21 August 2024
Dear 50 International,
Charles Dickens’s childhood spent pasting labels in a squalid warehouse and his father’s period in a debtor’s prison led his Mr Micawber to bewail “Annual income twenty pounds, annual expenditure nineteen and six, result happiness. Annual income, twenty pounds, annual expenditure twenty pounds ought and six, result misery”. Such is an immutable economic law!
A family’s finances can be generally managed with prudence and a saving strategy. For nation states external events can be tumultuous with ideology, economic reality and the unforeseen to be managed. WW II UK debt grew to 200% of GDP. It took until 1990 to get to 25% of GDP. Compounded by the financial crisis of 2008 our post Covid debt is now some 100% of GDP. Thus, emergency debt sits on the challenges of rapid evolutions in technology, competition, and trade, ever stressed by the malfeasance of State Actors.
Deeper still, social and economic shocks continue. Some steadily, as with inverting demographics, immigration with social unrest, an ageing workforce, deglobalisation and ever-extending life expectancy. To these, also watch for key stress indicators as in the cost of Shipping Insurance, China’s stockpiling of oil and key resources (protective reserves v war footing), projections on oil prices and climate-induced change to water and food supply.
Overshadowing these, however, is the globally rising liability to pensions and social care that will need both self-financing via long deferred retirement and increases to state taxation or borrowing (in effect the same). For Macron a two-year deferral from 62 to 64 brought riots. Denmark and others are already at 67. China currently set at 60 offers a salutary lesson with the IMF reports working-age Chinese (15 to 64) falling by some 170 million by 2050+ while the 65+ crest 380 million. In 2023, births fell to a record low of 9.02 million at a 1.1+ birth rate.
Ageing with declining births profoundly impacts economies' ability to fund health and social security systems. In 2021, the China ‘Elderly (65+) Dependency Ratio’ had every 100 workers with about 21 elderly to support! For perspective, UK obligation to Public Sector pensions is £2.2 Trillion.
The economics of ‘Something will turn up’ led Dicken’s Micawber to emigrate to the new territory of Australia to reinvent himself. Our new territories are AI, robotics, applied deep science, new technologies, 3D printing and onshoring for genuine wealth creation with policies to incentivise work and boost efficiency & productivity. In this, NHS needs to focus on sustaining health rather than managing illness. We must grow real GDP-generated taxation rather than that from internal social spending; mindless tax burdens suppress innovation and capital flees. Such is the consequence of habit and Ideology ignoring realities!
For Oliver "Please, sir, may I have some more, please?" earned him a beating, imprisonment and being sold. Will we too be beaten by the Beadles fist for having no reserves to face our challenges?
All the best
Alistdair
Comments