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Eureka: Export-driven economies in trouble
by Joseph Gatt
2018-01-20 08:40:11
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The baby boomers of Europe and North America are retiring. There was no other baby boom after that of the post-war in Europe, North America or East Asia. Export-driven economies have not really adjusted to this reality. Although subconsciously they have perhaps designed their economies to meet the needs of retiring baby boomers. More hospitals have been built, pubs and recreation facilities have seen more investment than usual, the tourism industry is one of the rare industries that has not suffered losses. The real estate market dwindled because when people retire they are willing to sell cheaper so they can keep the money as a safety net, some have relocated to countries with warmer temperatures and better health care systems.

exp01_400_03The main problem with products that were aimed for the consumption of younger generations is that they have seen product sales in steady decline. Clothing giants are going out of business, toy manufacturers are going out of business, the food industry has tended to have consistent losses, the soda and beverage industry is in decline, the book and textbook industry tends to be in decline, so is the entertainment industry, the movie and cinema industry, the furniture industry, the electronics industry among other industries. Let me explain further.

The older you grow, the more you tend to rationalize your spending. That doesn't mean you don't spend money or consume, you just tend to think twice before you buy a product. Younger consumers will buy more books than they can read and more food than they can eat, but the older you get the better you tend to estimate your consumer needs.

Why have many countries resorted to protectionist measures? Imported products no longer sell as well as they used to. When someome retires from his job, he has more time to think about his consumer habits and can spend money more rationally, and because there is no more stable source of income or possibility of income growth, retired people tend to save for a rainy day. So a lot of countries have realized that importing goods that will not sell very well is not a very smart option.

Is protectionism being forced by governments? Not really. Of course for political and electoralist reasons politicians make it sound like they are protecting the nation from the invasion of foreign products. But the truth is, ever since baby boomers started retiring, imported products have not been selling very well. Textile giants have had losses, electronics giants suffered losses, household appliances suffered losses along with many other businesses. So naturally imports decline, and governments prefer placing restrictions rather than having products dumped into the market that don't sell very well, and yet compete with products produced locally.

Will protectionism last for a long time? The new generation needs to understand that yesterday's baby boomers are not today's baby boomers. Yesterday's baby boomers filled carts at supermarkets, overindulged on certain products, sometimes spoiled their children. Today's baby boomers are buying just what they need. Go to any supermarket and you will notice that products aimed at the older generation are the ones put forward. Medication, health products, body care products. In the past it used to be candy and chewing gum.

How can the new generation adjust to working for a generation of baby boomers who seem to count every penny they spend? Well the older generation is older, tends to be wiser and has a lot of experiences with bad purchases. So you need to figure out what products it is that they need, and need to use very convincing arguments to sell them the products.

How can developing countries benefit from the baby boomer generation retiring? Not only will oil prices and raw material prices fall, but the demand for such products will also dwindle as time goes by. So what most countries need today is to look at inward development, focus on the local market first. Just because baby boomers retire doesn't mean that consumers are gone. But the size of the consumer population will be dwindling. So you want to think twice before building any factory or department store that is oversized.

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