China’s ambitions set to loom over Biden’s first Nato summit

Beijing increasingly projecting its might beyond the Pacific and into the alliance’s sphere of influence

Michael Peel in Brussels, Helen Warrell in London and Kathrin Hille in Taipei 

‘China [through its navy] has come through the Indian Ocean, into the Gulf, up to the Red Sea, and they’ve been in the Mediterranean,’ said one British military official © Kevin Frayer/Getty


China’s growing military and economic presence in the Atlantic region is expected to trigger a rare warning from Nato leaders about the potential security threat when they meet on Monday, diplomats said. 

From joint Chinese drills with Russia to western worries that China wants to set up military bases in Africa, the Nato focus reflects China’s primacy among western foreign policy concerns, in particular those of US president Joe Biden.

“This is not about ‘Nato going to China’,” said Claudia Major, a defence analyst at the German Institute for International and Security Affairs. 

“It’s about ‘China is coming to Europe and we have to do something about it’.”

In 2015, joint military drills with Russia brought the Chinese navy into the Mediterranean and the heart of Europe for the first time. 

Since then, China has built up the largest naval fleet in the world and invested in critical European infrastructure, including ports and telecoms networks.

“China [through its navy] has come through the Indian Ocean, into the Gulf, up to the Red Sea and they’ve been in the Mediterranean,” according to one British military official, who said China had not yet deployed submarines in the north Atlantic but could do so in future.

“You build nuclear submarines for range and stealth. 

And China does like to test the boundaries.”

The planned joint statement by the transatlantic security alliance, which diplomats said was still under discussion and subject to change, would be only the second time that Nato leaders have addressed the subject of China head-on. 

The first was in December 2019, at the insistence of the administration of Donald Trump.

But Biden is understood to be pushing for tougher language than the bland “opportunities and challenges” terminology used that time.

Nonetheless, how to deal with the issue represents a dilemma for the 30-member group, which was originally set up in 1949 to deal with cold war-era threats.

Internally, Nato countries are divided over how to treat China: member Hungary, for one, has good political relations with Beijing.

In addition, there is reluctance to confront Beijing in its own Pacific region — although the UK and France have followed the US in deploying ships to carry out freedom of navigation exercises in the South China Sea.

Chinese and Russian marines take part in joint exercises in China’s Guangdong province © Li Jin/Getty


China’s joint military operations with Russia are viewed as a particularly unwelcome development by some Nato members. 

As well as their annual military exercises, Beijing and Moscow have recently added joint missile defence drills and training for internal security forces.

“Their [the Chinese/Russian] relationship is transactional and pragmatic rather than ideological,” the UK military official said. 

“But working together in any form provides confidence. 

And confidence is something we should be wary of.”

As the Center for a New American Security, a bipartisan US think-tank, warned in a January report: “Where Russian and Chinese interests align, Moscow and Beijing could eventually co-ordinate their combined capabilities to challenge US foreign policy.”

Another Nato anxiety is Africa, which China could use to expand its military presence in the Atlantic as part of its long-term goal to become a truly global armed force.

Gen Stephen Townsend, head of US Africa Command, told the US Senate in April that his “number-one global power competition concern” was what he described as Chinese efforts to establish a militarily useful naval facility on Africa’s west coast. 

“I am talking about a port where they can rearm with munitions and repair naval vessels,” he said.

Experts on the Chinese military said there was no evidence that Beijing was trying to establish such a west African base, yet. 

However, China has a base in Djibouti and has already used international anti-piracy missions in the Gulf of Aden to train thousands of military personnel and to build military relations with countries outside its usual neighbourhood.

Each time a naval contingent finishes deployment, for example, it typically takes a detour on the way home. Some have visited the Mediterranean and the east and west coasts of Africa.

Another trend vexing Nato allies is the growing involvement of Chinese companies in critical infrastructure in Europe, such as through telecommunications company Huawei.

Chinese state shipping company Cosco also owns a controlling stake in Piraeus, Greece’s largest port, and is reportedly in talks to invest in a Hamburg port terminal.

