Printing money into the economy and lowering interest rates, hoping to achieve economic growth, as it has been since 2008.
The Bank of Japan is doing the same, printing over 127 trillion yen (approximately 18 1.18 trillion) in the past one year. The Federal Reserve of the United States has printed over 3 trillion in the past one year.
While Western central banks are printing money in the hope of creating economic growth, they are ignoring a fundamental factor, the population of their countries, shrinking or growing at a very slow pace. A March 2006 issue of the European Commission stated: “Economic growth has never been without population growth in history.”
The European Union (EU) birth rate in 2018 is at 1.54. This rate is the average number of children born during the fertile years for a woman. Thus, in the EU, in 2018, an average of 100 women gave birth to 154 babies. The Japanese birth rate in 2018 was 1.42. Birth rates throughout the EU have risen sharply over the past 25 years. In Japan, it has grown since 2005.
However, this is still far below the replacement rate of 2.1. The re-establishment rate is the total fertility rate of women, which the population automatically replaces from one generation to another. An additional fraction of 0.1 is primarily for girls who die young, before they reach reproductive age.
Both the EU and Japan are in a low fertility trap. Vaclav Smile Growth: From microbes to megacities As written: “The fewer and fewer children around change the perception of the ideal family size and are better set than the fertility level.”
Thanks to the low birth rate, the total population of Japan reached 128.1 million in 2010. It has been falling since then, and in 2019 was 126.3 million. Meanwhile, in the case of Japan, the working-age population (those between the ages of 15 and 64) reached 87.1 million in 1996 and 75.03 million in 2019.
In the case of the EU, the overall population is growing, albeit very slowly. In 2019 it was 447.5 million, an increase of just 1.5% from 2009. Interestingly, as Smile points out, by 2016, 12 of the EU’s 28 countries had already seen absolute population decline for more than a year.
Before it starts to decline, the EU population is expected to peak by 2025. Although the EU population is still growing, its working age population reached 295.8 million in 2009 and has dropped to 289.2 million since then.
The problem is that as a nation’s working-age population slows, so does economic activity. Furthermore, as Slim writes: “The aging population provides a small tax base and low per capita state revenues.” It also leads to a higher average tax burden and lower non-renewable income, making the birth of children fundamentally an unbearable option. The outbreak has severely damaged the Kovid epidemic revenues and tightens this long-term trend.
Although this trend is severe in the EU and Japan, it will become a major problem in large parts of the developed world in the coming years. Ruchir Sharma of Morgan Stanley Investment Management wrote in The 10 Rules of Successful Nations: “The number of working-age people in the United States, Britain and Canada is expected to grow by 0.2 per cent.”
This problem is especially acute in Japan. As the Japanese working age population dwindles, “Who will manage Japan’s extensive and amazingly efficient transport infrastructure?” And “Who cares for millions of elderly people?”
Although robots are expected to take over some of these activities, there is a need for young workers because Japan will see a shortage of health care personnel and other workers in the coming years. A similar trend can be seen in other developed countries, if not in Japan.
One way to solve this problem for developed countries is to allow more migration from other parts of the world, especially from areas where the population is still growing in Africa. As Rutger Bregman wrote for realists in the utopia and how we can get there: “If all developed countries allowed just 3% more immigrants, the world’s poor would spend $ 305 billion more to spend… that’s three times the total amount of development aid! “
To conclude, the lack of economic growth in large parts of the developed world is now a political problem and is not something that central banks can solve by printing money, which makes little difference. Japan is the third largest economy in the world and the largest in the EU. Their slow growth is affecting the whole world.
Vivek Kaul is the author of ‘Bad Money’