Much of the economic boom after the Second World War has been shaped by the attitudes of the baby boomers in America (age 47 to 66); they’ve done well economically over the years and they have spent like there’s no tomorrow.
70% of America’s economy comes from consumption expenditure, which in large part is the expenditure of baby boomers. As this generation gets older, their attitudes towards consumption are changing.
Savings and cautious investing are on their agenda, and not acquiring the next consumer gadget. When Americans slow down their consumption, their economy gets a cold, and the global economy gets pneumonia.
The world’s second largest economy (China) has a somewhat different yet similar problem. The one-child policy is now leading to a rapid ageing of the population. By some estimates, a third of China’s population will be over the age of 60 by 2050. The third largest economy in the world (Japan) already has a severe problem of ageing.
The elderly, whether they are Chinese or American or Japanese, consume less and in any case require different kinds of products and services.
It’s not the rise of the BRIC that is the big story in economics; it is slowing consumption by the baby boomers in USA and ageing in the world’s second and third largest economies. Sooner or later, this is going to shape the global economic agenda.