Such economic ties complicate Nato’s efforts to create a unified approach on China — as do the political relationships between Beijing and friendly European leaders.

That creates the potential for clashes, with the tougher stance of Washington and Jens Stoltenberg, Nato’s secretary-general, who last month warned that China was “coming to us” in areas including cyber space, Africa and the Arctic.

“There is a risk that having this discussion within Nato surfaces very uncomfortable differences between allies on how much China is actually perceived as a threat,” said Sarah Raine, an expert in geopolitics and strategy at the International Institute for Strategic Studies.

“The fact is that there are countries which are seen by hawks as making very pro-China arguments within Nato, at least with regards to being robust but not confrontational.”


Additional reporting by Katrina Manson in Washington


China’s ambitions set to loom over Biden’s first Nato summit | Financial Times (ft.com)

The Big Lie and Its Consequences

By demonstrating craven loyalty to Donald Trump despite his lies about the 2020 election, the Republican Party is no longer simply playing for the base. By questioning the very integrity of America's electoral system, it now represents an open threat to the US constitutional order.

Elizabeth Drew



WASHINGTON, DC – This period in US history could go down as the moment when America’s democratic system for electing a president – the most consequential duty of US citizens – was broken, perhaps for good.

True, the US constitution’s promise and central premise – that the people elect the president – has never been totally fulfilled. America’s aristocratic Founding Fathers didn’t trust the rabble (or slaves or women) to choose the person to fill the nation’s most powerful office. 

So, the United States ended up with supposedly wise men – the electoral college – who would select the president.

Under President Donald Trump, the cooked-up issue was whether the count in the electoral college actually represented the popular vote in their states. 

What has come to be termed “the Big Lie” was not just that the election had been “stolen” from Trump, but also included attempts to legitimize various underhanded means of attempting to reverse the true result.

In the run-up to the 2020 election, talk-show hosts joked that if Trump lost, he might simply refuse to leave the White House. 

But Trump had something more elaborate – and dangerous – in mind: if he lost, he’d declare that the vote count was wrong; that the election had been stolen.

According to The Washington Post, this strategy for a failed candidate had been floating around in right-wing circles for some time; but previous candidates for federal office had spurned the idea. 

Trump, however, has never been much concerned about the impact of his actions on others or the country. 

There’s little evidence that he grasps the Constitution.

But to question the veracity of the official election result is to undermine the assumption of the integrity of the election system. 

Yet a disgraced, rejected, twice-impeached former president, has persuaded up to three-quarters of Republicans of his evidence-free claims.

It’s worth pondering how this could happen. 

An important factor is that the concept of utilizing the Big Lie was subscribed to not by Trump alone but also by a phalanx of right-wing activists, with some broadcasters perpetuating it. 

Trump has the rhetorical skills of the talented demagogue; his rants are leavened with entertainment. 

He applies to the dangerous the cosmetic of fun. 

Also, a great deal of the American electorate is poorly informed. The teaching of civics has essentially died out. 

And Trump has encouraged distrust of the media. 

He’s turned the truth into a volleyball.

Given the large and impassioned following he’d already curried, the satisfying (for them) nature of his claim, and having dropped thousands of little lies, Trump had softened the ground for his most preposterous contention. 

Through derogation as well as raw muscle he has squashed potential rivals for party leadership – the canny Senate Minority Leader Mitch McConnell tried, but failed, to break Trump’s grip.

Now, should an incumbent Republican fail to exhibit sufficient obedience, Trump could “primary” that heretic by backing another Republican for his or her position. 

Thus, a large number of elected Republicans who know that his election claims are baseless (as are his denials that he fomented the January 6 assault on the US Capitol) espouse them nonetheless because in addition to being wary of Trump they also fear their constituents who follow him. 

On top of all this, Trump is far and away the party’s most adept fund-raiser.

What’s kept Trump from being an even greater danger to the country – his loss of the 2020 election at least halted his march on government authority, which included political control of the Pentagon and the Justice Department, both of which are supposed to have a bit of independence from the White House – is that, for all his shrewdness, tenacity, and entertainment value, Trump does dumb things: he trips himself up by overdoing things.

