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  • OP/ED

    The world goes on as usual – unpredictably

    Palestine is decisive for peace in Middle East!

    Azerbaijan dismisses claims of involvement in Israel-Iran conflict

    Elite Purges: Internal Conflict or External Design?

    Trump’s Threat of U.S. Intervention in Iran Exposes Roots of Critics’ Fears

    Crisis-Born, Purpose-Seeking: Can the EPC Define Europe’s Strategic Future?

    Serbia’s Request to the ICJ Turned Resolution 1244 into a Closed Chapter and Kosovo’s Independence into an Internationally Recognized Reality

    Unpredictable world

    Promoting Arab Culture and Language in the Framework of Cultural Diversity and Dialogue.

  • Interview

    “Diplomacy, Not War”: Palestinian Ambassador to Albania Calls for Justice, Peace, and Global Action for Gaza

    Exclusive: “Even After Tito – Tito”/ Ambassador Zlatko Kramarić on Authoritarian Legacies and Democracy’s Future in the Balkans

    The Conclusion of the Diplomatic Mission / Ambassador Dancho Markovski: Strengthening Albania-North Macedonia Relations for a Shared European Future

    A Century of Diplomatic Relations Between Albania and Russia: Exclusive Interview with the Russian Ambassador to Albania, H.E. Alexey Zaytsev

    Exclusive/ The chairman of the Freedom Party, Ilir Meta: “The will of the citizens will triumph in Albania, as it did in North Macedonia”

    Exclusive/ The Russian Ambassador to Albania Mr. Mikhail Afanasiev: Russia only aims to end that war started by the West in Ukraine

    Exclusive/ Skopje’s top diplomat to Tirana, Dancho Markovski: OSCE Chairmanship a Project of National Importance for North Macedonia

    Exclusive interview of Croatian Ambassador Zlatko Kramaric: ‘There is progress in Croatian-Albanian relations, but it is still not enough’  

    The first anniversary of the appointment as Archbishop at the head of the Catholic Church/ Mons. Arjan Dodaj: Only God can be the author of our walk!

  • Realpolitik

    Alaska, a bell toll for Europe! No trade partners but adversaries! Palestina and the two states solution! When Pristina drowns in a spoonful of water!

    Geopolitical equation with several unknowns!

    Summit G 6+1! The historic Summit and Trump show! Zelensky loses 0:2! Winners and losers of the 12 day war!

    Chancellor Merz passed “the exam”! Political stupidity! 5 per cent or study Russian! The Firing East!      

    A top phone call as disappointment! Exit from Brexit! Germany at the helm! End this political shame up!

    That’s it! The quartet of hope! Shame on Kosovo! The Summit of a Community without Identity!

    Only praises and prolises for Meloni! Facts versus untruths! Immediate ceasefire and genuine peace, no deal for new occupation! Back after 60 years !

    US nuclear tariff bomb!! Europa fires back! NATO ok, but with or without Article 5? Kallas urges reforms!

    Europe riarmed! Germany’s epochal shift! Spoiled soup! EU Commissioner Kos demands reforms!

  • Current Events

    Building a Digital Future: President Tokayev’s Roadmap for Kazakhstan

    Ambassador of Egypt Recognizes CAA’s Constructive Role in Middle East Affairs

    “Council of Albanian Ambassadors condemns Gaza operation, calls for two-state solution”

    Alaska, a bell toll for Europe! No trade partners but adversaries! Palestina and the two states solution! When Pristina drowns in a spoonful of water!

    The Americans In, the Russians Down, and the Iranians Out: The Regional Impact of the Armenia- Azerbaijan Peace Agreement

    How Belgrade Keeps the Serb Community in Kosovo Under Political Control

    President Aliyev gives an interview to Azerbaijani media: US-Azerbaijan open new chapter of strategic partnership 

    International recognition of Palestine: Political marketing or genuine change?

    Visit to the Council of American Ambassadors Headquarters.

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    Ambassador of Egypt Recognizes CAA’s Constructive Role in Middle East Affairs

    “Council of Albanian Ambassadors condemns Gaza operation, calls for two-state solution”

    Zelensky in Brussels: A ceasefire and clear security guarantees are needed for Ukraine

    Visit to the Council of American Ambassadors Headquarters.

