Ageing Wealth An Unequal Problem
By John Kinsley
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About this ebook
There are two broad economic challenges facing economies around the world today: the one is ageing demographics (particularly in established economies) and the other is inequality.
These two challenges may initially appear unrelated, but this book will argue that as much of the existing wealth resides in older generational groupings, the prevailing inequality may only get worse before it gets any better.
The differences between the ‘developed world' and the 'new developing world' in the face of these challenges will also be explored, as well as what this means for South Africa today.
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Book preview
Ageing Wealth An Unequal Problem - John Kinsley
AGEING WEALTH
AN UNEQUAL PROBLEM INEQUALITY IN AN AGEING WORLD – IT MAY ONLY GET WORSE
AGEING WEALTH
AN UNEQUAL PROBLEM INEQUALITY IN AN AGEING WORLD – IT MAY ONLY GET WORSE
John Kinsley
Copyright © 2018 John Kinsley
First edition 2018
All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or any information storage or retrieval system without permission from the copyright holder.
The Author has made every effort to trace and acknowledge sources/resources/individuals. In the event that any images/information have been incorrectly attributed or credited, the Author will be pleased to rectify these omissions at the earliest opportunity.
Published by John Kinsley using Reach Publishers’ services,
PO Box 204, Ashton, Western Cape, 6715, South Africa
+27833212434
john.kinsley18@gmail.com
Edited by Susan van Tonder for Reach Publishers
Cover designed by Reach Publishers
P O Box 1384, Wandsbeck, South Africa, 3631
Website: www.reachpublishers.co.za
E-mail: reach@webstorm.co.za
Dedication
For Michaela, Jordan and Nicholas
May you help make this world a fairer place.
Contents
Acknowledgements
Introduction
Part 1. Ageing Demographics
Demographic Profiles
Four Economic Challenges
Challenge 1 – economic growth
Challenge 2 – pension schemes
Challenge 3 – consumption patterns
Challenge 4 – longevity and wealth
Part 2. Inequality
The Gini Coefficient
A more detailed approach
Income Inequality
Wealth Inequality
Different rates of return
A low return environment
Piketty debate
The link to demographics
Part 3. Conclusions
Progressive Taxation
Intervention Successes and Failures
Example 1: Zimbabwe – land grabs
Example 2: Venezuela – oil grabs
Example 3: Thailand – skills transfer
Example 4: Singapore – state capitalism
The South African Perspective
Final Thoughts
References
About the Author
Acknowledgements
My appreciation goes to Aimee for her ongoing support and for helping me get the first draft down on paper. You are always there.
My thanks go to my good friend Yvette for editing the first draft and providing invaluable guidance and criticism.
Introduction
Key Points:
• Ageing demographics
• Increasing inequality
This book presents a brief discussion of two macro-economic challenges facing the world today.
The discussion is framed from the perspective of the man in the street and puts forward a ‘common-sense’ rather than an academic view. The section on rates of return may be slightly more challenging, but the book is not an attempt at groundbreaking economic research. As most readers are likely to be South African, I will conclude by asking what lessons we as South Africans can learn from these challenges.
There are always economic challenges facing the world at any one time and these challenges usually differ between regions and countries. The mature or developed western world economies in Europe and North America, by way of example, tend to face very different challenges from those faced by developing economies in Asia, South America and Africa. Economic challenges can be cyclical (as part of a repetitive cycle over time) or structural (indicating a one-off shift or change).
The two economic challenges discussed in this book are, firstly, ageing demographics and, secondly, inequality.
The first challenge, I would argue, is of a slow structural nature and, whilst the second may be cyclical in nature, the cycle is certainly very long and drawn out. Although these two challenges might at first glance appear to be separate and largely independent of each other, during the course of this book I will argue that the one has a very real and growing link to the other. This link may not be true for developing markets yet, but there are important decisions to be made now in developed markets and valuable lessons to be learnt for developing markets as a result.
The ageing demographic profile of the western world simply means that the population is getting older in these regions. Work done by the United Nations Department of Economic and Social Affairs has shown that in the year 1950 the total world population was just over 2.5 billion people. Of that total, just over 5% were 65 years of age and older. Just 100 years later, in the year 2050, it is estimated that the world population will be over 9.5 billion, of which over 15% will be 65 years of age and older. In fact, by the year 2050 it is estimated that over 2 million people in the world will be over 100 years of age.
In the case of inequality, it will come as no surprise to the reader that there are major differences between developed markets, on the one hand, and developing markets, on the other. Developed markets tend to include the major western economies often regarded as the G20, headed by countries in regions such as North America, the United Kingdom (UK), Europe and Australasia. Emerging markets would include much of Africa, South America and parts of Asia. China, the rising economic powerhouse, which is strictly regarded as an emerging market, is an unusual case. It has pockets of fast-growing wealth but the bulk of the country, particularly the rural areas, remains in relative poverty. Similarly, Russia, which has strong links to European history, is highly dependent on the oil it produces from an economic perspective and has a mix of developed and developing market characteristics to its economy.
Whilst the difference between developed markets and emerging markets appears fairly obvious, what is perhaps not so obvious is the inequality within certain of the developed markets. I will argue that within major developed markets