A Look at the Likely State of the Economy Over the Next Several Years (Part 3)

A Never-Before Happening: Worldwide Population Implosion

I said at the end of the last post that I would begin sharing thoughts about coping with the economic challenges that lie ahead. I lied. Actually, I changed my mind. I thought I should do a bit more stage setting by looking at economic conditions on a global scale to make the point that population-driven challenges to economic order extend far beyond our borders.

“House prices saw their biggest fall in 12 years during November. Data suggests the cost of an average home slid by 0.8% from a month earlier” – that from the BBC website, November 29 of this year.

The London-based Telegraph said in a recent online article, “The credit crunch is hammering the US, which now faces a likely recession. Things don’t look great for the UK either; here growth could plunge to 1 per cent next year.”

Looming economic challenges the UK and the rest of Europe face in the near future cannot all be attributed to the credit crunch in the U.S.

More than three decades of births too few in numbers to replace the population has caused a progressive decline in new household formations. Population growth, which has ceased in nearly every developed nation, was the mother lode of economic growth since the end of World War II.

Much of the coming economic slowdown stems from negative growth birthrates since the 1960s and ‘70s.  Many, hoping to restore fertility rates to levels sufficient to replace the population have instituted cash-rich pronatalist polices to encourage couples to have more babies.

Working parents in Sweden are entitled to 18 months' paid leave per child. Estonian mothers are entitled to 18 months of paid leave, starting up to 70 days before due date. The amount paid depends on wages earned during previous calendar year - most will receive 100% or full wage.

In the UK all female employees are entitled to 52 weeks of maternity leave, 39 weeks of which is paid, with the first six weeks paid at 90% of full pay and the remainder at a fixed rate.

But despite large payouts designed to encourage couples to have more children, fertility rates remain below population replacement rates virtually everywhere.

The result of negative growth fertility rates is something economists have never had to contend with: population implosion.

Every person born represents a lifetime of sales in myriad product lines. When births fall below levels needed to replace those leaving the marketplace because of advanced age and death, consumer demand contracts.

In all, 60 countries, about a third of all nations, have fertility rates today below 2.1 children per woman, the number necessary to maintain a stable population. Demographers project that at least 43 of these nations will have smaller populations in 2050 than they have today.

Some countries have instituted creative approaches in attempts to reverse population implosion. “Japanese prefectures have been organizing hiking trips and cruises for single people - dating programs to halt the baby bust,” noted the Christian Science Monitor in an Oct. 7, 2004 article on the topic.

Russia’s population has been projected to drop from 146 million in 2000 to as little as 100 million in 2050.

Japan’s projected shrinkage over the same period is 25 million out of the 126 million citizens it had in 2000. Every Western European nation except Ireland will have significantly fewer residents in 2050 than they entered the 21^st century with.

Now, of course, some say that is population implosion in Japan and the West is nothing to worry about because growing affluence in China and India will take up the slack. That is an arguable claim that I won’t address here because it’s not germane to the main objective of this series to do so.

The main objective of this series is to provide evidence that here in the U.S. we face a long period of economic malaise that calls for aggressive planning by businesses and their marketers. 

Now, I really will get on the task of presenting in the next posting thoughts about actions that companies and their marketers can take to cope.

 

 

Comments

[Ronni Bennett]

Here's what I have never understood about the falling birthrate:

We are using up the planet's finite resources. Rainforests are disappearing. Millions starve in third-world countries. Honeybees, on which agriculture depends are disappearing. Good god, even local water supplies are drying up in the U.S. There is much more, and it is all due to too many people than the planet can support.

We have known this for a long time.

So why aren't governments, business and economists developing new economic models that do not depend on continued population growth rather than encouraging more babies that will further deplete the planet's resources?

Call it a downsizing model or whatever they want, but it seems to me that everyone's missing (or ignoring) the big picture - the biggest picture ever: the survival of the planet.

[David]

Ronni, seminal question:

"So why aren't governments, business and economists developing new economic models that do not depend on continued population growth rather than encouraging more babies that will further deplete the planet's resources"

Lewis Mumford once observed, "Everything has its natural organic limits." Collectively, we've paid no head to that timeless wisdom.

Happy Holidays, Ronni, and may the New Year bring you a flood of joys.

DBW

[Kare Anderson]

Government leaders have not acted because it is not a war or other disaster so it is impossible to attract support or attention to it. it would have taken an extraordinary popular gov. leader, back by a squad of respected business leaders to even start a serious public discussion on this issue you have so aptly summarized. Beyond the drop in birth rates are other factors that are going to make "cash king" and lean to lean times or worse... so let's enjoy the holidays, eh?

[David]

Kare, I do intend to enjoy the holidays with my brood of 6 children (5 daughters, mind you) and 14 grandchildren. Still, with so many lives attributable to me you can surely understand my concern about the economic future.

Thanks for your observations.

DBW

[Jeff]

David - With the aging of the leading (first and second) world economies over the next two decades, we have 5 options to deal with the economic fallout (coming global labor shortage and disequilibrium of retirees to workers):
1. Have a lot more babies
2. Open borders to the parts of the world (Africa, South America and Indian subcontinent) that are not aging as quickly.
3. Encourage euthanasia among retirees.
4. Increase productivity of the workforce dramatically.
5. Empower and enable work unitl much later in life.

I believe that 4 and 5 are the only politically viable alternatives.

[Lauren Edwards]

Hi David - Great that you have stepped outside the US and included the global economy. Down here in New Zealand,we too are seeing the effects of the baby boom on the economy, albeit slightly later than UK & US, and less pronounced (our second largest birth rate year after the boom in 1945 was actually during the GenX period).
However, in NZ, ingrained into society has been the drive to own your own home, even to the point that during the 50's & 60's the government released thousands of 'state houses' with their own 1/4 acre section, so the huge numbers of new families could enter the housing market through subsidised rents while they saved for their own home.
Now, with so many 20-40 year olds struggling to enter the inflated real estate market, paying off student loans and blaming the 'Boomers' on the 'mess, the proof of global recession is very real even here at the bottom of the world.
Being involved in mature marketing, it occurs to me that the only way to increase spend and stabalise the economy is to start exploiting the aging market the same way we have been exploiting the birth market. For years now we have seen huge growth in baby businesses, some would argue many of the products aimed at parents today are completely unnecessary, but exploitation of babies has continued regardless. So why is it so wrong 'exploit' older consumers by developing new products and services they can buy that generates economic growth? It's the only sure-fire method of getting all the $ tied up in housing and investments back into the local economy. As the saying goes - there are no pockets in a shroud!

[David]

Jeff -- Alan Greenspan agrees whole heartedly with you about empowering and enabling work much later in life than has been customary. He believes it is not so much as required for a healthyt economy in the future.

DBW

[David]

Lauren,

You will get no argument from mme on your jey points. In fact in my book "Serving the Ageless market" that I wrote nearly 20 years ago I said that the elder members of society were key to bring the economy to a soft landing following the great period of growth we had when boomers were starting and raising families. It seems that in their old age the economy still needs them while it adjusts to a very different demographic picture.

David

[Lorene]

i really arpaecipte you caring enough abt.others limitations not push as many others make me angrY, when when thaY don't provide advise ,encouragement people w/restrictions due 2 health issues disabilities so thay don't hurt themselfs .less is more keeps u healthy so u don't get hurt have wait a few wks. 2 only lose more flexability .great job .