Demographic Trends and Economic Prosperity
How will the planetary ecosystem survive the tremendous population increase we are experiencing since the early 20th century? This is an ethical, political, humanitarian, and environmental problem of historic proportions. Less population growth is good, but population growth also fuels economic growth. A shrinking population not only causes economic contraction, but it also shifts the median age upward. This means that fewer and fewer young people have to support an increasing number of old people, to the point where the intergenerational contract is in danger of breaking apart. What is the right balance between population dynamics and economic development? Looking at population trends 20 years into the future, which countries and regions are best positioned to reach sustainability and prosper economically?
Over the next 20 years, the world as a whole won’t have the demographic ingredients to keep the global economy running at the pre-2008 speed (the time of the mortgage crisis in the US.) Surprisingly, one of the main reasons for it is the lack of educated people with the necessary skills to sustain high growth rates.
The world’s population quadrupled between 1900 and 2000, increasing by 4 billion people, a growth rate and scale unprecedented in human history. The reason? It’s not that we were breeding like rabbits, but we stopped dying like flies: healthcare advances reduce mortality rates, and this is the major factor in the population increase. The background to population growth is the Malthusian idea that populations grow exponentially if unlimited resources exist.
The total world population is still growing, but the birth rate is falling. This means that population growth will eventually reach a plateau and then begin to shrink again. The process works differently in the different regions of the globe.
The population explosion is slowing down, and in some countries populations are actually declining based on lower fertility rates, even when healthcare advances increase life spans. About half the world is below a “replacement-level” fertility rate, and this section is getting larger. The trend is particularly important when we apply it to working-age populations. In the next 20 years, the working-age population, roughly defined as those between the ages of 15 and 64, will grow by about 800 million, half as fast as it grew in the previous 20 years. And almost half of that 800 million will come from the 49 countries of Sub-Saharan Africa - the poorest and least-educated region of the world.
According to a World Bank report, there will be about 10 billion people in the world by 2060: 5.2 billion in Asia, 2.8 billion in Africa, 1.3 billion in the Americas, 0.7 billion in Europe, and 0.1 billion in the rest of the world.
Here is more data about population growth: worldometers.info.
The demographic fundamentals of the emerging economic superpowers, particularly China, aren’t nearly as good as we commonly think. On October 28, 2015, China announced that it would end its decades-old “one-child” policy, an acknowledgement that the country’s aging population threatens its economic rise.
China is the world’s most populous country (1.36 billion people) with tremendous demographic challenges. It is the second-largest economy (exchange-rate, nominal, the GDP was at 14.9 trillion US Dollars in 2019). Various data sources show that China’s working-age population will contract by about 100 million by 2035. Between the late 1970s, the start of the economic revolution led by Deng Xiaoping, and 2012, China’s working-age population grew about 2% a year. Today, that population is starting to decline, as the long-term effects of China’s one-child policy kick in.
China continues to have a population explosion — of old people. The number of its citizens age 65 or older is growing 4% a year, making China the most rapidly graying population in world history, rivaled today only by Japan. But Japan established a solid social security system well before the aging began; China is in the opposite position, which is much more difficult to manage.
Also, China’s demographics are shifting towards men, which is the outcome of sex-selective abortions. At the start of the one-child policy in the late 1970s, Chinese women gave birth to about 103 boys for every 100 girls. The ratio today is about 120:100, creating an enormous sub-culture of “un-marriageable,” socially alienated young men who tend to be poor, poorly educated, and slightly frustrated – demographics that also correlate to politically extreme behavior.
Japan is the world’s fourth-largest economy, but the median population age is high at 48.6 years (in comparison: median age in China is 38.4 years, estimate for 2020.) It is among the oldest populations in the world, due mostly to low fertility rates (only about eight births per 1,000 people) and long life expectancies (84.5 years on average). It has an estimated nominal GDP of $5.1 Trillion dollars in 2020.
Traditional Asian family values are rapidly disappearing in Japan: there is only a 50/50 chance for a young Japanese woman to marry and then stay married through age 50, similar to the situation in many Western countries. Also, Japan’s total population fell by a record amount in 2015, down 271,058 from the prior year to 126.2 million people, and the pace of decline is expected to accelerate until 2060 and beyond. In 2019, the population shrank by 0.27%. The government has assembled an advisory panel of cabinet members and population experts with the goal of setting policies to stabilize the country’s population at 100 million people within 50 years, but even that goal is probably not achievable (See: Aging of Japan Article on Wikipedia.)
Meantime, Japan’s working-age population has been declining since the late 1990s and is on track to shrink by more than a third until 2035. That decline is a function not only of low birthrates, but also its lack of immigration. Immigration is the factor that stabilizes the working-age populations of many other Western countries.
Western Europe’s population is aging rapidly as well, mostly for the same reasons as in Japan – low birthrates and long life expectancies – but immigration has propped up the workforces in many EU countries. This is the main reason why the German government was smart to welcome the refugees from Syria and the Middle East. (Demographics of Europe Article, Wikipedia.)
