The Great Demographic Reversal: Ageing Societies, Waning Inequality, and an Inflation Revival” by Charles Goodhart and Manoj Pradhan is an insightful exploration into the long-term macroeconomic trends driven by demographics and the global participation of China in the global economy. It provides a novel and thought-provoking perspective on the intricate interconnections between population changes, economic inequality, and inflation.
The authors astutely argue that the convergence of ageing societies and China’s economic ascent have, over the past three decades, brought about deflationary forces that explain the fall in inflation and nominal interest rates. These same factors have contributed to weaker nominal wages, increasing inequality in many countries, and socio-political unrest.
The book boldly forecasts a shift in these trends in the coming decades, predicting a resurgence of inflation due to demographic changes and the expansive fiscal and monetary policies introduced in response to the COVID-19 pandemic. As per the authors, these factors are set to stimulate more investment and less saving, pushing the natural rate up and eventually leading to inflationary pressure.
However, Goodhart and Pradhan are not without their critics. Some have presented Japan’s long standing low inflation and declining labor force as a counterargument to their thesis. Yet, the authors provide a compelling response, engaging readers in a riveting discussion of various objections, and encouraging them to critically examine conventional economic beliefs.
The authors’ bold assertions and comprehensive analysis of demographic and economic trends make this book an engaging read. As they challenge conventional economic wisdom, Goodhart and Pradhan offer a fresh lens through which to view the future, warning that financial markets and policymakers may be ill-prepared for the demographic reversal and ensuing inflation they predict.
However, the book’s focus on predicting future economic trends based on demographic changes may not resonate with every reader, particularly those seeking a broader examination of socio-political factors influencing the economy. Also, while the authors offer a compelling argument, the unpredictability of global economic dynamics means that their predictions should be considered as an interesting perspective rather than a definitive forecast.
Overall, “The Great Demographic Reversal” provides an intriguing exploration of demographics and their profound influence on economic trends. It should be high on the reading list for anyone interested in understanding the long-term influences shaping our global economy and the potential challenges that lie ahead.
