Demography as an economic development driver
Artem Karida
Educator | C-suite advisor | business strategy, innovation, and marketing expert
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Eight major trajectories society and the economy grow
There are eight major trajectories along which society and the economy grow (any country). The numbering is arbitrary because factors and priorities vary by country and stage of development.
In this template, you can describe challenges in any country's development to better grasp the limiting cause.
For example, Europe.
The awful demographics and natural population growth halted 20 years ago (in Germany 50 years ago), the share of older people is increasing, and the able-bodied population is decreasing, which is slightly offset by migration.
Since 2008, the private sector's organic debt expansion has ended, and the system of doping has replaced private debt to the state.
Consumption attained maximum saturation and transfer between revenue clusters ended, respectively, within the context of the existing class system.
Because of the repeated "advice" of American friends, the drive for technological development stalled at the beginning of the century - the range of products is not expanding. This factor was one of the most powerful drivers of European economic expansion from 1950 to 2000.
The positive industry change ceased in the late 1990s and the system was nearly stopped by 2008. Slight differences occur in the biotech, while the infotech is totally intercepted by the US, leaving Europe completely reliant on nearly any technological solution.
The lack of growth points, capital applications in a real economy, declining margins and return on capital all prevent investment activity from expanding.
The increase in performance has slowed significantly since 2010 - the most giant leap in performance occurred between 1980 and 2010 at the economy's automation trajectory in all sectors.
The last stronghold of stability is globalization, which was initiated in 1990th, accelerated in 2016, and reached a climax in 2020 with Covid. Finally, events in Ukraine triggered the final disintegration of global space.
Thats why Europe is not growing and will not be anytime soon
This article focuses on demographics as a fundamental economic development engine, which is severely misunderstood by Western citizens (thanks to Mr W. Lippmann).
Demography as a source of economic growth
One of the most important long-term factors limiting economic growth potential is demography.
A young civilization has the greatest capacity for innovation, quick advancement, and industrial transformations. It is vital to highlight that population ageing does not halt technological advancement but rather alters the speed and vector of progress.
A large proportion of the younger population, on the other hand, does not guarantee economic growth; otherwise, African countries would be the most prosperous.
Several things must be present for development to be successful:
The ageing of the population and the resulting shift in the average age shifts society's priorities. The "development" project has been phased out in favour of the "protection and conservation" initiative. The older a civilization is, the more likely it is to solidify. Yet, dreamers and enthusiasts drive civilization and technology.
The younger the society, the faster phase transitions and sectoral transformations occur. Youth is defined by ambition, risk-taking, adventure, mental flexibility, physical endurance, and cognitive efficiency.?
For example, the typical age of hackers and cybercriminals is 17-19 years old, when the proclivity for knowledge, self-affirmation, and danger is at its peak, and the mind's elasticity and plasticity allow you to absorb, analyze, and accept a great amount of new information.
The best physical flexibility occurs between the ages of 16 and 18 (when combined with experience), which verifies the average age of rhythmic gymnastics and figure skating winners. During the time of setting records, the average age of champions in athletics and swimming is 22-24 years, representing the optimum combination of endurance and strength. Efficiency is maintained for a period of 25-27 years.
When experience, endurance, and physical strength are combined, the average age of peak performance in strength sports and martial arts is around 27 years old. Efficiency is maintained over a period of 30-33 years. Cycling, skiing, and speed skating all have somewhat comparable distributions.
The age limit for the highest efficiency in areas of activity requiring explosive short-term strength and endurance is 23-27 years, and in power shifts, it is 28-32 years. The greater the distance, the lower the likelihood of success.
Based on an analysis of the ages of scientific breakthroughs, patents, and Nobel Prizes, the best age limit for the highest scientific efficiency is 35-37 years, when several criteria determining success converge (experience, memory, desire for knowledge and discoveries, the ability to process large arrays of information, flexibility of the mind)
Until 42-45 years, research efficiency is maintained, then rapidly declines. We're talking about revolutionary discoveries that will change the world, not ordinary pseudoscientific work.
Because starting a business requires innovativeness in a competitive environment and a proclivity for risk, the best age range for beginning a successful inventive business is 30-40, and after 45, the odds of success diminish significantly on the trajectory of falling productivity.
Demography is crucial in determining developmental milestones. Old folks do not generate or develop civilization. Youth is responsible for the advancement of civilization, science, and technology.
The shift in demographic proportion to the older age affects:?
National assets ownership
The demographic structure influences the rate, direction, and stability of technical advancement, while the political establishment is made up of those who own national assets.
In mid-2022, 16% of the market capitalization (for the population, which is 70% of total capitalization) belongs to individuals born before 1945, i.e. those who are 77 years old or older (according to the Fed). Baby-Bummers born between 1946 and 1964 own 55% of the market, or more than 70% of the capitalization of the US stock market in adults aged 57-58.
Yet, the rate of scientific and technical growth, as well as industry reforms, began to decelerate (from 2006 to 2008), pointing to a strengthening propensity for ageing and an increase in middle age.
The reverse proportion is that the older the population, the slower the rate of innovation and the resulting economic growth, though technological progress always continues because dreamers and enthusiasts are constantly trying to come up with and introduce the next development that will change the world.