He is, for example, in legal jeopardy for trying to bully some state officials into rigging election results. 

His demands that his political enemies be prosecuted even became too much for the theretofore supine attorney general, William Barr. 

The separating of migrant children from their families at the border was a national disgrace.

His demand that House Republicans remove Liz Cheney as chair of the Republican Caucus, because she was vociferously insisting that Trump’s lies about a stolen election were a threat to the Constitution, to be replaced by a toady, Elise Stefanik of New York, has made Cheney into a far more potent enemy. 

In fact, there was something of a point to the Republican argument that it was awkward that one of the three House party leaders was an outspoken critic of the prevailing, if misguided, party position, but the Republicans couldn’t get around the more evident point that they were squelching dissent – on a fundamental constitutional issue.

The schism within the Republican Party over the Big Lie isn’t just about the past; it could decide the party’s future. 

Joe Biden’s Electoral College victory was narrow; a switch of only some 43,000 votes in three states (Georgia, Wisconsin, and Arizona) would have reversed the outcome. 

And now, Republicans at the state level are rushing out legislation designed to make it harder for Blacks to vote, since, immorality notwithstanding, voter suppression has been deemed by Republicans as key to presidential victory. 

These laws could make it difficult for Biden or another Democrat to replicate the 2020 electoral map.

We Americans claim to be a country committed to the rule of law. 

But a democracy cannot succeed without voluntary cooperation, trust, and restraint. 

The laws aren’t self-executing, and there is a good reason why Supreme Court nominations are now the subject of vicious contention. 

Though it has sometimes set boundaries to his excesses, as a result of Trump’s presidency, the Court is firmly in conservative control for some time to come.

If key figures consistently act in bad faith, laws won’t protect us in the end. 

This is why Trump and what he’s set loose are such a threat to our constitutional democracy.


Elizabeth Drew is a Washington-based journalist and the author, most recently, of Washington Journal: Reporting Watergate and Richard Nixon's Downfall.

Whither (or is it wither?) the buck

Robert Armstrong


It is hard to find a foreign exchange analyst or an investor on Wall Street who is not bearish on the dollar. 

That may be reason enough to expect the currency to rise, but let’s consider the bear case first. 

Most often, it is grounded in the US’s “twin deficits”.

First deficit: current account. 

The US buys a lot more stuff from the rest of the world than the world buys from the US. 

That difference has to be financed; as a matter of mathematical identity, there has to be an inflow to match that outflow. 

There could be inflows in the form of, for example, direct foreign investment in US real assets or, as is more often the case, investment in US securities, most often our sovereign bonds (we do make a lot of them, after all).

There is a limit to this, theoretically. 

At some point, the interest on all those bonds would consume the entire US budget. 

And that limit gets a little closer if the US also has a second deficit, in its budget, because it is spending loads of money on other stuff, like transfer payments, aircraft carriers, or whatever. 

Here are where the twin deficits stood as of 2020. 

They almost surely have gotten worse since (via the Fed): 

 No alt provided

At some point, the buyers of all those bonds will look at a chart like this and demand higher interest payments. 

But let’s suppose (just suppose) that the US government is also intervening to keep the rates on its bonds low. 

What is going to fix the imbalance then?

The dollar can help: if it falls, everything in the US — its securities, its exportable goods, its companies — go on sale for the rest of the world. 

That draws assets in, keeping the accounts in balance. 

In a country where the books are wildly out of whack, the dollar can be the counterweight.

Don Rissmiller of Strategas summed up the point bluntly to me. 

When you have a major imbalance like the US has, “you have to get poorer, either locally or globally”. 

But, he cautions, none of this has to happen quickly. 

As a global reserve currency, and as a safe place in a crisis, the US currency remains “the cleanest dirty shirt,” among the global currencies. 

This was clear at the beginning of the beginning of the pandemic, when the dollar rose with demand for safe assets. 

Here is the DXY dollar index: 

 No alt provided


Rissmiller also points out that if the dollar is going to fall, it has to fall against something. 

But what? 

