Ageing Populations Threaten A Repeat Of The 1930s

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By John Richardson

THIS is an era of the populist strongman, and also a woman if Marine Le Pen wins this year’s French presidential election.

We have been here before, of course, many times in history, most notably in the 1930s where rising discontent over the failure of mainstream politicians to meet the needs of their people led to the horrors of the Second World War.

A problem with populists is that their solutions to discontent can be simplistic. For example, in a highly globalised, and so complex world, “Made in America” is something that will be incredibly hard to even define, never mind realise.

Take the example I gave last week of Chuck Reid’s Michigan-based company that makes cinema seats. He has recently expanded his workforce from 15 to 40. But two-thirds of his low-cost components are imported from China, and he told the New York Times that alternative components in the US simply don’t exist at the right price and quality.

What happens if jobs are lost, rather than gained, because of Made in America? Compromise and a step back from failed policies? This historically has not been the nature of political populism. And there is a risk that Donald Trump in particular will blame others for failure and double-down on simplistic solutions. This might lead to a US-China trade war, and even geopolitical conflicts that closely parallel the 1930s.

Similarly, what might happen in the Philippines if, as I suspect, the Philippines and the rest of the Southeast Asia gets dragged into this year’s global recession?  Will President Rodrigo Duterte calm his rhetoric down and say, “Look, I need a new approach to deal with today’s complex global problems”?  Or will he double-down and blame others for a recession in one of the world’s best-performing economies?

None of this is commentary about the rights or wrongs of any one populist politician. It is instead an effort to detail the facts on the ground, as they stand today, and how they might develop so you can plan realistically for 2017.

Where I am going to comment, though, is about the failure of the liberal post-Second World War political consensus in the West. It has missed the fact that demographics drive demand, and that today’s discontent is the result of failure to deal with the economic consequences of ageing populations.

The success of the liberal consensus was largely down to the luck of a one-off boom in demand caused by the Babyboomers entering the years in which they were earning lots and lots of money.

Now they are retiring too much supply is chasing too little demand – hence, the diminished economic opportunities in countries such as the US, which was behind the popularity of Donald Trump.

Charlie Robertson, Chief Economist of the UK-based investment bank Renaissance Capital, also makes the point that as people get older they think differently. Referring to an article by the FT’s Gideon Rachman on the rise of what he called nostalgic nationalism, Robertson wrote:

Nostalgia should be a natural feeling among the ageing voters of the UK, the US, Hungary or Russia. Many of them will remember their countries being more powerful in the past. This nostalgia contrasts with 1930s’ fascism which appeared to offer something new to rising young populations and glamorised technological progress and war itself. The unprecedented rise of the elderly of the 21st century may be producing quite different political themes, of world-weary protectionist cynicism rather than the hope and enthusiasm that still easily engage younger populations around the world.

The way forward for all politicians, whether they regard themselves as populists or mainstream. is to turn the negatives of ageing populations into positives.