    China looks forward to Europe viewing bilateral ties in a comprehensive, dialectical, and developing manner: Chinese FM spokesperson

    The NATO Summit in 2027 will be held in Tirana.

    NATO allies agree to allocate 5% of GDP to defense by 2035

    Reza Pahlavi: “This Is Our Berlin Wall Moment” — Exiled Prince Calls for Global Support as Iran Nears Regime Collapse

    Where does Donald Trump stand on the Israel-Iran conflict?

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Demographic and GDP

5 August, 2022
in ENGLISH, English OP/ED
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By Les Nemethy*

Many believe that demographics is at most remotely related to economics. If you are one of these, perhaps by the time you finish reading this article, you will be convinced how fundamentally demographics underpins economics.

Let’s start with GDP. GDP = No. of staff in workforce and productivity. So, if the population of certain countries (Russia, China, etc.) is expected to decrease by 30-40% the next 30 years (which is indeed the expectation), unless there is a productivity miracle, their GDP’s will constitute a smaller share of global GDP.

In Russia, urbanization happened somewhat earlier than in China. People tend to have fewer children when they live in overcrowded apartments than when children provide free labor on farms. In China, the demographic implosion was accelerated by the Government’s “one child” policy. Severe sanctions were imposed on families with more than one child. Estimates range as high as 200 million to the number of infant girls killed so that the family could have another chance at having a son. This inhibits family formation.

In Russia, demographic implosion is now being further accelerated by men dying in their prime in Ukraine, and massive emigration since the start of the war.

The United States enjoys much healthier demographics: baby boomers, for whatever reason, had more children than in Russia or China.

As mentioned, demographics deals not only with population numbers, but also breakdown of the population according to age cohorts. Over the next few years, a large number of baby boomers will transition from the workforce into retirement all over the world. While there is a graying population in the United States, the trend is far more pronounced in China and Russia.

Given that, 25–65 year olds provide the bulk of the workforce, in the unlikely event that birthrates could be encouraged to say double, it would take 25 years for newborns to enter the workforce, let alone reach peak productivity. There is no instant solution. One might surmise that relative GDP of Russia and China are peaking at present vis-à-vis the United States.

Russia’s GDP ($1.775 trillion) is much smaller than most people realize, less than Canada’s! ($1.991 trillion). (2021 numbers). Russia packs a punch above its economic weight thanks to their stock of nuclear weapons and a strategic position with respect to commodities, most notably oil and gas. However, as Russia’s GDP declines in relative terms due to demographics, their nuclear arsenal becomes more obsolete, energy stocks become depleted and the world turns away from hydrocarbons, their influence in the world may well decline. The start of the Ukrainian War may well mark “Peak Russia.” In my opinion, it is “all downhill” from here – perhaps why Putin thinks it’s now or never that Russia must exercise its muscle – to maintain its geopolitical prominence.

With China, the situation is much more subtle, given that its population is triple the US, their GDP is already larger than the US on a Purchasing Power Parity basis, and that they are so much more of a force in technology than the Russians. Yet, here as well, a demographic implosion is preordained and irreversible. If their population goes down by 30-40%, and the US population goes up by 15-20% by 2050, it is likely that Chinese GDP relative to the US will also shrink.

Where does Central Europe stand with respect to demographics? Unfortunately, they are trending imploding as well.

So the situation does not look that healthy for Central Europe – in fact, over the past decade or so, births have been even fewer than in Russia or China.

Until age 40-45, wage earners are primarily spending their earnings (having children, making a household, etc.), whereas after that age, the emphasis is on savings (e.g. for retirement). Once again, the former triggers consumer spending, which propels GDP growth.

Of course, one of the most significant aspects of aging populations is the increasing ratio of elderly, who must be supported (pension, medical, etc.), to workers. In Europe, for example, the ratio of pensioners to workers is expected to rise to 71% by 2060.

There is no short-term solution. If we were to change tax policies, housing availability, etc. today, in 25 years we could see the pensioner to worker ratio improve. The other solution would be to encourage everything that promotes productivity (automation, etc.). For example, Japan, which is facing a major problem with an aging population, is using digitization to compensate for a lack of labor. /Argumentum.al

*Les Nemethy is founder and CEO of Euro-Phoenix Financial Advisors Ltd. based in Budapest, former World Banker

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