Tito Mboweni, the immediate past Reserve Bank governor, warns of “a social revolution in South Africa similar to those in Portugal, Greece and Cyprus, where taxpayers protested in the streets when governments implemented budget cuts after over-committing on social expenditure” (Mboweni, 2013). There is rising concern in South Africa that social security transfers and expenditure on public health may jeopardize the solvency of the public sector, thereby inducing macroeconomic and financial instability. Among the rich countries, the United States stands out as experiencing more rapid population growth and among the emerging markets, China stands out as ageing with exceptional rapidity. Some of the poorest countries, particularly in sub-Saharan Africa but also including Afghanistan, Yemen, and Guatemala, continue to grow rapidly in population. Many others, especially in Europe and East Asia, can be expected to grow only slowly. Some countries, most notably Russia, Japan, and Germany, are already experiencing a decline in total population, despite increasing longevity. Thus while the world’s population will grow by an additional 2 billion between 20, its geographical and age structure will change dramatically. For both quite different reasons, the world population is ageing rapidly, with the median age (half older, half younger) rising from 29 years in 2010 to a projected 36 years in 2040. Birth rates continue to fall throughout most of the world, from their global peak in the mid-1960s, but with large differences from country to country. Longevity continues to increase throughout most of the world, at a rate of more than two years a decade. Pradhan also warned: "One of the biggest challenges we are facing is that central banks should help to ensure economic growth while at the same time ensure fiscal expansion and controlling inflation”.We are living through a demographic revolution. "The current inflation figures are for the most part meaningless," said Goodhart at the end of the web seminar, "they are based on a consumer basket that does not match the consumer basket people are actually using”. The Corona pandemic causes such economic uncertainties that, in the opinion of the authors, the previous global economic predictions can hardly be held upright. Technological progress and innovation could only be used to a limited extent to halt demographic development. The mobilization of the Indian and African labor supply for globalization could mitigate these effects, however, the current political environment does not allow to import labor from these countries. While yield curves are steepening, asset return are becoming increasingly difficult to achieve, and productivity is declining Western and Asian countries are putting pressure on their respective national central banks to keep nominal interest rates as low as possible and to maintain monetary expansion. Worldwide opposing trends characterize the global economyĪs consequences of the global reversals, the authors noted in the SAFE Policy Web Seminar that the opposing demographic developments in the Western world and Asia on the one hand, and India and Africa on the other result in trade deficits when economies move away from globalized structures. In order to be able to continue to grow and compensate for the shrinking labor supply the country is increasingly focusing on modernization: "China is adapting its economic model and is becoming increasingly technology- as well as consumer-oriented," said Pradhan. In addition, China's phase of rapid capital accumulation in sectors linked to the global supply chains of manufacturing industry is coming to an end. With the onset of demographic change, however, it is becoming apparent that the labor supply in the West and China will shrink accordingly in the future.Ĭhina's working age population has been declining steadily since 2010 reflecting the increasing aging of Chinese society, Pradhan said. Newly industrializing countries have been able to catch up with the industrialized nations in terms of wage inequality where in turn wage inequality between the various skilled workers has increased," explained Goodhart. "This shock was used as a deflationary push to keep inflation exactly at or below the central banks' targets. Access to new markets, especially in Eastern Europe – after the end of the Cold War and with the EU's eastward expansion – and in Asia virtually shocked the supply of labor. For both advanced and emerging economies, the two authors' descriptions show that the labor supply strongly increased for decades allowing production to be relocated to low-wage economies.
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