The Great Demographic Reversal: Ageing Societies, Waning Inequality, and an Inflation Revival

In this thought-provoking book, Goodhart and Pradhan seek to explain the rising inequality, stagnant wages, and disinflationary pressures of recent years. They describe how the integration into the world economy of China and other emerging markets, with their initially young populations, added billions of workers to the global labor force. In the advanced economies, this disadvantaged less skilled workers, reduced the power of workers and labor unions, and increased inequality. In addition, a flood of new supply into global markets, together with China’s high savings, put a lid on global inflation. But as populations now age, including in China, and as the high savings rates of more elderly populations come down, the same dynamics will run in reverse. This will make for falling inequality, rising wages, and higher inflation. Perhaps, as the authors argue, demography is destiny. Still, one wonders whether politicians might also have something to say about what happens to the distribution of wealth and income and whether central banks will really be powerless to shape the course of inflation.