Colony Collapse Disorder
A Demographic Crisis Is About To Envelope The World And War With Russia & China Is Just The Beginning
Dean Brooke

Dean Brooke

Dean Brooke's economics & financial column brings you news, in-depth analysis, research, occasional gossip, and more. You can email him at dbrooke@rogueeconomics.net.
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Background

It is a widely accepted conclusion within the national mood of many people who live in the UK and the US and certain other nations that the west is on a downward trend.
 
Indeed all the rhetoric from economists and the press is that we have to ultimately accept that the developing world will soon overtake us.
 

This sort of existential tiredness and the belief that our story is coming to an end has been highlighted by many right-wing commentators and is regularly propagated by those on the left and the more liberal end of the Tory and republican spectrum in the UK and the US.

This sentiment is usually coupled with a belief that we must ultimately cede economic leadership to the developing world.

Politicians, journalists, academic economists, financiers and others besides all pressed the line of developing world economic leadership for decades which was coupled with a belief that the west is in a terminal decline and the responsibility for driving world growth must be ceded to the likes of China and Russia and other developing nations who only recently accepted modern capitalist principles.
 
There is an inherent set of assumptions built into this idea.
 
  1. That the likes of China and Russia have only recently adopted anything resembling a market economy and are therefore reasonably close to “Year Zero” with a good few hundred years of economic development ahead of them in line with what we have experienced in the UK and the USA since we transitioned to become capitalist economies (which I argue started in the 1700s).
  2. That the west has ultimately “driven out” some of the more important commerce and industry with regulations and high wages and therefore we cannot possibly compete with the lightly regulated Chinese economy and the massive labour pools which they command and that therefore ultimately “need” the ex-communist nations to provide manufacturing weight to the global economy.
  3. That only Russia and China, with their vast populations, will reform as they become more economically successful and that only they possess the “political weight” or “military might” to lead the world forwards in economic terms.
There are many problems with these ideas.
 
Firstly, I will make the argument that nations do not succeed purely by virtue of its money and military. In fact, it could be argued that these are secondary factors versus more important environmental and social factors.
 
Demographics (along with raw environmental and geographical positioning) is actually the most single important fundamental contributor to the success of a nation.
 

Demographics Are Destiny

Demographics, for instance, is one of the primary determinants of how productive a nation is in terms of its ability to manufacture and create services and consume these products and services within a market economy.

This should be fairly obvious. As we age, our productivity drops due to the fact that we retire and become simply too physically frail to participate in certain physical work-related activities and of course lots of us ultimately look forward to retiring on the gains we accrued during our years on the job.

Our consumption habits are also strongly influenced by our age and tend to change as we grow older. During our teens and early 20s, we are less likely to have settled down and are very focused upon consumer goods and technology-related spending and going on holiday and so forth. Yet, after we reach the mid-life point during our 40s/50s, we spend far more upon saving for retirement and are often ploughing cash into property or our adult families and are no longer spending the vast sums on personal consumption.

On the macro-scale, this means that the dominant age brackets of a nation determine how it will perform in the future and whether it will be oriented towards consumption or investment.

Here’s an example of how we can measure & illustrate this phenomenon in a useful illustrative chart.

This is what we call a “population pyramid” which displays how age is distributed within a population.

The obvious weighty phenomenons of mortality and birth build this chart into a pyramid and this is typically what we would see with strong family formation and a growing population that is fundamentally consumption-oriented due to its focus upon child-rearing.

Does it seem controversial or counter-intuitive that family-formation and childbirth would drive a consumption-oriented disposition among a particular nation?

Think about it for a moment.

One of the primary drivers of consumption & spending we experience during our lives is when we have children.

Children, being unable to fend for themselves, require food and clothing and protection and toys and tuition and entertainment and so on and so forth. All of which we must provide for them as parents.

Similarly, in the 2nd-half of our lives, investment becomes the primary focus because as we approach retirement, we are squirrelling away every penny possible for retirement, helping our children so that they can help us when we need them to care for us in the future, and so on, and so forth.

So, as counter-intuitive as it may seem, one of the primary drivers of western lifestyles and its paradigm of investing and consumption has ultimately been due to the moral authority we granted to the role of the nuclear family.

This, in turn, drove the urgency for western nations to adopt free markets because we needed a strong private sector to provide investment opportunities and of course, we needed free-enterprise which allowed the young to rise through the ranks to maintain the vigour of that sector.

