Photo/Illutration The United Nations headquarters in New York (Asahi Shimbun file photo)

The United Nations last week revised its World Population Prospects for the first time in three years.

One finding of interest is that China’s population, now the world’s largest, will start declining this year.

Also worth noting is that the global population growth rate has fallen under 1 percent for the first time since 1950.

How does the shrinking or slowed growth of the world’s population affect the global economy? I tried to gain some insight from a book published in 2020 and translated into Japanese this year.

Co-authored by Charles Goodhart, emeritus professor of banking and finance at the London School of Economics, it is titled “The Great Demographic Reversal: Aging Societies, Waning Inequality, and an Inflation Revival.”

In a nutshell, Goodhart argues that years of inflation lie ahead for the world because the factors that kept the prices of goods low for the last 30 years are going to disappear.

Those factors, according to Goodhart, stem from globalization that made it possible to supply the world economy with plentiful labor, primarily from China, which in turn stimulated production, increased the availability of goods and services, and brought down prices.

Thanks to the abundance of labor, businesses around the world were able to curb wage increases, which helped keep inflation at bay.

Goodhart points out that these factors were mainly responsible for years of deflation in Japan, which leads the world in the greying of society and low birthrates.

But in the coming years, he predicts, global labor shortages will usher in an era of prolonged inflation.

Inflationary trends are already in evidence around the world, caused by growth in demand in reaction to the COVID-19 pandemic, as well as by surging energy prices due to the war in Ukraine.

Even if we get a temporary respite from the current rise in inflation, are we to brace ourselves for the “main inflation” waiting to strike?

Goodhart’s audacious theory must have invited many dissenting arguments. But should his prediction prove right, the war against inflation that nations around the world are being forced to fight is actually a “rehearsal” for what’s to come.

--The Asahi Shimbun, July 23

* * *

Vox Populi, Vox Dei is a popular daily column that takes up a wide range of topics, including culture, arts and social trends and developments. Written by veteran Asahi Shimbun writers, the column provides useful perspectives on and insights into contemporary Japan and its culture.

Related News