The Globe’s Demographic Winter

 

This week the world’s population hit the 7 billion mark. Many greeted the news with trepidation.  Do we have enough resources to support this growing population?  Can the earth handle this carbon imprint. I don’t see it this way at all. I’m not concerned about too many people on earth. I’m worried there soon won’t be enough. Especially in the industrialized world

Nicholas Eberstadt, a scholar at the American Enterprise Institute, says the earth’s population growth is a result of better public health. He argues that advances in modern medicine, rather than a baby explosion, is why the planet now has 7 billion inhabitants.

Global population has soared over the last two centuries. It reached a billion for the first time in 1804. By 1927, the world had 2 billion residents. That number has multiplied over 3 fold in the last 86 years.

But that rapid growth began declining over the last few decades.Over the last four decades, many nations fell below their replacement rate, a U.N. figure that says each woman in a country must produce 2.1 children in order to maintain a nation’s population  If a nation doesn’t have a 2.1 rate, its population will start falling

One should fear what Eberstadt calls “the march toward sub-fertility rates” that have occurred around the world. This march began after the Baby Boomers arrived. Today, more than 75 countries have sub-fertility rates. Many of these countries are in the developed world.

This will lead to an aging society and a declining labor force in affluent areas. Much of this is taking place in Asia, a part of the world that’s experienced rapid economic growth over the last few decades.

Some (notably economist David Bloom) suggest Asia’s economic growth is due to lower fertility rates. Bloom argues that a quarter of Asian GDP growth since 1972 is due to fewer babies. Sixty years ago, the average Asian woman had six babies. Today that number is two.

There may be something to Bloom’s assertion in the short-term (see this q-and-a); supporters call this the initial demographic dividend which temporarily frees up capital and human resources of parents raising children back into the market economy.  This creates greater productivity and higher economic growth in the short-term.

But sub-fertility rate has disastrous long-term consequences. Let’s look at some cases in point.

China has the world’s largest population and the globe’s fastest growing economy. Annual GDP growth has averaged 9% over the last decade. But China has a demographic nightmare on the horizon-in part because of its one child policy. Today, China’s fertility rate is 1.54, 25% below the replacement rate. The People’s Republic hasn’t reached the 2.1 threshold in two decades; it is projected to begin losing population in 2026.[1]

South Korea has demographic challenges as well. Right now, it has the lowest fertility rate in the world according to demographic scholar Francesco Billari. A state agency report this September said the country’s labor force population would decline by 1% from 2018 on and said the state’s fertility rate of 1.2 (the 2010 level) was responsible.

The situation in Russia, is if anything, much worse. Here’s what Nicholas Eberstadt said about Russia in a 2006 speech: “Russia’s population is already in absolute decline because of very low fertility and catastrophically high mortality. Steep population decline–on the order of 500,000 or more each and every year– is Russia’s demographic prospect as far as the eye can see.”

The situation in Western Europe is little better. Demographers think 30 million working Europeans will disappear by 2050. This will put a huge strain on the social democratic states as fewer workers will be paying into the public pension systems.

In a 2008 New York Times feature (aptly titled “No Babies”), contributor Russell Shorto noted that Europe had dangerously low fertility rates. Southern and Eastern European countries had a fertility rate below 1.3 (among the lowest in the world). Scandanavia’s 1.8 rate (15% below the replacement rate) was among the highest.

Carl Haub, a senior global fertility researcher at the Population Reference Bureau, said these were worrisome figures. He told the Times “you can’t go on forever with a total fertility rate of 1.2…You can’t keep going with a completely upside-down age distribution, with the pyramid standing on its point. You can’t have a country where everybody lives in a nursing home.”

The march towards “demographic winter” has continued in the last three years.[2] Just recently, the Organization for Economic Cooperation and Development (OECD) issued its 2011 report “Society at a Glance” that highlighted aging societies around the world. Currently 14.61% of people in the OECD countries are over age 65. That figure is expected to jump to 25.66% by 2050.

The numbers of G7 (the world’s most developed nations) are more disconcerting. Currently 16.72% of the G7 population is over age 65. That number will soar to 26.12 by 2050.

Right now, the United States does not have the demographic nightmares that many of its international partners have. But it does have an aging population and must figure out how to handle retiring baby boomers who will put a strain on the administrative entitlement-state when they start collecting Social Security and Medicare.

Fortunately, the U.S.(along with Israel) is one of two industrialized state’s (I guess Oswald Spengler wasn’t counting India as an industrialized state) with a replacement rate above the 2.1 rate.

Demographics play a significant role in the global economy and the future fortunes of a nation-state. Those that remain below must rely upon mass immigration to maintain population levels and fund the welfare state. Developed nations that keep up with the replacement rate, on the other hand, will likely continue prospering.


[1] Contrast that with India, its economic rival. India grew at 7% over the last decade but has a population growth that’s over two times greater than China’s. It will equal China’s population by 2025 and is expected to keep growing until 2050. Currently its fertility rate is 2.65 (well above the replacement rate threshold) and won’t hit the 2.1 plateau until 2035.

[2] Demographic winter is a term borrowed from Oswald Spengler’s hyperlinked essay.

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