The rest is history.

The Demographic Landscape

So what is happening with demographics in the world today?

Indeed, I believe demographics are informing much of the serious movement we observe in the modern world.

Firstly, lets look at the UK and USA in terms of their population pyramids and population projections.

The United Kingdom

We can see here that although the UK is an aging population, that population growth projections are still very positive because we have a positive birth rate which is a result of many factors including a willingness to settle-down at older ages, the state’s own subsidies for childbirth (including child benefit and implicitly, the NHS), immigration from other nations and more. We have also not aged so far that our situation would be completely unrescuable and births are still strong relative to deaths.

The United States of America

Similarly, the US has a very positive demographic outlook because although it is still an aging nation, it is not so aged that the situation is completely unsalvageably and of cours, the USA’s own habits have evolved to accommodate this which includes a population which is more open to settling-down at older age ranges and the US still has a very positive birth rate and thus a positive demographic outlook.

Canada

Canada shows a very heavily aging population but for the moment, they are also showing very positive population forecasts and as such, I consider that as long as they do nothing to further harm their demographics, that ultimately they will still manage to retain their modern strength into the future.

 

Russia

We can see that Russia has a very different setup and outlook.

The demographic pyramid shows two very interesting features:

  • The male-to-female ratio is very skewed due to the fact of Russia’s long-running problem with alcohol and drug abuse which kills many more men than women. Pew Research covered this in 2015 and it seems that one of the reason for a mismatch in life expectancy is that the attitudes of Russian women with respect to alchohol are far more conservative than those of men. This is creating a mismatch in life expectancy because alchoholism and other social phenomenons are killing far more men than women at the 50+ age boundary.
  •  There appears to be “missing generations” which are represented by the “dent” in, for instance, the 10-30 age range and although things have recovered marginally, this shows that parenting-age couples are demonstrating less willingness to have children at a rate which is above replacement level (I.e. at which births outnumber deaths on a national basis). This appears to correlate with the point at which population begins declining on the raw population chart (at roughly the 2008 point).

The raw data which is represented on the line chart shows that Russia are already in a state of steep population decline which will continue for the foreseeable future.

 

China

Similarly, China are in a very similar precarious state with respect to their demographics.

Not only do they show a similar demographic profile to Russia, but also, their population appears to have peaked-out in 2020 and is projected to drop every year over the next 100 years.

Europe

Europe as a whole has been in serious trouble for many years in demographic terms.

As you can see, not only is Europe aging rapidly, but their population peaked around 2019 and are entering terminal decline from here.

Much of this will be driven by the declines in rapidly aging incumbent economic leader nations such as Germany however, we must bear in mind that the migration from nations in East Europe along with the prolonged economic crises in nations such as Greece have also driven migration from poorer nations to wealthier nations. Unfortunately, it just isn’t enough to compensate for rapid native population decline and ultimately, this phenomenon risks dragging-down developing nations as well.

Japan

Japan is the most famous of the aging nations.

  • Their population peaked around 2010 and is entering terminal decline from hereon out.
  • Their vanishing youth is ultimately shrinking with every successive generation.

Korea

South Korea has some of the worst problems with the aging of their population.

  • Their population will peak in about 5 years time and begin a serious decline thereafter.
  • They show some of the most severe aging over a relatively short period.

The Consequences And Future Impact Of Demographic Crises

Demographic Collapse Will Kill Growth In Emerging Markets & Europe

The populations of developing markets only really maintain their subservient natures while their governments can deliver growth.

Russia and China’s citizens for instance, are only likely to maintain their loyalty to the governing regimes as long as the regimes continue to deliver year-on-year economic growth.

This looks unlikely because with a collapsing, aging population, China and Russia will not be able to deliver long-term growth.

On the contrary, due to the aging of Russian and Chinese population and the impact of western sanctions and ring-fencing through tariffs and other blockades, deflationary factors are set to become entrenched within the league of developing nations known as the BRICS.

This will accelerate the brain-drain from these nations because as their national productivity drops, employment will weaken and migration will become a more attractive option for citizens who want to seek better opportunities in the developed world.

War May Be Unavoidable

The reason that Russia and China are making moves on other territories now, is because in a couple of decades time, they may not possess the manpower to do so (or at least will be in a radically weaker position).

Furthermore, Russia and China are not moving on the Ukraine and Hong Kong because they lack resources but rather, because they are scared about running out of people and need more people for their nations..

