NEW YORK -- Economists like to emphasize the importance of economic policy. They are quick to give credit to sound policies in periods of prosperity and look for policy mistakes whenever things go wrong.
But they tend to disregard the enormous role played by demographics. There is, for example, a heated debate in this country over which policies created the current economic boom.
Yet, with all due respect for various economic ideologies, it could merely be that the baby boom generation is responsible. The baby boomers are, after all, entering their most productive, most prosperous years.
Theirs is the largest demographic bulge in this country's history, and the best-educated one.
Not content to work through the ranks of one company, boomers advance by job-hopping, creating a highly mobile and flexible labor market.
Unlike those who grew up in the Depression and World War II, the boomers are willing to take risks. While saving for retirement, they have emptied their government-insured savings accounts and poured their money into the stock market. This has been a major factor in the relentless Wall Street rally.
Never ones to defer gratification, boomers have been spending on expensive services and fancy imports. Their consumption boosted U.S. economic growth, but also opened a yawning trade gap and pushed savings rates into the negative territory. And now the first baby boomers are entering their mid-50s.
For those economists who wonder when the current U.S. economic upswing will come to an end, the answer is when boomers pass through their productive years, enter retirement age and begin to overwhelm this country's social and health services.
Alexi Bayer, an economist, is president of Kafan FX Information Services, a New York-based consulting firm. He wrote this for Bridge News.
Pub Date: 7/18/99