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Sketching the modern economy Sketching the modern economy
by Akli Hadid
2016-11-16 10:42:00
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econ01_400Any country’s economy can be sketched by determining what age groups are the dominant demographic in its economy.

1. Dominant demographic: children

Consumption: High

Investment: Low

Savings: Low

Government spending: High

Imports: High (finished products)

Exports: High (raw materials)

These economies have to spend on education, security, housing, energy, food and so on and such economies need a strong government and to semi-plan the economy. Private sectors are difficult to establish because in an ideal world the government would have to tax the private sector heavily to maintain its infrastructure for a crowded state. What results is often relying on available natural resources for exports. If no natural resources are available, such countries try their luck with tourism, available agricultural products or development aid to build an industry.

Main problem: low savings rates means relying on foreign banks for investment, leading to a weak private sector. 

Why do such countries have such high birth rates? High birth rates tend to have a correlation with high rural population rates, so most of the population lives in the countryside.

2. Dominant demographic: teenagers

Consumption: High

Investment: High

Savings: High

Government spending: High

Imports: High

Export: High

In sum, the ideal economy. Teenagers can get part-time jobs and parents haven’t had children in a while so can start saving quite a lot. Teenagers are consumers so investment and consumption are high. The government needs to spend on the children’s education, but can get its investment back in the form of military or civilian service. In sum, you get a booming economy.

3. Dominant demographic: People in their 20s

Consumption: Low

Investment: High

Savings: High

Government spending: Low

Imports: Low

Exports: Low

Oh-Oh… people enter the workforce, start producing more and consuming less. That’s lots of products no one’s buying. People save, meaning investment money is available, but the government and consumers are not spending. You start businesses but no one comes in. If they don’t start having children, you’re probably getting a recession.

4. Dominant demographic: 30s, 40s or 50s

Consumption: Mediocre

Investment: Very high

Savings: Very high  

Government spending: Low

Imports: Low

Exports: Low

Mid-level career workers are saving for a rainy day and are not spending on anything other than that occasional beer. Too much money flowing around, investments tend to be wasted. Ideally, this economic model should be trying to invest in foreign countries with booming birthrates.

5. Dominant demographic: 60s and over

Consumption: Low

Investment: Low

Savings: Declining

Government spending: High

Imports: Low

Exports: Low

That’s when the notion of a nanny state emerges. The government spends its cash reserves, and relies on immigration to fill its coffers, while trying hard to convince older people that foreigners are not as scary as they look.


   
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