While the US is one of the world leaders in vaccinations and growth, he says, capital seems likely to keep flowing towards dollar assets. 

But this could change, he says, as the rest of the world catches up, and we might end up with 2017-style synchronised global growth, sending capital out towards to the rest of the world for better returns. 

Currency traders often talk about the “dollar smile.” 

This refers to the fact that the dollar rises at the two ends of the US growth spectrum. 

If the US is outgrowing the rest of the world, then the dollar rises as capital flows to America. 

If US growth is particularly sluggish, as it was in March of 2020, then that probably means the whole world is in poor shape, meaning that US assets become an attractive safe haven, driving the dollar up again. 

It is in the middle of the growth spectrum, where the US is fine, but not world-beating, that the dollar tends to weaken. 

Rissmiller is arguing, in essence, that we could be heading back to the middle of the smile. 

Calvin Tse, a Citigroup FX analyst, is a long-term dollar bear, too, but not because of the twin deficits. 

He thinks the appeal of US Treasuries will endure. 

“What’s happened over the past decade, ever since the financial crisis, is a rip in equity prices, resulting in a big build-up in global wealth. 

Investors are very long risk, and they need safe assets in their portfolios to offset that.” 

In this excellent chart he shows how global savings and risk assets have shot up, but safe assets have not kept pace:

 No alt provided


Furthermore, as the Japanese and German central banks have bought up more and more of their own sovereign bonds, US Treasuries have become an increasing slice of that proportionally smaller store of truly safe assets:

 No alt provided


Tse sums up: “When risk sells off, as it did in March of 2020, nothing makes money but AAA sovereign assets, but there are not many AAA assets out there.” 

As a result, he expects “perpetual” high demand for Treasuries. 

Like Rissmiller, he thinks what may ultimately weaken the dollar is a resurgence of global growth, but he thinks the model here is not 2017 but the early-to-mid-2000s. 

Back then global economic activity rose and, just like today, a long bull market in equities driven by US tech companies was receding into the rear-view mirror. 

Again, were looking at that low, middle bit of the dollar smile. 

If the dollar is going to weaken, how should investors position themselves? 

The traditional answer is that stocks that report in US dollars, but generate a big chunk of their revenues abroad, should see their profits rise as the dollar falls. 

Tech companies are the classic choice. Commodities companies’ products are priced in dollars, so they too will see higher revenues if the dollar weakens. 

But in the case of tech stocks, currently trading at somewhat dizzying valuations, it is worth considering this chart from Rissmiller’s colleague at Strategas, Jason Trennert:

No alt provided


Price/earnings valuations tend to fall when the dollar weakens. 

This makes sense. 

If a coming period of global growth does, in fact, draw capital towards risks elsewhere in the world, what is going to happen to the prices of tech stocks, which have after all had a tremendous bull run?

Long Slide Looms for World Population, With Sweeping Ramifications

Fewer babies’ cries. More abandoned homes. Toward the middle of this century, as deaths start to exceed births, changes will come that are hard to fathom.

By Damien Cave, Emma Bubola and Choe Sang-Hun

A family eating hotpot at a restaurant in Beijing. China’s population is projected to contract sharply this century. Credit...Gilles Sabrié for The New York Times


All over the world, countries are confronting population stagnation and a fertility bust, a dizzying reversal unmatched in recorded history that will make first-birthday parties a rarer sight than funerals, and empty homes a common eyesore.

Maternity wards are already shutting down in Italy. 

Ghost cities are appearing in northeastern China. 

Universities in South Korea can’t find enough students, and in Germany, hundreds of thousands of properties have been razed, with the land turned into parks.

Like an avalanche, the demographic forces — pushing toward more deaths than births — seem to be expanding and accelerating. 

Though some countries continue to see their populations grow, especially in Africa, fertility rates are falling nearly everywhere else. 

Demographers now predict that by the latter half of the century or possibly earlier, the global population will enter a sustained decline for the first time.

A planet with fewer people could ease pressure on resources, slow the destructive impact of climate change and reduce household burdens for women. 

But the census announcements this month from China and the United States, which showed the slowest rates of population growth in decades for both countries, also point to hard-to-fathom adjustments.

