Thoughts For The Ages

The world has long worried about a population bomb. It seems that we must also worry about an ageing bomb

By Anil Madan

It is a reasonable bet that if the subject of the world’s burgeoning population came up, one would have adverted to either China or India, the former the world’s most populous country for oh, ever so long, and the other close on its heels.

One would have paid scant attention to Kenya, Nigeria, Egypt, or Iran, or indeed, any number of countries that have had explosive population growth from the 1960s to date.

The fDi Intelligence website, part of the Financial Times, projects that the top gainers, percentagewise, in population with increases over 90% by 2050, will be mostly African countries, Congo (DRC), Central African Republic, Angola, Somalia, Niger, and Chad.

The UN expects that by 2050, 126 out of 237 countries will see population growth. These include India, Indonesia, Nigeria and the US, already among the most populous countries in the world.

In contradistinction to these projections, that are based on seeing the world’s population grow from 8.1 to 9.6 billion by 2050, are some jarring reports.

A spokesman for the Chinese government explained that China’s National Social Security Fund was established in 2000, is a “strategic reserve fund for social security needs during the peak period of population aging and the ballast of my country’s social security system.” Whatever.

What is significant is that China just announced that it will shore up the almost 3 trillion-yuan fund, making it bigger and stronger, to help support its rapidly ageing population as the birth rate drops and the number of younger workers to support the system shrinks.

Ageing bomb

The world has long worried about a population bomb. It seems that we must also worry about an ageing bomb. Over the next ten years, almost 300 million Chinese will retire. This is close to the total US population. Euromonitor, a data analytics firm, estimates that one-half of all people aged over 65 in the Asia-Pacific region will be found in China by 2040.

The US birthrate — a calculation of how many babies the average American woman is expected to have over her lifetime — has dwindled to a record low of 1.62 births per woman in 2023. The alarm that this has engendered among demographers and economists was reflected in the statements by Yoram Hazony, chairman of the Edmund Burke Foundation: “If you are not having children, your nation is finished,” and “America has now followed Europe into an inability to guarantee another generation.”

Politicians of all persuasions have wrestled with ideas to deal with this crisis. So far, their prescriptions are limited to providing child support payments or cash rewards for having children. All of this is of little effect. The number of births in the US last year was the lowest since 1979.

On the other side of the coin, the United Nations estimates there will be 1.3 billion people in the world between the ages of 15-24 within the next six years, by 2030. Given the massive rates of population increase in African countries, it is no surprise that most countries that will have younger populations are on that continent.

As might be expected, African countries have the lowest median age. Monaco has the highest median followed by Japan, Italy and Andorra. India’s median age is just north of 28 years. Indonesia, with a population of 168 million has a median age of 30 years. Vietnam, with a population of 41 million has a median age of 33 years. In Latin American and Caribbean countries, over 90% of the population is under the age of 65.

The implication for economic development seems reasonably clear. One would think that the world’s manufactories of the future will be in India, Indonesia, and Vietnam in Asia, Africa, or Latin America. But, given the advent of Artificial Intelligence and robotics, people centric manufacturing doesn’t quite seem to be in the cards.

Do the world’s leaders reflect a similar age distribution? Not necessarily. The Pew Research organization reports that the median age of current national leaders is 62, as of May 1, 2024. The largest share of global leaders today (34%) are in their 60s. Roughly a quarter (22%) are in their 50s; 19% are in their 70s; and 16% are in their 40s. Biden is among the 5% of leaders who are in their 80s.

Pew suggests that countries that are less free tend to have older leaders.

Pew also reports: “In most countries, the leader is significantly older than the median member of the population. For example, the median American is 38, according to UN population projections for 2024, while Biden is more than twice as old. In fact, the only countries that have a leader who is younger than the median resident of the country are Montenegro, Ireland and Italy. Andorran Prime Minister Xavier Espot Zamora, at 44, is the same age as the median Andorran resident.”

Economic Impact

The world’s population is in flux. It seems reasonable to expect that capital deployment will tend to favour automated and robotic production. Whereas the lower cost of real estate in developing countries might favour locating factories there, there are concerns about security, currency risk, and shipping costs. Population flows from Latin American and African countries to the US and Europe will surely continue, but the downside to automated factories and robots is that there will be lower demand for human workers.

Ultimately, the twin problems of caring for an aged population — yes, there will soon come a time when the ageing population has aged — and of providing jobs for younger workers will run into major obstacles and may be insurmountable.

Consider that Apple does most of its manufacturing in China. The cost of labour is significantly lower in China than in the US. But soon, Indonesia, Vietnam, and India may offer even lower rates. On the other hand, robot factories in Arizona or Texas could operate around the clock and with far greater efficiency. As long as supply chains are robust enough to support production on a home base, it seems a no-brainer for Apple to relocate its production to the US. The downside is that its access to foreign markets might be curtailed.

It will be a challenge for countries to provide jobs for their populations. In America, immigrants do the work that most Americans don’t want to do. As AI and robotics eliminate more and more production jobs, and what remains is just service work that requires a human worker, will American citizens have no choice but to do the work that they now don’t want to do? In other words, will America become like the rest of the world where employment opportunities do not abound in the manufacturing sector?

We are witnessing major changes in technology and communications. At the same time, the world’s population is presented with different and often conflicting challenges depending on the country involved and whether it has a younger population or an aged one.

In time, we shall see. Time marches on.

Cheerz…
Bwana

Mauritius Times ePaper Friday 6 September 2024