Shifting Models
Pfäffikon SZ, Switzerland – The composition of the global economy changes faster than many investors realize. Additionally, certain population groups want a rapid, durable change in the area of energy; In practice, this is not possible yet. It is increasingly becoming clear that demographic shifts get hold of the development of an economy.
Behavior
When you read something about demographics, it usually refers to the composition of a population based on age. About behavior little is known. Europe would even be on the eve of severe demographic headwind. Meanwhile, the data does not lie. In the fifties of last century, on average, there was one retired relative to twelve active persons. The expectation is that by mid-2050, there are only two active persons relative to one retired person.
Devastating
Japan is, of course, the example of how devastating demographics are. Japan’s national income has been under pressure since 1995. It is expected that this income will be wiped out for about two-thirds by 2050. Europe is on its way to follow this example, and this may explain the current deflationary environment. The main question is how to deal with these sliding business models? Many classic models have been under pressure for years. Entrepreneurs complain that turnover leaks away on an ongoing basis. We see this phenomenon at all levels of the economy. Taxis, hotels, restaurants, retail and music, the litany of sliding models is long.
Labor will suffer increasingly under the weight of retirees. The automatic retardation of labor productivity and productivity growth forces companies and governments to seek innovative solutions. Technological changes call for new policies and thinking. In this way, the world economy can find its new way. Low economic growth will be the new normal.
It remains for me to wish you a good weekend.
Jan Dwarshuis is CIO at Thirteen Asset Management AG. Dwarshuis writes his columns in a personal capacity. Professionally, he holds positions in major European, American and Russian stock funds. The information in his columns is not intended as professional investment advice or a recommendation to make certain investments. At the time of writing, he has no position in above mentioned shares and has no intention of doing so in the next 72 hours.