The strain of longer lives and low fertility, leading to fewer workers and more retirees, threatens to upend how societies are organized — around the notion that a surplus of young people will drive economies and help pay for the old. 

It may also require a reconceptualization of family and nation. Imagine entire regions where everyone is 70 or older. Imagine governments laying out huge bonuses for immigrants and mothers with lots of children. Imagine a gig economy filled with grandparents and Super Bowl ads promoting procreation.



ImageSiblings in Seoul, South Korea. The country’s fertility rate is the lowest in the developed world.

Siblings in Seoul, South Korea. The country’s fertility rate is the lowest in the developed world. Credit...Kim Hong-Ji/Reuters


“A paradigm shift is necessary,” said Frank Swiaczny, a German demographer who was the chief of population trends and analysis for the United Nations until last year. 

“Countries need to learn to live with and adapt to decline.”

The ramifications and responses have already begun to appear, especially in East Asia and Europe. 

From Hungary to China, from Sweden to Japan, governments are struggling to balance the demands of a swelling older cohort with the needs of young people whose most intimate decisions about childbearing are being shaped by factors both positive (more work opportunities for women) and negative (persistent gender inequality and high living costs).

The 20th century presented a very different challenge. 

The global population saw its greatest increase in known history, from 1.6 billion in 1900 to 6 billion in 2000, as life spans lengthened and infant mortality declined. 

In some countries — representing about a third of the world’s people — those growth dynamics are still in play. 

By the end of the century, Nigeria could surpass China in population; across sub-Saharan Africa, families are still having four or five children.

But nearly everywhere else, the era of high fertility is ending. 

As women have gained more access to education and contraception, and as the anxieties associated with having children continue to intensify, more parents are delaying pregnancy and fewer babies are being born. 

Even in countries long associated with rapid growth, such as India and Mexico, birthrates are falling toward, or are already below, the replacement rate of 2.1 children per family.

A center for elderly people in Washington, D.C. U.S. population growth has slowed to its lowest rate in decades. Credit...Justin T. Gellerson for The New York Times


The change may take decades, but once it starts, decline (just like growth) spirals exponentially. 

With fewer births, fewer girls grow up to have children, and if they have smaller families than their parents did — which is happening in dozens of countries — the drop starts to look like a rock thrown off a cliff.

“It becomes a cyclical mechanism,” said Stuart Gietel Basten, an expert on Asian demographics and a professor of social science and public policy at the Hong Kong University of Science and Technology. 

“It’s demographic momentum.”

Some countries, like the United States, Australia and Canada, where birthrates hover between 1.5 and 2, have blunted the impact with immigrants. 

But in Eastern Europe, migration out of the region has compounded depopulation, and in large parts of Asia, the “demographic time bomb” that first became a subject of debate a few decades ago has finally gone off.

South Korea’s fertility rate dropped to a record low of 0.92 in 2019 — less than one child per woman, the lowest rate in the developed world. 

Every month for the past 59 months, the total number of babies born in the country has dropped to a record depth.

Families in sub-Saharan Africa are often still having four or five children. By the end of the century, Nigeria could surpass China in population. Credit...Luis Tato/Agence France-Presse — Getty Images


That declining birthrate, coupled with a rapid industrialization that has pushed people from rural towns to big cities, has created what can feel like a two-tiered society. 

While major metropolises like Seoul continue to grow, putting intense pressure on infrastructure and housing, in regional towns it’s easy to find schools shut and abandoned, their playgrounds overgrown with weeds, because there are not enough children.

Expectant mothers in many areas can no longer find obstetricians or postnatal care centers. 

Universities below the elite level, especially outside Seoul, find it increasingly hard to fill their ranks — the number of 18-year-olds in South Korea has fallen from about 900,000 in 1992 to 500,000 today. 

To attract students, some schools have offered scholarships and even iPhones.

To goose the birthrate, the government has handed out baby bonuses. 

It increased child allowances and medical subsidies for fertility treatments and pregnancy. 

Health officials have showered newborns with gifts of beef, baby clothes and toys. 