Ilon Mask (dreamer, enthusiast, adventurer, risk-taker) and Buffet are two well-known contemporary characters (settled conservative, committed to traditional values and aimed at preserving and consolidating).
Two entirely opposite extreme approaches, yet what matters is that both are vital, complementary, and harmonized among themselves.
It is unthinkable to consider Mars colonization and the construction of cybernetic beings, but thanks to enthusiasts, existing stereotypes are breaking down, awareness bounds are increasing, and new technologies are being developed. Wisdom was, and conservatism, on the other hand, is critical for the consolidation and preservation of established proportions.
Consolidation in terms of economic balance sheets, industry structure, and technological drive in developed countries. For the past 15 years, industry transitions have almost never occurred since the older generation relies on previously generated resources (assets and technology) to preserve equilibrium, rather than creating new factors and conditions of phase transition.
We underline that this (a drop in the urge for technical growth) is one of the roots of the industrialized countries' structural crisis. There are also other explanations (see more):
The demographic element as a long-term issue in the US
The natural change in the population (births minus deaths) excluding migrants in the United States was 14.1 people per 1000 inhabitants in the 1950s, 10.3 people per 1000 population in the 1960s, 6.4 in the 1970s, 7.2 in the 1980s, 6.6 in the 1990s, which is higher than the 1970s, 5.9 in the 2000s, 4, from 2010 to 2019, and 1.3 in 2020-2021. (here also influenced by the COVID factor).
Despite rising medical quality and life longevity, natural population growth is dropping year after year. Fertility rates have fallen from 3.4 in the 1950s and 1960s to 1.6-1.7 today.
Careerism, infantilization, and the dissolution of the institution of family and marriage are the causes of the long-term trend of diminishing natural population increase.
From 2000 to 2021, the US population increased by 56.7 million individuals, while the net influx of migrants was 25.6 million, accounting for 45% of overall population growth.
From 2000 to 2019, migrants to the US added an average of 0.38% of the population per year, with the height of the migration occurring in the 1990s, when migrants accounted for up to 0.6-0.7% of annual US population growth. Since 2018, net migration inflows have been declining, and since 2020, they have fallen to a historic low of 0.17-0.2% of the annual population increase.
Hence, there are two negative tendencies in the United States.
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The intentional annihilation of the American middle class
Who owns the stock market in the United States? The market was worth $60 trillion in December 2021, dropped $15 trillion in June 2022 (it was estimated to be worth $44.2 trillion), and has recently rebounded to about $52 trillion. Almost 70% of this money belongs to the US populace, both directly and indirectly through middlemen (investment funds, mutual funds, trusts, and so on, but excluding pension and insurance funds).
American families owned slightly more than $36 trillion as of August 5, 2022. The top 1% of US households own around 54% of these $36 billion, and the top 10% of American households control 89-90% of the total market capitalization (for the part that is distributed among the population).
In truth, the market's rise or fall has little influence on the top 10% of households' present consumption, because their financial excess is so large that they have long been able to afford anything, and consumption there is exceedingly saturated.?
Meanwhile, the middle class in the United States (ranging from 50 to 90% of the richest) is steadily deteriorating, and it is this sector that drives the consumer economy, dictating trends and demand. In 2000, the middle class accounted for 20% of the market; by 2010-2013, it had dropped to 14%, and it now accounts for 10%.
Half of the people in the United States have nothing. In terms of wealth, the bottom 50% holds little more than 0.6% of market capitalization, compared to 1.7% at the start of the 2000s.
Generations and their influence
As we all know, half of the American population has nothing - they are all literally poor (only 0.6% of the stock market capitalization among the population), the middle class is gradually declining in income and assets (historical lows), and almost all wealth is concentrated in the top TOP 10%, where 1% own 55% of the market capitalization.
Have you ever wondered why people of senior age are governing in the United States, and Europe? (and in most other countries throughout the world)?
Who benefits from the expansion of the US market? As of mid-2022, persons born BEFORE 1945 (those aged 77 or older) control 16% of the market capitalization (the portion of the population that owns, which accounts for 70% of total capitalization) (according to the Fed).
As a very typical reflection of demographic trends, the older generation is occupied in administrative posts (most senior managers of the largest firms are aged 50+), constitutes the core of political factions, dominates Congress and the state, and the business elite forms a political establishment.
The deep state that constructed and created the United States from the 1970s to the present is age-old people over the 60s (who are now in charge), so the age composition of Congress and the White House should come as no surprise.
Baby boomers born between 1946 and 1964 control 55% of the market, or more than 70% of the market capitalization under the control of those aged 57-58 and older.
Since 2017, the age group born between 1965 and 1980 has been rapidly growing. This category comprises the beneficiaries of fintech, infotech, and biotech, and the technology industry has only recently begun to flourish.
Youth, defined as those aged 42 and under, have essentially no assets in the US stock market, accounting for 2.6% of total capitalization, a figure that has increased dramatically since 2019 when they controlled 1.8% of the market. This is essentially a subset of private investors that rode the wave of speculative mania 2020-2021 following helicopter money and Reddit cases. Yet, they have "toy" deposits of less than $10,000 and have no market influence.
