Global demographics, the changes which happen in a population, matter and the world is beginning to experience some profound differences versus decades past.
Between 1950 and 1987 (37 years), the Earth’s population grew from 2.5bn people to 5bn. It is expected to double again by 2059, reaching 10bn, but taking much longer, 72 years. The rate of population growth is slowing down, but more importantly, by 2100, the number of humans that occupy this planet is expected to shrink, this will be the first time since 1346, the onset of the Black Death, that this has happened.
Chart 1: Global population size and annual growth rate: estimates, 1950-2022, and medium scenario with 95 per cent prediction intervals, 2022-2050
Source: UN Population Division
Changes are already afoot, global fertility rates in 2000 were 2.7 births per woman, they are currently at 2.3 births and to keep the current population numbers stable, a replacement birth rate of 2.1 is required. 15 of the largest countries by GDP already have fertility rates below the replacement rate, these include the USA, China, and India. The Chinese birth rate in 1970 was 6 children per woman, it fell below 2.1 in 1991. Africa, an area that continues to grow in numbers, has also shown a distinct collapse in birth rates. In 1980 the African birth rate was 6.6 kids per mother, in 2023 it is 4.2.
Pro family policies (incentivizing more births) are failing – Singapore has used incentives for years with no positive effect, China has tried the same for the last couple of years. China’s National Bureau of Statistics announced that its population shrank by 850 000 people in 2022. The UN predicts that China’s population will halve by the year 2100 to 700m.
So, the one demographic change is fewer children, the other is an aging world. By 2050, there are expected to be twice as many 65 years olds walking the planet as 5-year-olds. By 2030, more than 50% of East and Southeast Asians will be over the age of 40.
Chart 2: Percentage of population aged 65 and over
Clearly though, population numbers continue to rise for the foreseeable future and considering that many developed countries are already deeply into population regression, where is this growth coming from? Well, more than 50% of the world’s future population growth comes from Southern Africa. Sub Saharan Africa presently represents 1.152bn people and by 2040, this is expected to reach 2.00bn. A further example of Africa’s population growth is Ethiopia, it has a population of 120m, by 2050 this is predicted to reach 205m people and by 2100, 294m.
To grasp the gravity of these changes, one needs to understand how important population numbers are for GDP growth, particularly as countries develop and undergo what is know as demographic transition, which is closely aligned to improving wealth. We will cover demographic transition and its impacts in more detail in future Big Picture articles, for this quarter however, we will briefly allude to some of the impacts that shifting population demographics are having on economics.
These include: a future world with less workers and potentially worse educated workers as populations are growing in areas where education is lacking; less tax receipts and thus less fiscal funding as older populations are in retirement; significant slowdowns in GDP growth for countries that have relied on real estate to grow GDP – like China – lower numbers of home buyers; a potential reduction in creativity and problem solving – young people are known to improve fluid intelligence – most patents are lodged by younger generations as an example; finally, the prospect of social upheaval as these population dynamics place strain on a system we have traditionally become accustomed to.
Chart 3: Forecasted working age populations
Note: Working age includes people aged 20-69
Chart: Shayanne Gal/Insider
Source: United Nations World Population Prospects
Demographic shifts are tectonic and they accelerate in the decades ahead and will have a profound effect on wealth creation in ways that are not intuitive. It is our responsibility to research these, be aware of all their nuances and position your capital to capture the many opportunities which they offer.