The government is also building kindergartens and day care centers by the hundreds. 

In Seoul, every bus and subway car has pink seats reserved for pregnant women.

But this month, Deputy Prime Minister Hong Nam-ki admitted that the government — which has spent more than $178 billion over the past 15 years encouraging women to have more babies — was not making enough progress. 

In many families, the shift feels cultural and permanent.

A village school in Gangjin County, South Korea, has enrolled illiterate older people so that it can stay open as the number of children in the area has dwindled. Credit...Chang W. Lee/The New York Times


“My grandparents had six children, and my parents five, because their generations believed in having multiple children,” said Kim Mi-kyung, 38, a stay-at-home parent. 

“I have only one child. 

To my and younger generations, all things considered, it just doesn’t pay to have many children.”

Thousands of miles away, in Italy, the sentiment is similar, with a different backdrop.

In Capracotta, a small town in southern Italy, a sign in red letters on an 18th-century stone building looking on to the Apennine Mountains reads “Home of School Kindergarten” — but today, the building is a nursing home.

Residents eat their evening broth on waxed tablecloths in the old theater room.

“There were so many families, so many children,” said Concetta D’Andrea, 93, who was a student and a teacher at the school and is now a resident of the nursing home. 

“Now there is no one.”

Even in countries like India that have long been associated with rapid growth, birth rates are falling toward, or are already below, the replacement rate of 2.1 children per family. Credit...Poras Chaudhary for The New York Times


The population in Capracotta has dramatically aged and contracted — from about 5,000 people to 800. 

The town’s carpentry shops have shut down. 

The organizers of a soccer tournament struggled to form even one team.

About a half-hour away, in the town of Agnone, the maternity ward closed a decade ago because it had fewer than 500 births a year, the national minimum to stay open. 

This year, six babies were born in Agnone.

“Once you could hear the babies in the nursery cry, and it was like music,” said Enrica Sciullo, a nurse who used to help with births there and now mostly takes care of older patients. 

“Now there is silence and a feeling of emptiness.”

In a speech last Friday during a conference on Italy’s birthrate crisis, Pope Francis said the “demographic winter” was still “cold and dark.”

More people in more countries may soon be searching for their own metaphors. 

Birth projections often shift based on how governments and families respond, but according to projections by an international team of scientists published last year in 

The Lancet, 183 countries and territories — out of 195 — will have fertility rates below replacement level by 2100.

A couple in Acciaroli, Italy. The population of many Italian villages has dramatically aged and shrunk in numbers. Credit...Gianni Cipriano for The New York Times


Their model shows an especially sharp decline for China, with its population expected to fall from 1.41 billion now to about 730 million in 2100. 

If that happens, the population pyramid would essentially flip. 

Instead of a base of young workers supporting a narrower band of retirees, China would have as many 85-year-olds as 18-year-olds.

China’s rust belt, in the northeast, saw its population drop by 1.2 percent in the past decade, according to census figures released on Tuesday. 

In 2016, Heilongjiang Province became the first in the country to have its pension system run out of money. 

In Hegang, a “ghost city” in the province that has lost almost 10 percent of its population since 2010, homes cost so little that people compare them to cabbage.

Many countries are beginning to accept the need to adapt, not just resist. 

South Korea is pushing for universities to merge. 

In Japan, where adult diapers now outsell ones for babies, municipalities have been consolidated as towns age and shrink. 

In Sweden, some cities have shifted resources from schools to elder care. 

And almost everywhere, older people are being asked to keep working. 

Germany, which previously raised its retirement age to 67, is now considering a bump to 69.

Going further than many other nations, Germany has also worked through a program of urban contraction: Demolitions have removed around 330,000 units from the housing stock since 2002.

Playing pool in a retirement community in Beijing. China’s rapid slowdown in population growth will pose economic challenges. Credit...How Hwee Young/EPA, via Shutterstock


And if the goal is revival, a few green shoots can be found. 

After expanding access to affordable child care and paid parental leave, Germany’s fertility rate recently increased to 1.54, up from 1.3 in 2006. 

