Dysfunctional politics in Europe and the US hurts us all

THE chairman and founder of one of the renowned global institutes dropped in for coffee recently. We talked about a number of contemporary issues including the omnipresent US elections, the smartphone generation, China's dangerous debt-to-GDP ratio, the impact of Brexit, etc. Knowing my background in the global capital markets, he then asked a poignant question: despite 10 years of zero interest rates, why is global growth so anaemic?

There are a number of reasons for this, something that Larry Summers called "secular stagnation". But much of the narrative surrounding stagnation remains unspoken. And as with everything, if we want to correct the problem we need to be transparent about the causes.

Arguably the single most important feature of economics, the spoken narrative, is the impact of demographics. Through much of the 1980s and 1990s, as the babyboomers worked their way through the workforce, global GDP growth reached its peak. The 2000s have, on the other hand, seen a reversal in this demographic trend. While you can question the effectiveness of the United Nations, its World Population Ageing Study 2015 makes interesting, if worrying, reading. According to the study, the fastest growing segment of global population is the "over 80", followed by the "over 60". This statistic is not limited to any particular continent. Even in the United States where immigration patterns mask the ageing of the population, the "over 60" is expected to grow some 40 per cent over the next 15 years. These groups, having gone past their highest income-generating years, tend to spend less and save more, which is less conducive to GDP growth.