After the Brexit, the European Union still has a population of 446 million people, and the total European population in 2018 is 741 Million people. Europe’s health explosion and increased productivity has led to more vacations and better retirement packages. Governments have adopted policies that encourage older Europeans to leave the workforce early, but this puts further strain on government expenditures. An extreme example for retiring-age mismanagement is Greece, even though rampant corruption and tax evasion has also contributed to the fiscal disaster from which Greece slowly recovers.
There are many opportunities in European countries if their aging, healthy, and well-educated citizens decide to work longer. Moving in that direction would require a new social consensus in each country, not just government mandates.
Russia has a population of 145 million in 2019, and a GDP of $1.7 trillion (nominal). Its economy keeps falling behind: in 2019, Russia ranks as the 11th-largest in the world, after the US, China, India, Japan, Germany, the UK, France, Italy, Brazil, and Canada. In terms of GPD per capita, Russia ranks only 50th on the list of nations with $27,400 in 2020. The GDP/Capita is half of that of Germany or the US (measured in purchasing-power-parity, PPP.)
Russia is a demographic disaster, especially among men. The reasons are mostly health-related. The life expectancy for males in Russia is about 67 years, putting it among the lowest 50 countries. (in comparison, for Russian women it is 77.6 years, a male-female difference of more than 10 years.) This is due to high levels of alcohol consumption and smoking among the men. A 15-year old Russian man has a life expectancy that is three years shorter than his counterpart in Haiti.
The Russian Government has made major miscalculations under Putin (i.e. Annexation of Crimea in 2014), resulting in international economic sanctions. The economy shrank by 3.5 percent in 2015, and is expected to struggle in the future. Russian economic well-being depends on the price of oil, gas, and other natural resources on international markets.
There is also an innovation catastrophe. Russia’s share of international patent applications is just two-tenths of 1%, despite its having 2% of the world population and 5% of the world’s college graduates. While Russia underperforms when it comes to technical innovation, Japan, Taiwan, South Korea, and Israel are noteworthy for their superior innovation trends.
As a nation, Russia struggles on many levels, and it could very well become a failed state in the future. It ranks 129th on the corruptions perception index, behind Mexico, Pakistan, and several African States.
(See: Economy of Russia, Wikipedia.)
If poor health and a weak economy is Russia’s main problem, lack of education is the main challenge for India, the world’s second-most-populous country (1.37 billion people in 2019) after China. India also has the third-largest economy (GDP of $9.6 trillion, PPP, 2019). In terms of GDP/Capita, India produced $7000 per person in 2019, and ranks on place 124 compared to other nations. GDP/Cap has grown by more than 5.6% for the last 9 years, and India is only a percentage point behind the Chinese rate. However, almost a third of India’s working-age population never went to school and are assumed to be illiterate. The Covid Pandemic in 2020 will cause the economy to contract by around 5%.
The demographic fundamentals of the US and Canada are very positive through 2035—perhaps the best in the world. The US is the world’s third-most-populous country (329 million people in 2019) and the largest economy in the world (GDP of $20.8 trillion, estimated for 2020, in ppp). Its estimated GDP/Capita for 2020 is $63,000, with a moderate average growth rate of 1.3% over the last 9 years.
It is projected to have modest population and working-age population growth over the next 20 years. Its population will age more slowly than in other OECD countries. The US still has a positive replacement-level fertility rate, augmented by continued immigration, including an influx of highly educated immigrants at a rate above the OECD average.
It is hard to predict the future: We could face another boom in world-wide trade and development, with expanded and accelerated globalization. However, recent political uprisings and nationalist trends everywhere seem to turn against a rapidly globalizing world. The current geopolitical situation is still based on a global economic system that the United States imposed on the world at Bretton Woods after its victory in World War II. The United States used its naval superiority to build a global trade network as a means towards containing the Soviet Union and China. The Soviet Union is gone, and China has modernized so furiously that it is in process to surpass even the US in economic development. Other world markets don’t have much to offer, or they have problems on their own. Aging demographics, corruption, market saturation. America is geographically insulated from the rest of the world. and in recent years, has also reached energy independence due to shale oil technologies. The US is now the largest oil producer in the world, supplying 19% of the total consumption. It is also still the largest contributor to the world economy, producing roughly 20% of the 87 trillion dollars of world GDP in 2019 (IMF, exchange-rate values.)
As Trump's movement demonstrated, it can easily be argued that the US would do better without its global network of alliances and obligations. American disengagement from the world is entirely possible, which in turn will leave other countries to fend for themselves in securing access to goods, services, food and energy. International disorder can grow, and the world could become a much darker place, with different systems operating in various regions. In addition, national economies don't have to converge, and inequality could rise sharply, even if population growth will slow down considerably towards the end of the century. The 2020 pandemic has shown us that disruptions can easily create turmoil in the world, leaving every country to fend for itself. The looming environmental catastrophe will certainly bring more chaos into a world that is already profoundly unjust.