The largest deposits of those aged 77 and up are concentrated primarily in the industrial, energy, and consumer sectors. Fintech, infotech, and biotech are classified as 1965-1980.
Population age distribution
The age structure of the population is a long-term element that has a significant impact on economic sustainability and the potential to grow.
Let's start with Europe. The proportion of the population over 65 years old (including men and women) has increased dramatically over the last 30 years, as reflected in financial balance sheets and consumption trends.
The oldest population among large countries (over 65 age and older):
Scandinavian countries were the most "old" 30 years ago; currently, the movement is to Western and Southern Europe. Over the last 30 years, the proportion of the senior population in Western Europe has climbed from 14.6% to 21.2%, 13.6% to 21.5% in Southern Europe, 15.3% to 19.2% in Northern Europe, and 11.1% to 17.1% in Eastern Europe.
Pan-European maturation has been pretty rapid: from 12.9% in 1991 to 15% in 2001, 16.4% in 2011, and 19.4% in 2021. Every ten years, 3 per cent of ageing is a horrific rate.
As can be seen, there is a trend toward accelerated ageing - growing life expectancy, low birth rates, and a fundamental demographic failure, because the population aged 0 to 19 years is only 21%, a historical low compared to 35% in 1950 & 1970. As a result, accelerated ageing will continue; these processes are now irreversible. This is compounded by impulses toward careerism, infantilism, and other factors that inhibit natural population growth and birth rates.
This affects everything: the load on the pension system, the structure of assets and liabilities (lower capacity and proclivity to accumulate debt), spending patterns (more cautious and less intense), mobility and speed of progress, and innovation.
Retirees for a long time
A tendency began more than 20 years ago to lower the number of able-bodied adults of working age (15-64).
The main source of stress is an increase in the number of pensioners, which has been a long-term trend for numerous generations, as well as fertility issues. It will not end as it did in the 1970s and 1980s when there was a population collapse owing to the war, but the postwar baby boom compensated for the unfavourable demographic trend that followed the 1970s.
The population of young people is dwindling. The proportion of people aged 0 to 14 is now at its lowest point in history, accounting for only 15.4% of the European population. As a result, there is no "support from below," as there was in the 1970s and 1980s.
As a result, the trend toward a drop in the active population of working age will continue.
Therefore there are three issues:
Obviously, neither the printing press nor fiscal incentives can fix all of these problems.
Europe in Peril
All European countries had a natural population drop (all births minus deaths) of 1.25 million people at the end of 2021, a record since 1945. In comparison, the population loss in 2020 was 1.12 million and 343 thousand in 2019.?
Are there any European states with a positive natural population influx? Among the main countries: the United Kingdom, France, and the Netherlands, the overall trend is negative - demographic decline began virtually concurrently from 2012 to 2014. Still positive, but approaching zero.
Germany has the worst demographic position of any country in Europe, with a natural population decrease continuing unabated for 50 years.?
Italy has been in a population decrease "mode" for nearly 30 years. Since 2012, the rate of extinction has increased dramatically, and Italy currently loses 300,000 individuals every year, a record for all European countries.
Since 2016, Spain has been losing between 100 and 130 thousand people every year. Eastern Europe isn't any better. The largest countries (Poland, Romania, and Hungary) are all on the verge of annihilation. Hungary has been in decline since the mid-1980s, Romania since the fall of the USSR, and Poland has been in decline since 2018, but the downward trend has been speeding dramatically since 2018.
The tendency has emerged. The more sophisticated and prosperous a community grows, the lower the fertility rate and the greater the likelihood of extinction.
The availability of optimum conditions for reproduction does not guarantee the preservation of the genetic code.
Germany's demographic disaster
The European demographic disaster is most visible in Germany.
From 1950 to 1971, there was a positive balance between births and deaths; over these 20 years, the natural increase amounted to 7.4 million people.
In 1972, the overall population was 72 million; by 2022, the figure slightly grew to 83.4 million. The population has increased by about 12 million people, with migrants accounting for the whole increase.
Remarkably, there has not been a single year in Germany in the last 50 years when the population has naturally increased. Almost the whole 1950-1971 growth has been mitigated right after 1972.?
A net migration flood began in the late 1980s and has accelerated dramatically since 2008. Without migrants, the population would have declined for 50 years, reaching lows not seen since the mid-1950s.
Because there is a persistent shortage of labour resources in Germany, especially of low and medium skills, it is foreigners who fill the "dirty" jobs.
Since 1950, the net influx of migrants has totalled 11 million people, but the birth rate of migrants is vastly higher than that of native Germans, therefore population renewal has outpaced migration inflow.
According to available data, non-hereditary Germans have "renewed" nearly a third of the German population over the last 50 years. This already has a direct impact on political balances, culture, and consumer norms, as well as a variety of social processes.
Thus far, Germany has avoided a demographic disaster through external inflows of human resources, meanwhile, already half of the German population will be "renewed" in the next 20-30 years.?
THE END OF THE REPORT
Stay tuned.?
Regards, Negorbis.
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