Are demographics going to save the US economy?

Sometimes the simplest things can have wide-ranging effects.

Business Insider's Joe Weisenthal touched upon a very interesting aspect of contemporary economics in a recent interview with Bill McBride, the economics blogger who, at his site Calculated Risk gained fame for his remarkable prescience about the global financial crisis, particularly the US housing bubble.

McBride hasn't stayed with the "doom and gloom" message, though, and has been arguing that there will be a hefty rebound in US GDP for since shortly after the economy bottomed out in 2009. His reasons for thinking that way are an interesting mixture of anecdote – normally verboten for serious economic analysts – carefully chosen statistics, and a few broader macroeconomic indicators.

For example, he argued in January 2009 that the car market (sales were plummeting at the time, and a large part of the collapse in employment and GDP) was bottoming out, and would shortly start to grow again:

So I wrote this article that says look, auto sales are near the bottom – we were at a 9 million annual rate then – I said there’s just no way – we have to be selling 12, 13, 14 million, because people need new cars every 5-7,8 years.

Similarly, the housing market couldn't stay as weak as it had been for very long, because:

After a while, there’s all this excess supply that was built, then people pulled back and lived with their parents – but people don’t want to live with their parents very long. That supply gets absorbed. When I go out into The Inland Empire I can tell you… If it’s not mostly growing, it’s getting there. Where I live, as soon as foreclosures come on the market there’s people lined up.

In other words, houses and (in most of the US) cars are necessities of life. Demand for them can fall, as people put off purchases or attempt to economise on what they do buy, but eventually, those purchases will be made. A car only lasts so long, and a growing population can only shack up in spare bedrooms for a short while.

Obviously, there is still a fair amount of analysis to perform. McBride's call on the auto industry was on the money, not just because he realised it couldn't fall forever, but also because he checked the statistics for average length of car ownership, and pre-crisis sales, and realised that the vehicle lifespan was being pushed to historically long durations.

But the methodology is reminiscent of the (apocryphal) story that some foresight of the 1929 Wall Street Crash was provided by the realisation that the bubble of the "roaring twenties" was driven by the growing adoption of a number of consumer technologies which were nearing saturation point. If economic growth over the last decade has occurred because car ownership rose from 10 to 90 per cent, it is clear that economic growth over the next decade cannot come from the same source.

The problem with these arguments is that there are a lot of specific indicators to choose from, and only some of them will have macroeconomic consequences. McBride was correct about the auto industry, but that doesn't mean that the method will work every time.

Weisenthal, following the interview, tried his hand at a similar form of analysis: proving the US naysayers wrong by looking at the nation's demographics. He writes:

When you've collapsed SO much, then really simple observations like that are germane because the demographic lift on its own to counteract the hard cyclical downturn.

And that's where the Americans should be thankful: Because there is in fact a demographic lift.

Japan is probably the economy whose struggles most resemble ours, and that force is much weaker there.

Here's a comparison of year-over-year population growth rates for Japan and the US going back to 1960. Growth in Japan (red line) has been much slower for decades.

…Japan's demographic tail wind has been non existent.

With some knowledge about demographics and the need to replace cars, you could look at a chart like this one (which divides motor vehicle sales by population) and ascertain that the lows seen in 2008/2009 were WAY out of whack with anything vaguely historical.

…The overall point is simple: A demographic lift combined with the same innovation and investment that's gone on for a long time is why the dreams of the doomsayers, who were riding so high just a few years ago, haven't come to pass.

Japan's demographic squeeze has been predicted and feared for a long time, but Weisenthal goes further by pinning a lot of hopes on America's demographic health. Is he right? Time will tell, but one thing which is worth noting is that this demographic lift isn't something which comes out of nowhere. In fact, it is something which, with the popular consensus around the need to limit immigration, is being actively fought by most US policymakers. We've written here about the unintended consequences of that limitation, but hopefully pushing the idea that demographic lift is the nation's biggest economic hope might do a little to build the coalition on the other side.

A worker builds a car in Michigan. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Aussies and Kiwis can be “us” to Brexiteers - so why are EU citizens “them”?

Nostalgia for the empire means Brexiteers still see Australians and New Zealanders as "Brits abroad". 

There are many terrible things about Brexit, most of which I counted, mournfully, on the night of the referendum while hiding in a stairwell because I was too depressed to talk to anyone at the party I’d just run away from. But one of the biggest didn’t hit me until the next day, when I met a friend and (I’m aware how ridiculous this may sound) suddenly remembered she was Dutch. She has been here 20 years, her entire adult life, and it’s not that I thought she was British exactly; I’d just stopped noticing she was foreign.

