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Forget class war. Instead, prepare for the war of the generations, because it is not the rich who are keeping us down, it is the old. It is those baby boomers and a global surge in the numbers of working people that has tilted the scales in favour of capital and against labour.

But a great reckoning is on the horizon because we are crossing a demographic Rubicon. The expansion of the global work force is slowing and we are now heading for a shortage of labour. With fewer people seeking work, wages and prices will rise and investment returns will shrink. The changing economic landscape will change our politics, too, putting the interests of labour back in the driving seat while forcing governments to invest heavily in provisions for the old.

Inequality is the great political totem of left-of-centre politics. The received wisdom is that it is the owners of capital who are keeping us all down. While they accumulate more cash, more stocks, more bonds and more real estate, our wages don't go up and we get poorer as they get richer. The reason, asserted by Thomas Piketty, the French economic historian and darling of the Left, is that the average return from investment naturally exceeds the rate of growth in the economy and ordinary earnings over time. For Picketty and a host of politicians, including Justin Trudeau and the new leader of the British Labour Party, Jeremy Corbyn, the solution to the problem of greedy capital getting bigger is more taxes on the rich.

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They are flogging a dead horse, reckons Charles Goodhart, a professor at the London School of Economics and former senior staffer at the Bank of England. In a joint research paper published by Morgan Stanley, he argues that the world has been in a "demographic sweet spot" since 1970. A sharp increase in the number of working-age people in the developed economies since the 1970s was followed more recently by the sudden doubling of the global work force when China and the states of Eastern Europe joined the global capitalist economy during the 1990s.

It was a massive labour supply shock, says Prof. Goodhart, and employers took advantage. The export of manufacturing jobs to the huge cheap labour pools in the Far East kept a lid on wage growth. Labour's share of the economy diminished, worsening inequality. Meanwhile, the Chinese invested their surpluses in the U.S. Treasury bond market, causing interest rates to fall. All that is history, because the demographic supply shock is about to shift into reverse.

Regular readers of this column will know that the population "problem" is about to be turned on its head. In poor countries, fertility rates (meaning live births per female) have declined from a rate of more than six in the 1970s to less than three, while in the richer countries, births are now below the replacement rate. Global population growth is now 1.25 per cent a year and the UN predicts it will fall to 0.75 per cent by 2040.

"We are at the point of inflection" says Prof. Goodhart when the "sweet spot" disappears. The working-age population in developed countries and North Asia will soon begin to decline sharply and the ratio of workers to the retired will deteriorate. And it will get worse, he points out, because the aging population in developed economies means more demands on the labour supply in terms of caring for the elderly, the sick and the infirm.

It's great news for workers but it's bad news for employers and investors. Prof. Goodhart rejects the argument that the demographic upheaval will lead to Japan-style deflation. Japan was different, he argues, because its demographic transition happened in the 1970s when the global work force was expanding. Japanese firms invested in cheaper labour overseas, but this time it's different. Interest rates will rise as the aging population in richer countries begins to save less and spend more.

Governments, too, will be forced to spend more to provide the infrastructure needed to service the growing cohorts of non-working people. Wages will rise with the improved bargaining power of a shrinking work force but taxes will go up, too, as governments demand more of the national cake to pay for the increasing burden on the state from pensioners. A cycle of wage hikes, tax increases and more wage hikes could lead in turn to inflationary pressures and push interest rates even higher.

Such demographic upheavals in the work force have happened before, but mainly due to war or plagues, such as the Black Death in the 14th century when a shortage of agricultural labourers caused huge wage inflation. In the 21st century, the wild card is likely to be technology. The response of businesses to surges in wage inflation may be investment in technology. A surge in labour productivity may mitigate the negative impact of labour shortages, but in the short term, technology is unlikely to have much effect in sectors where labour shortages are likely to be acute, such as health care, social services and house building.

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A different world will lead to a different kind of politics. Supporters of the radical socialist movements in Europe may be disappointed; instead of a conflict between capital and labour, battle is joined over the vested interests of generations. Indeed, Justin Trudeau could do worse than turn the tables on his opponents, Stephen Harper and Tom Mulcair, when they deride the Liberal leader's youth. In a future Canadian election, an aging population may become fundamental to the political debate.

During the next quarter century, politics will not just be about the right to a good job and fair wages. Instead it will also be about the right to retire. A swelling cohort of retirees will acquire huge political power in democratic countries due to their sheer numbers and their sense of entitlement. At the same time, the working-age population will demand greater economic power in return for the burden they will have to bear in terms of higher taxes and a much longer working life. Political parties will have to redefine their mission and their constituency. It will be a new "them" and "us."

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