WHAT is the most important commodity in the world?
It’s not gold nor oil or even technology.
The most important commodity in the world is actually demand.
In economics, demand is defined as the desire for a particular good plus the means of purchasing that good, and is commonly used to track the amount of goods and services households consume.
Thanks to the COVID-19 pandemic, demand – and therefore, consumption – all over the world is falling, and it’s going to get worse.
One of the best indicators for consumption is gross domestic product or GDP (private consumption + investment + government spending + exports and imports). The Philippines’s GDP dropped by 16.5 percent in the Second Quarter of 2020, the lowest recorded since 1981.
The US and other developed countries aren’t faring too well either. According to the US Bureau of Economic Analysis, “the real GDP for the nation decreased at an annual rate of 31.4 percent, per statistics released today.”
The point is that consumption all over the world has fallen due to the COVID pandemic, and this fall has an extremely negative effect.
Even if we do find a cure for COVID, consumption will never be the same again because of one simple reason: demographics.
East Asia and Europe have aging populations, while the rest of the world is not far behind. SouthEast Asia and Latin America are headed towards the same situation. Only Africa has a growing population but even they will eventually start to demographically decline, according to projections.
The US is the only country that still has stable consumption demographics but it’s largely artificial, and driven by immigration, to a great extent, unsustainable.
What COVID has done is that it has accelerated this trend. The world could still maintain stable consumption demographics before the pandemic, but it was already in decline.
What was happening back then was kicking the can down the road, but the coronavirus stopped that. It has accelerated the effects of falling demographics.
Markets and trade routes will dry up as population continue to age. Economies will continue to rely on increasing amounts of debt to push consumption, but that is most likely temporary. You can’t have economic activity without people, and people are projected to decline.
For the past several centuries, the Western dominated paradigm relied on growing demographics to create trade and markets. As global demographics decline, the world economy will suffer a tremendous change./PN
