Of Population Pyramids and Value Chains

It is by now well known that the main hope for developed societies subject to rapid population ageing who wish to maintain their relative standard of living lies in increasing their collective productivity more rapidly than they increase their dependency ratio via-a-vis the older age groups. Now in the comments thread on the recent ‘Reform is a Dirty Word‘ post I ventured to say that I found it obvious that at some stage we would reach a point where the rate of population ageing was going to outstrip the rate of productivity increase (in which case relative income per capita would inevitaby start to fall). David, unsurprisingly, asked me why I thought this to be the case. I was not happy with the response I offered (which was essentially some ‘rigmarole’ about the biology of ageing which is coming in a separate post), and since that time I have been scratching my head trying to find a simple way to get this point across. Perhaps I now have one.

All you need to get to grips with what follows is a basic understanding of geometry and a vague interest in football.
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German Exports Continue To Rise

German exports, long the mainstay of the national economy, rose for a third month in four in August according to data released today from the Federal Statistical Office. The year on year increase of 13.4% is partly a reflection of the way the recent drop in the value of the euro has helped boost demand.

According to provisional data of the Federal Statistical Office, Germany exported commodities to the value of EUR 63.4 billion and imported commodities to the value of EUR 51.9 billion in August 2005. German exports of August 2005 thus were 13.4% and imports 15.3% above the respective August 2004 levels. Upon calendar and seasonal adjustment, exports increased by 3.5% and imports by 6.0% compared with July 2005.

The foreign trade balance showed a surplus of EUR 11.6 billion in August 2005. In August 2004, the foreign trade balance showed a surplus of EUR 11.0 billion. Upon calendar and seasonal adjustment, the foreign trade balance showed a surplus of EUR 12.7 billion in August 2005.

While exports power ahead the continuing weaknesses in domestic consumer demand and investment are to be seen in the fact that German industrial production fell 1.6 percent in August while factory orders fell 3.7 percent.