Leipzig, which once was shrinking, is now growing again after reducing its housing stock and making itself more attractive with its smaller scale.

“Growth is a challenge, as is decline,” said Mr. Swiaczny, who is now a senior research fellow at the Federal Institute for Population Research in Germany.

Demographers warn against seeing population decline as simply a cause for alarm. 

Many women are having fewer children because that’s what they want. 

Smaller populations could lead to higher wages, more equal societies, lower carbon emissions and a higher quality of life for the smaller numbers of children who are born.

But, said Professor Gietel Basten, quoting Casanova: “There is no such thing as destiny. 

We ourselves shape our lives.”

The challenges ahead are still a cul-de-sac — no country with a serious slowdown in population growth has managed to increase its fertility rate much beyond the minor uptick that Germany accomplished. 

There is little sign of wage growth in shrinking countries, and there is no guarantee that a smaller population means less stress on the environment.

Children in Munich, Germany. The fertility rate in Germany has increased after the country expanded access to child care and paid parental leave, but it remains below the rate of replacement. Credit...Laetitia Vancon for The New York Times


Many demographers argue that the current moment may look to future historians like a period of transition or gestation, when humans either did or did not figure out how to make the world more hospitable — enough for people to build the families that they want.

Surveys in many countries show that young people would like to be having more children, but face too many obstacles.

Anna Parolini tells a common story. 

She left her small hometown in northern Italy to find better job opportunities. 

Now 37, she lives with her boyfriend in Milan and has put her desire to have children on hold.

She is afraid her salary of less than 2,000 euros a month would not be enough for a family, and her parents still live where she grew up.

“I don’t have anyone here who could help me,” she said. 

“Thinking of having a child now would make me gasp.”


Elsie Chen, Christopher Schuetze and Benjamin Novak contributed reporting.

Are ageing populations really bad for the economy?

Don’t believe the myth that an ageing population means economic decline

Merryn Somerset Webb

Bucking the trend: Princess Beatrice, with husband Edoardo Mapelli Mozzi, announced this week she is expecting a baby in the autumn  © EPA-EFE/Christophe Petit Tesson


Last spring, at the beginning of the pandemic, there was a suggestion that long-term home arrest might lead to something of a baby boom.

I wasn’t convinced: who wants to have sex when they’ve been repeatedly told that being touched or breathed on by the wrong person is an almost certain path to instant death? 

It’s just not sexy is it?

It turns out I was right on this one. 

We cleaned out pet shops and animal shelters (we now have a few substandard house rabbits to cope with — there wasn’t much choice). 

But physically produce our own little things to love? 

No. Birth rates, which were already falling, have dropped further over the past year. In England and Wales we are down to 1.6 per woman. 

The rest of the world is headed in the same direction. 

In the US, the fertility rate fell last year to 1.6. 

That represented the sixth consecutive annual decline. 

In China it’s 1.69. 

Japan, Italy, Taiwan, Greece and Portugal are all under 1.5. 

Only in sub-Saharan Africa are average fertility rates still what we would consider high (over 4). 

You can attribute this to all sorts of things — from the long-term improvement in child mortality figures to the economic dislocation of the global financial crisis and lockdowns to expensive housing and climate crisis freak-outs. 

But while there are scraps of baby joy about (Princess Beatrice has just announced her first pregnancy) the general trend is pretty clear: in most developed countries populations are only not shrinking because they are ageing.

Does it matter? 

You’d think given the general hysteria about planetary overpopulation everyone would be pretty pleased. 

Far from it. 

Instead we have gone from too-many-people argh to not-enough-people argh. 

The problems, say the pessimists, are threefold. 

Without more young people to support the old the dependency ratio will rise to unsustainable levels. 

Without young people we will lose our creative mojo. 

And finally, without young people, demand will fall and we will end up in a spiral of long-term deflation. 

Older people are replacers of goods not active buyers — the more of them we have, the more overall demand will fall. 

Sounds awful doesn’t it?

Luckily, it might be another consensus opinion that isn’t quite right. Start with the spending. 

Look at the 2018 ONS data, and you will see that the highest-spending homes as ranked by age of the household head are the 30-49 group (£666 a week). 