The more time passes, the worse the demographic crisis becomes in Russia and China and certain European states, and the opportunity cost of invading other nations therefore reduces.

As such, China and Russia have likely reached and inflection point wherein the opportunity cost of invading nations to grab territory and populations is less of a risk than sitting on the sidelines and trying to resolve the demographic issues by traditional means. Therefore, they are militarising and become more aggressive.

This means war could become unavoidable.

Our response to this should not be to make aggressive moves, but, we should increase military spending, and prepare to draw lines in the sand when these aggressive dying nations start lashing out with greater audacity and reaffirm both NATO and our commitment to defend nations which could be in the firing line (such as Taiwan and Ukraine).

 

Why The Anglosphere Will Experience A Renaissance

Lets note that in the above dataset, only the US, the UK and Canada have anything near a positive forecast for their populations and demographics.

By 2100 all other nations which constitute our national competition will be in serious decline as a result of a slow population collapse caused by their toxic demographics.

This means that, despite the issues which the anglosphere might be experiencing in the short term, in the long-run, the anglosphere will be all that’s left.

This means that rather than fearing economic collapse or hyperinflation or anything like this, by 2100, we are more likely to see a national renaissance in the English-speaking world.

Rates Will Normalise

In the near future, because the anglosphere will be all that’s left in terms of investment and money management and such, this means that the trend of capital flight from English-speaking nations to developing markets will begin to reverse.

This will more than offset the deflationary factors embedded in our own ageing populations and, although I am absolutely not predicted a return to the 70’s inflation mess, it will prove mildly inflationary and give central banks wiggle-room to normalise interest rates.

They will be forced to raise interest rates and this will, in turn, reinvigorate our savings and investment industry.

This by itself, will set up a huge relocation of capital desperate for yield and I suspect fixed-income investing writ-large will make a comeback.

How Government Policy In The UK, USA And Canada Should Respond To This

Firstly, if we work on the basis that there will be no escape from war at this point, we should absolutely take the opportunity to prepare for this now.

  1. Economic Warfare We must begin to weaken the future enemy with economic sanctions while we have the chance and still possess some leverage. The enemy must be put in the position where it must behave, or be slowly weakened with economic warfare so that it will not be able to wage effective traditional warfare.
  2. Increase Military Spending By building-up national defense so that we are prepared to participate as necessary in any international conflict with the enemy being put in a position of being required to make the first move, but being met with overwhelming and debilitating force if it ever dares to do so.
  3. Re-Commit To NATO By reinvigorating and enlarging the NATO alliance and reinforcing the mutual defense compact so that it is known that no nation will be attacked by aggressors without serious consequences and through this we can also lobby member nations to build up their own national defense so that attacks by non-NATO states are less likely in the first place. We should maintain our target of meeting NATO military spending targets because we are currently one of very few NATO member states which meets this target and this gives us significant leverage within NATO.
  4. Immigration Reform We should reform our immigration system so that it can be open to people who flee conflicts and are willing to adapt to the British way of life but keep borders closed to nations which harbour hostile cultural influences. For instance, I am open to the idea of Ukranians migrating to the UK because Ukranians will ultimately integrate and be good citizens. The same is less-likely regarding those who migrate here from Islamic nations or from China. This will help prop-up our own demographics and ensure that crises do not weigh-in too much on our reproduction rate.
  5. Commit To Normalising Interest Rates And Stamp-out Inflation We should attempt to normalise interest rates as soon as possible so that capital seeking returns is incentivised to move to the UK rather than seek returns in the higher-risk developing nations. This would also have the impact of potentially causing economic crises in Russia and China because a strong sterling and strong dollar would not only see-off the currency inflationary headwinds but it would also help destroy Russia and China by driving down the value of their commodity sector and by raising their servicing costs for their debt which is dollar denominated (which is a substantial amount of China’s debt).
  6. Decouple From Nations Which Are Set To Be Engulfed By Demographic Crises
    As Britans, we should forget about the moribund EU because it is very vulnerable to the incoming demographic crisis and we will never have a substantial export surplus with nations which are aging as quickly as Germany. Rather, we should focus on NAFTA and seek to fold the UK into NAFTA as a first choice and strike a wide-ranging FTA with NAFTA nations secondly. This would unite the English-speaking world into one miltiary and economic framework due to the UK’s own membership of the Commonwealth and would not erode national sovereignty in the same way that EU membership did.
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