Con Keating | Comment


will be reached by 2035, somewhat below 9 billion, and that from 2040 onwards it will be plateaued or declining. As we have seen in the case of Japan, this brings significant economic challenges. Indeed, it represents a serious challenge for capitalism as we have come to know it. Clearly it is well within the time horizons of our pension systems, funded and unfunded, public and private. Concurrent with this fertility trend, declin- ing mortality has led to an ageing popula- tion. The proportion of elderly has risen, while dependency ratios have increased markedly. They will continue to do so. It is fortunate that state finances are now and will be less strained by the costs of educa- tion of large childhood cohorts. In this world, consumption demand is lower and differs from the demand of the more bal- anced populations of the past 50 years. It is


true that robotics and artificial intelligence can serve to substitute for labour in the pro- duction process, but robots don’t buy white goods – and nor for that matter do the elderly. The highest levels of consumption demand arise in the early years of raising a family.


The scale and ubiquity of this population ageing simply cannot be offset to any mean- ingful degree by immigration, labour force participation will be far more important. There is a green dividend to the population ageing and decline scenario; with the exception of health care, this smaller older population should need and demand less – there is evidence from the US and Japan to support that idea. The extent and precise consequences of this shift for greenhouse causes and effects are open questions. This is a world with adequate resources; a world with non-existent or negative growth; a


world of high unutilised industrial capacity. This probably augurs well for international relations, but even that prospect is clouded by the likelihood that some nations will grow old before they grow rich. We might ask if such a population would find investment in debt securities prefera- ble to equities. We may reason that in this no-growth world, lower for longer charac- terises the prospects for interest rates, but we should also ask what, with these pros- pects, motivates saving at all. Of course, demographics alone do not determine our destiny and there are many instances, from Thomas Malthus to Paul Ehrlich, where projections from them have failed to mate- rialise, but the principal concern here is the total lack of consideration, the absence of any public debate or even any sign that our regulators have given these possibilities any thought at all.


Issue 86 | September 2019 | portfolio institutional | 19


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