Except now, post-referendum, she very definitely was and her right to remain in Britain was suddenly up for grabs. Eleven months on, the government has yet to clarify the matter for any of Britain’s three million European residents. For some reason, ministers seem to think this is OK.

If you attended a British university in the past 20 years, work in the NHS or the City – or have done almost anything, in large parts of the country – you’ll know people like this: Europeans who have made their lives here, launching careers, settling down with partners, all on the assumption that Britain was part of the EU and so they were as secure here as those with British passports. The referendum has changed all that. Our friends and neighbours are now bargaining chips, and while we may not think of them as foreigners, our leaders are determined to treat them as such. People we thought of as “us” have somehow been recast as “them”.

There’s a problem with bringing notions of “us” and “them” into politics (actually, there are many, which seems like a very good reason not to do it, but let’s focus on one): not everyone puts the boundary between them in the same place. Take the Tory MEP Daniel Hannan. The sort of man one can imagine spent boyhood afternoons copying out Magna Carta for fun, Hannan spent decades campaigning for Brexit. Yet he’s not averse to all forms of international co-operation, and in his spare time he’s an enthusiastic advocate of CANZUK, a sort of Commonwealth-on-steroids in which there would be free movement ­between Canada, Australia, New Zealand and the UK.

When pushed on the reasons this entirely theoretical union is OK, when the real, existing one we’re already in isn’t, he has generally pointed to things such as shared language, culture and war memorials. But the subtext, occasionally made text by less subtle commentators, is that, unlike those Continentals, natives of the other Anglo countries aren’t really foreign. An Australian who’s never set foot in Britain can be “us”; the German doctor who’s been here two decades is still “them”.

There’s a funny thing about Hannan, which I wouldn’t make a big thing of, except it seems to apply to a number of other prominent Leave and CANZUK advocates: for one so fixated on British culture and identity, he grew up a very long way from Britain. He spent his early years in Peru, on his family’s farm near Lima, or occasionally on another one in Bolivia. (You know how it is.) That’s not to say he never set foot in Britain, of course: he was sent here for school.

His bosom pal Douglas Carswell, who is currently unemployed but has in the past found work as both a Conservative and a Ukip MP, had a similarly exotic upbringing. He spent his childhood in Uganda, where his parents were doctors, before boarding at Charterhouse. Then there’s Boris Johnson who, despite being the most ostentatiously British character since John Bull, was born in New York and spent the early years of his life in New England. Until recently, indeed, he held US citizenship; he gave it up last year, ostensibly to show his loyalty to Britain, though this is one of those times where the details of an answer feel less revealing than the fact that he needed to provide one. Oh and Boris went to boarding school, too, of course.

None of these childhoods would look out of place if you read in a biography that it had happened in the 1890s, so perhaps it’s not surprising that they instilled in all of their victims a form of imperial nostalgia. I don’t mean that the Brexiteers were raised to believe they had a moral duty to go around the world nicking other people’s countries (though who knows what the masters really teach them at Eton). Rather, by viewing their homeland from a distance, they grew up thinking of it as a land of hope and glory, rather than the depressing, beige place of white dog poo and industrial strife that 1970s Britain was.

Seen through this lens, much of the more delusional Brexiteer thinking suddenly makes sense. Of course they need us more than we need them; of course they’ll queue up to do trade deals. Even Johnson’s habit of quoting bits of Latin like an Oxford don who’s had a stroke feels like harking back to empire: not to the Roman empire itself (he’s more of a late republican) but to the British one, where such references marked you out as ruling class.

There’s another side effect of this attitude. It enables a belief in a sort of British diaspora: people who are British by virtue of ancestry and ideology no matter how far from these shores they happen to live. In the 19th century, Australians and Canadians were just Brits who happened to be living abroad. What Britain absolutely wasn’t, however, was just another European country. So, in the Leavers’ minds, Aussies and Kiwis still get to be us. The millions of Europeans who have made Britain their home are still, unfortunately, them.

I’m sure these men bear Britain’s European citizens no ill-will; they have, however, fought for a policy that has left them in limbo for 11 months with no end in sight. But that’s the thing about Brexiteers, isn’t it? They may live among us – but they don’t share our values.

Jonn Elledge is the editor of CityMetric

Jonn Elledge edits the New Statesman's sister site CityMetric, and writes for the NS about subjects including politics, history and Daniel Hannan. You can find him on Twitter or Facebook.

This article first appeared in the 18 May 2017 issue of the New Statesman, Age of Lies

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