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Posted: June 19, 2012

The futurist: More on when countries go bust

The next chapter in global unrest is about to begin

Thomas Frey

(Editor's note: This is the second of two parts. Read Part 1.)

Labor demonstrations are almost a daily occurrence in southern European cities. Demonstrators decry the austerity measures and budget cuts being imposed on them.

However, one of the biggest factors affecting these future economies will be their declining population base. They are sitting on a demographic decline that, if not soon reversed, all but guarantees the continent’s downward slide.

Spain, once one of Europe’s economic superstars, rose to the top largely through real estate speculation and its growing assimilation with the rest of the EU. As little as six years ago, the country was building upwards of 50% as many houses as the U.S. while having 85% less population. Roughly six million immigrants came to work in Spain during the boom times.

Countries like Greece, Italy, Portugal and Spain have not developed strong economies to compensate for their fading demographics. When the real estate bubble broke, there were few industries to step in and fill the gap.

Spain’s unemployment rate has climbed to over 23 percent, more than twice the EU average. Unemployment among those under 25 in both Spain and Greece is now over 50 percent.

A generation ago Spain was a strongly Catholic country with among the highest birth rates in Europe, with the average woman producing almost four children in 1960 and nearly three as late as 1975-1976.

With an increased number of women in their childbearing years, the population is now higher than it was in 1975, but the number of marriages has declined from 270,000 to 170,000 annually.

Unlike Sweden or Germany, Spain cannot count on immigrants to compensate for their demographic decline. Although 450,000 people, largely from Muslim countries, still arrive annually, over 580,000 Spaniards are leaving for places like northern Europe and Latin America.

At this rate, projections show that the Spanish population will decline from its current 47 million to just over 35 million by 2060.

Their declining population coupled with a growing number of young people leaving and an overall aging population will mean a far higher “dependency rate.” The dependency rate is the number of people working in proportion to the people dependent upon them. Projections show that in Spain, by 2021, there will be six people either retired or in school for every person working.

Yes, it’s counter-intuitive that a declining population base will lead to higher unemployment, but the current financial crisis is upending conventional thinking.

Corporations don’t want to entrust their future to an unstable country with weak finances. So jobs that would have materialized during a good economy have gone elsewhere.

The unemployment rate is a very good indicator of which countries will go bankrupt next.

Final Thoughts

If you think we are past the point of more countries going bankrupt, think again.

Most national bankruptcies are like Bernie Madoff on steroids. What once seemed like a good investment suddenly turns into a giant Ponzi scheme with the working public footing the bill.

The problems become exacerbated when there are fewer people working and many more retired.

The growing crisis in Greece, Spain, Portugal and Italy are but the tip of a much larger iceberg.

The question then becomes a matter of how the problems are dealt with.

Do they deteriorate into something tantamount to a civil war, like what happened in Argentina? Or can they be handled in a more civil manner like Iceland?

And how do the modern communication systems we have on the Internet factor into this equation?

Social networks like Twitter and Facebook all heighten awareness, and countries close to collapse have already begun to experience a brain drain, with the most wealthy and talented moving to more stable communities.

In today’s fluid environments, people and resources can react instantly to any adversarial conditions. So if taxes go beyond a certain pain threshold, people will simply fold their tent and move elsewhere.

Those left behind will feel trapped, and as a result, will become very angry at the situation. This anger will be channeled towards any person, company, or entity they feel is culpable in the matter. In most cases, this will be banks, financial institutions, and government officials.

With the fester mood ramping up in Europe, and the current attitude toward imposing hardships on the people of a country for the improprieties of a few, this will not end well.

The next chapter in global unrest is about to begin, and for the growing ranks of the unemployed, this will become their new occupation.

 

Thomas Frey is the executive director and senior futurist at the DaVinci Institute and currently Google’s top-rated futurist speaker.  At the Institute, he has developed original research studies, enabling him to speak on unusual topics, translating trends into unique opportunities. Tom continually pushes the envelope of understanding, creating fascinating images of the world to come.  His talks on futurist topics have captivated people ranging from high level of government officials to executives in Fortune 500 companies including NASA, IBM, AT&T, Hewlett-Packard, Unilever, GE, Blackmont Capital, Lucent Technologies, First Data, Boeing, Ford Motor Company, Qwest, Allied Signal, Hunter Douglas, Direct TV, Capital One, National Association of Federal Credit Unions, STAMATS, Bell Canada, American Chemical Society, Times of India, Leaders in Dubai, and many more. Before launching the DaVinci Institute, Tom spent 15 years at IBM as an engineer and designer where he received over 270 awards, more than any other IBM engineer.

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