday, as young immigrants are viewed not as competitors for limited employment opportunities but as sources of tax revenue to help support aging populations.
11 Comments on "Slower Growth Seen in a Graying World"
thomas on Fri, 9th Nov 2012 11:46 pm
Why does this article not include GDP per capita growth? Sure India may overtake China soon in GDP growth but it’s population growth is much higher therefore per capita it may not be getting wealthier than China.
DC on Fri, 9th Nov 2012 11:52 pm
Lol! Aging really has nothing to do with anything. Demand destruction and expensive resources, thus expensive finished goods that fewer will be able to afford will do the job just fine.
Beery on Sat, 10th Nov 2012 1:05 am
Yeah DC, but if you were a cornucopian, wouldn’t you rather blame it all on an aging population?
DC on Sat, 10th Nov 2012 1:25 am
No! I be SoS and blame it all on the peak politics and the ebil gobmint regulations!
BillT on Sat, 10th Nov 2012 1:29 am
Blame is the favorite pastime in the US today. Blame the government, aging, ‘terrorists’, the poor, the sick, etc.
Don’t even think that it could be:
Peak Energy/oil
Climate change
A failing world economy
P.S. Be good little serfs…er…elves and don’t forget to do your Capitalistmus shopping early! Those Wall Street CEOs are looking for their huge bonus’ again this year!
PrestonSturges on Sat, 10th Nov 2012 4:45 am
1947 (start of baby boom) + 65 (retirement age) = 2012
Retirees will be cashing out their stock portfolios at an increasing rate.
BillT on Sat, 10th Nov 2012 9:32 am
Preston, you are so correct! Think of all those 401Ks that will be drained over the next 10-15 years and then consider how the stock market can possibly survive when the workers cannot even afford the basics of life and will certainly not be buying those stocks…lol. It will be a rush to the bottom and no return…unless…the government makes everyone else invest their S.S. taxes and other retirement contributions in stocks.
I’m looking for the government to grab those and all other retirement plans that hold stock and only allow a limited withdrawal per month.
Arthur on Sat, 10th Nov 2012 10:05 am
The article is not without merit… the (white) world is aging, so yes, an ever increasing proportion of the population is retiring, so won’t produce, won’t invent, won’t serve, etc., which has a negative effect on growth. On top of that, there is peak oil.
It was only ten years ago that in Holland most people were able to retire before 60, often at 57 or even 55 with a corporate pension and additional state pension at 65. These days are gone forever. Retirement age is now 65 and soon will be 67… and counting. In Russia, after the crash of 1991 working to 70-80 was normal, if you lived that long. After the likely Great Default we are going to witness, starting either in the US or Greece and then cascading through the rest of the west, this probably will become the norm here as well.
cephalotus on Sat, 10th Nov 2012 11:55 am
What a bullshit. Who believes in a constant exponential growth.
Look what a real expert should have predicted in the year 1912 for Germany, which was ruled by emperors for decades at that time:
In 5 years Germany will fight against half the world in a war with technologies and death polls never been seen before.
In 10 years Germany will have lost all its colonies, the emperor will be gone, but Germany will have the golden age of culture
In 20 years people will buy a leaf of bread with a barrow full of money
In 25 years Germany will again have an Emperor and will start a genozide on millions of Jews and other minorities
In 30 years Germany will rule a Reich ranging from the polar circle to North Africa, from the Atlantic to the Ural
In 35 years Germany will be bombed to dust and devided into two parts.
In 50 years the western part of Germany will have the Wirtschaftswunder and starting to become the biggest export nation of the world…
This is 50 years of history of one single country and those experts make a study based on constant growth over 50 years. What a joke!!!
Arthur on Sat, 10th Nov 2012 12:52 pm
Very true cephalotus,
Extrapolating currents trends into the future generally is the best way of knowing what at least is *not* going to happen. Nobody, really nobody anticipated the fall of the Berlin Wall and the subsequent collapse of the USSR. It happened anyway.
It will not be different with the US lead West. Today in lewrockwell.com the presentation of the US Paul Craig Roberts shadow government:
http://lewrockwell.com/roberts/roberts376.html
Laugh if you will, but this type of government is only one youtube vid away from the 911 Pentagon showing an exploding facade and no plane. This would mean that the entire US political establishment would be exposed as complicit and would be put out of business. This could also very well mark the beginning of the US turning in one big multilingual Switserland, a confederation of nearly independent 51 states. A provisional Ron Paul or Paul Craig Roberts government would be the next logical step. The abandonment of empire and miltary-industrial complex would be next. Next a loose alliance of the EU, Russia and majority European north American states could sit around the table with the only serious other power China and negotiate a radical arms reduction program: no subs, no carriers, no icbm’s, just a few hundred war heads and long range bombers, that’s it. Mutual verification program. Atlantic European, Pacific Chinese sphere of influence. No empire’s.
BillT on Sat, 10th Nov 2012 1:33 pm
Arthur, I hope we get to that before we destroy the ecosystem.