John Kay, FT columnist and renowned economist, is someone I tend to follow. Having read so many of his columns over the years, he must have had quite a profound although unquantifiable impact on my own thinking. However, in today’s FT I have to differ with his rather complacent point of view about demographic change, namely the impact of the ageing baby boomers http://news.ft.com/cms/s/b5ea6e52-10b8-11d9-a73b-00000e2511c8.html. When US Federal Reserve Board member Edward Gramlich addressed the Euromoney Bond Congress in February he remarked how few commentators were saying much about the fact that the first of the baby boomers would start retiring in 2008, and that they would become eligible for state medical benefits four years after that. The impact on US government spending would start to escalate with an inevitable impact on taxation and thus economic activity. If top central bankers start pointing to problems ahead it is a little complacent for Kay, months later, to suggest that such demographic shifts will take care of themselves. The doom mongers can be ignored, he says. If I recall correctly, Gramlich was pointing some fingers at the politicians, and not least because of concerns about the government deficit. Since then there has been a bit more in the press, and clearly the UK pensions crisis is generating awareness of the issue, but as far as I am aware, these are not central issues in the US election campaign. For society to respond to such challenges, it must be aware of them. It’s just not good enough to say it will sort itself out. It will be someone’s job eventually to sort it out. And as individuals, it pays us to be forewarned so that we can at least start to make the right judgements about how to prepare. We also need to highlight this issue for it represents business opportunity. Kay is a resource and capabilities man. These cannot be sensibly developed without a keen eye on the “far environment,” as busines strategists and marketers like to describe it. Meanwhile, the problem of baby boomer retirement has been made worse by the asset-based view of the world that the boomers have promoted, so that we have all become convinced that it is through the accumulation of speculative investments (tech shares and now housing), rather than through income and risk-free savings that our futures will be assured. The unravelling of this cultural conceit will be necessarily painful. The sooner the collective mind is focussed on it, the shorter will be the period of pain. Then, as Kay points out, the change will be absorbed.

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