Tectonic Forces Converge On Economy

Tectonic forces such as the aging population are set to converge and promise to make economic outcomes unpredictable, says Stephen Poloz, governor of the Bank of Canada from 2013 to 2020. He told the Franklin Templeton ‘2022 Retirement Symposium: Adapting to New Realities’ session on ‘The Next Age of Uncertainty: How the World Can Adapt to a Riskier Future’ that the arithmetic on these can’t be done because all five forces are interacting with each other at the same time. Aging has been “super tranquil for 50 years,” but now it is the most active it has been since the ’70s. As the baby boomers leave the workplace, there will be a moderating trend on global growth and lower real rates of interest. Technological progress is also underway. There have been three industrial revolutions in the past ‒ the steam engine, electrification, and computer chips. Now there is “the digitization of everything.” This is clearly a force for good, he said, but it will disrupt 15 per cent of global workers. Growing income inequality means people get left behind and perceive they have been left behind. This can prompt the sort of populist movements that saw, for example, the election of Donald Trump as president of the U.S. Finally, debt, especially government debt, exploded during the pandemic to levels not seen since World War II. These are all growing at the same time and there has not been a major confluence of forces like this since the 1970s. At that time, the economy was so bad “the professionals could not even explain what was going on,” he said. These forces will grow and interact and result in unpredictable volatility.