By John Richardson
JAPAN has seen two decades of deflation and rising debts. Everyone should now recognise that Abenomics have failed to resolve this crisis. Abenomics were always going to fail because you cannot print babies.
What a pity that Western central bank chiefs didn’t take a long hard look at Japan years ago. Instead they also have attempted to print babies.
Round and round in circles we will continue to go – downward spiralling circles of worsening debt and deflation – until or unless people recognise that demographics are economic destiny.
It is not just in the West where demographics are destiny. In China, too, the ageing of its population is a major challenge. This largely explains why the global economy, in effect, has been taken off life support as China withdraws economic stimulus. China must find a new growth model – not one driven by the wrong kind of past investment – if it is to escape its middle income trap.
It is not that we have had an open to debate about this subject and that there are two different well thought-out points of view.
You don’t get Western central bankers and politicians coming to the debating table with mountains of data to refute the argument that the global decline in birth rates has resulted in a global demand deficit. This is the opposite of the 1960-1980s when an excess of demand and shortage of supply created major inflationary pressures.
No. Instead if you spend hours reading everything you can get your hands on, and talking to as many people as possible, as I do, demographics are barely mentioned.
Perhaps I have missed something. Buried in the electronic archives of one of the central banks, or some economic research institute, there might be a treasure trove of carefully thought out research that blows a hole in our argument about demographics. I would love to see this research.
I worry that this kind of research doesn’t exist – and that instead Western central bankers, politicians and chemicals company CEOs have taken what in effect is an intellectual short cut. They have either dismissed the issue of demographics without giving it the analysis it deserves. Either that or they have missed this issue altogether.
The trouble is we are rapidly running out of time, as the chart above firmly indicates. Chemicals company CEOS need to get up to speed about what this means.