An investment bank executive has warned that several economies around the globe are facing a debt crisis, with economic growth being stunted by an increasingly ageing population.
According to the European chief executive of Goldman Sachs Asset Management, the average age of the population has been increasing in the US, Japan and Europe, increasing the pressure on younger individuals to bear their burden.
Japan, most noticeably, has been struggling to cope with its ageing population. The country’s gross governmental debt has increased to more than 200% of its gross domestic product and it is predicted to cross 400% by 2040. As a result, the Japanese government has announced drastic measures to boost economic productivity, with Japanese Prime Minister Shinzo Abe keen on increasing female labour participation.
Goldman Sachs believes that a more straightforward way out of the crisis would be to boost productivity by increasing immigration. The demographics in most major economies including the US, in Europe and Japan – are a major issue and present us with the question of how we are going to pay down the huge debt burden.
Goldman Sachs also pointed to increasing life expectancy which is causing a major shift in demography in many economies. “With life expectancy increasing rapidly, we no longer have the young, working populations required to sustain a debt-driven economic model in the same way as we’ve managed to do in the past.”
The demographic shift means that we need to look to more creative policy, including immigration and workforce expansion in order to find ways to pay down debt.