Get off of my lawn! Welcome to Planet Elderly - InvestingChannel

Get off of my lawn! Welcome to Planet Elderly

As I look back on 2016, several patterns stand out.  Consider the recent Brexit vote in the UK.  Millennials in the UK were strongly in favor of staying in the EU.  They might dream of studying in Italy or working in France.  They like vibrant cosmopolitan cities, and may have friends who are from the immigrant community. When you are young, nationalism is the furthest thing from your mind—the world seems like a big adventure.  (Yes, I’m old, but at least I can still recall what it was like to be young.)  Even though the younger voters were overwhelmingly opposed to Brexit, it passed by almost 4 points, based on strong support among the far more numerous elderly voters.

For years we’ve been told that demographics is destiny, and that America was going to inevitably become a browner country.  Obama said that just a few days ago.  But these pundits missed an equally momentous demographic change, which seems to be affecting politics even more dramatically. The world is aging rapidly. In the 21st century, the world will become dominated by the old for the first time in human history.  This may create a demographic split on values going forward:

Liberalism  —  authoritarianism

Cosmopolitanism — xenophobia

Optimism — fear

Change — tradition

Reform — reaction

The elderly voters will dominate—pushing politics to the right.

Japan already has a “silver democracy” where 60% of the electorate are over 55, and a far higher percentage of actual voters are over 55.  Hillary won the 18 to 44 year olds by a Reaganesque landslide of 14%, whereas Trump won the (more numerous) 45 and older voters by about 8%.  Pot legalization in Arizona failed due to opposition from the elderly.  (I believe the combined age of Trump and Hillary was the highest in US presidential election history–can someone confirm?)

Going forward, an important issue will be how voters change as they grow older.  I suspect they will become more conservative on some issues (economics, crime) but less willing to change on others (pot, gay marriage).  It depends how their views have been shaped by life experience.

At the international level, part of the friction will be between a young Muslim world, and a rapidly aging Western, Hindu and Chinese world.  That will ramp up the level of bigotry on both sides, as compared to if the average ages in each group were similar.

While the elderly tend to be nationalistic, they are also risk averse.  So they oppose total war.  Instead, wars will continue to be fought in developing countries.

It goes without saying that it will be increasingly difficult to cut entitlements aimed at the elderly.  I’m less confident in predicting monetary policy, as Abe won in Japan on a promise of increasing inflation.  For now, I think 2% inflation continues to be the most likely outcome (a view shared by the markets.)

Also keep in mind that we are in the early stages of this demographic transition. The bulk of the Baby Boomers have not yet reached 65, so the proportion of elderly will continue to grow rapidly for many years.  The 45-64 years olds were just as likely to vote for Trump as the 65 and older group.  The big issue is what happens to the politics of 30 to 44 year olds as they move into the over 45 group.

Although immigrants will make up an increasing proportion of the US and European population, non-immigrants will be older, and will continue to have a disproportionate influence on politics.

The elderly are more likely to be NIMBYs—hence the post title.  Bad news for millennials seeking a place to live.

Overall, however, 2016 was not a bad year.  Although the global rise of nationalism is certainly very discouraging, the big story continues to be the boom in China and IndoAsia, the best thing that has ever happened.

PS.  I first tried to coin the term ‘IndoAsia‘ about 3 years ago.  Now Goldman Sachs seems interested in the idea, but has not yet adopted my name for the group.  (Developing countries between Pakistan and the Philippines, with the core region being India to Indonesia.  Well over 2 billion people.)

PPS.  Merry Christmas to all my Christian readers and Happy New Year to everyone.  Blogging will be spotty over the holidays.