The Population Bust

The notion that demographic change will slow the flow of trade in manufactured goods met some resistance when I suggested it a few years ago in Outside the Box. Some countries, notably South Korea, China, and Mexico, are heavily dependent on manufacturing, and the idea that making stuff and exporting it will lose importance doesn’t go down easily. In the United States, the political imperative of adding factory jobs is somewhat at odds with the reality of weak demand for many of the things factories produce, not least motor vehicles.

In many countries, consumer spending on services is outpacing spending on goods by a considerable margin, due in good part to the declining the number of new families and the increasing number of older people, whose consumption tends more to services than to goods. “The EU’s population is shrinking faster than expected,” according to a report in the Financial Times. The same is true in China, Japan, and Korea. In all these countries, and some others, population stagnation or shrinkage is discouraging home building, which in turn is holding down demand for imported refrigerators, carpets, and the other sorts of things people put in their new homes.

I don’t mean to suggest that stuff is going extinct, but these factors imply that goods trade will not be robust in many parts of the world. They also point to a shift in trade patterns that is already underway, with Africa and South Asia, where the number of new households is still growing, playing more prominent roles. These trends are likely to have major impacts on ocean shipping and on ports in Europe, North America, and East Asia that are under continuing pressure to expand. It’s curious that we don’t hear much about this.

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