There’s a lot of nervousness about the outlook for global economic growth. Will the pace and location of growth in the world change? What impact will our aging population have? Jaana Remes and Richard Dobbs, partners of McKinsey Global Institute, discuss what will happen in this short video:
In 1964 the world economy was approximately the size of China’s economy today in terms of purchasing power. Since then we have had a remarkable era of growth on a global scale. In the last 50 years the global economy has become 6 times larger. The reason is two-fold; the labour pool expanded and productivity for all those workers increased.
The global economy has on average grown 3,6 percent per year the last half century. We have in other words had a phenomenal demographic tailwind.
But now that will come to an end because of our aging population. We are approaching flat demographics. Consequently global growth will slow down significantly unless we can increase productivity substantially. Wolfgang Fengler of Brookings Institution took an interesting look at demographics in our world in “How your birthday reveals global demographic shifts”
Peak in 2050
The number of workers in the world will reach its highest level in 2050. In quite a few developed economies that has already happened. For instance in Germany, Italy and Japan. But between 2020 and 2025 it is estimated that even China and South Korea will peak. Needless to say this will have an enormous impact because they have both been growth engines during the last 50 years. India and Nigeria, however look likely to have their peaks later on.
If economic growth stays the same as the last 50 years global GDP will decline by 40 percent. In other words the global economy will only grow by 2 percent a year as opposed to 3,6 percent.
Did you know how our aging population is likely to impact global growth? Are Jaana Remes’ and Richard Dobbs’ predictions likely to take place? Do you believe we can increase productivity enough to compensate for the fall in the number of workers? What are your suggestions? In what areas of the world are you predicting we will have the highest growth? How can we in the West increase productivity?
Video: McKinsey & Co. Photo: World Economic Forum