Next come the 50-64 cohort (£633), the 65-74 group (£506) and the 75s and over (£336). 

There are a few things to note here. 

First, the under-74s are pretty big spenders, and second, the fall-off above that in part surely reflects a big increase in one-person households in the older age groups: in 2019 49 per cent of those living alone were 65 or over.

It might be that the idea that oldies are frugal waste-not-want-nots is based, in the UK at least, on the behaviour of those who hit adulthood during the austerity of the war years.

Other statistics also suggest that older people aren’t as parsimonious as you might think: across the G20 developed countries, spending by older households (led by someone over 50) made up 22 per cent of gross domestic product — and makes up more than the combined GDP of Japan, Australia, Canada and Brazil. 

It also grew by 9 per cent from 2010 to 2015, with the highest rises in countries where the employment of older people is rising fastest. 

In 2005 the average over-50s led household in the G20 spent $2,577 less than the average under-50s household. 

But in 2010 the difference was down to $367.

The UK-based International Longevity Centre, a specialist think-tank, in a report called The Global Longevity Dividend, says that “is consistent with trends . . . identified in the UK over a longer time period”. 

It might be that the idea that oldies are frugal waste-not-want-nots is based, in the UK at least, on the behaviour of those who hit adulthood during the austerity of the war years and then entered retirement on fixed incomes, rather than on those who hit adulthood in the 1960s, achieved their peak earnings in the 1990s, and obtained manna from inheritance heaven in the 2000s (the frugal generation having left them a lot of housing wealth). 

On top of this, they tend not to retire completely as previous generations did. 

This younger lot seem to have a different attitude (along with more flexible spending power). 

Anecdotally, I know a couple of examples (enjoying your new car, Mum?) 

It might also be that if companies really start thinking about creating products these more flexible spenders want, the gap between their spending and younger generations disappears completely. 

One of the great mysteries of marketing has long been the sector’s insistence that the best way to sell stuff is to make young people want it. 

I would have thought the best way to sell stuff would be to make people with money want it. 

It might not be quite so much fun to market your product to the over-50s but my guess is it is a lot more lucrative.

Other good news surely comes in the form of wages and productivity. 

Assuming no rise in productivity, output will obviously fall as the working population falls.

But why would you assume no rise in productivity? 

Might it be that the easy availability of low-cost labour globally (due in large part to the opening of China and reintegration of eastern Europe to the global economy) has not only created decades of deflation, but also put a lid on productivity growth for decades (who needs to invest in technology when you have cheap people)? 

And now, might a coming lack of cheap labour reverse that trend? 

Think of robots and artificial intelligence as extra pairs of hands and what’s the problem? 

Productivity might be about to soar — something that makes miserable mutterings about dependency ratios entirely redundant: if the worker of 2040 can produce three times as much as the one of 2020 what matter if he has two more high-spending oldies to produce goods for?

Wages should soar, partly because of the productivity rises and partly due to the increased bargaining power of the young. 

So there you have it. 

You’ve got used to the idea that baby busts and the ageing populations they come with are a bad thing. 

They might not be.

The obvious costs are high (health and social care) but the benefits are much overlooked. 

If you must worry about something, worry that the dynamic will add to the long-term inflationary impulses already building in the economy as the well-off old spend and splurge and the hard working young demand more cash to produce the goods for them to buy. 

Keep your portfolio primed for that. 

Otherwise, there are plenty of exchange-traded funds around that let you invest in the nothing-wrong-with-lots-of-old-people theme: iShares has a health company-heavy Ageing Population ETF). 

There are also some interesting individual stocks that will make good long-term holdings around the theme: for example, Smith & Nephew make the joint replacement systems that I fully anticipate having in my knees within 15 years.

Among actively-managed funds is the Axa WF Framlington Longevity Economy fund. 

Top holding? 

Nike. 

The new old (and their new knees) aren’t the same as the old old.


Merryn Somerset Webb is editor-in-chief of MoneyWeek. Views are personal. merryn@ft.com. Twitter: @MerrynSW