When I was a kid growing up in the 1960s, there were widespread concerns about overpopulation. I remember Paul Ehrlich’s best-selling book, The Population Bomb, which was released in 1968. The book predicted widespread shortages of just about everything within our lifetimes. Of course, that didn’t happen.
Despite Ehrlich’s book, having and raising kids was seen as one of the most important things people did, and the global population growth rate continued to rise. While the global population is still growing and is expected to reach the milestone of 8 billion people this year, the growth rate has slowed dramatically – and is expected to continue falling.
The global population grew by less than 1% a year in 2020 and 2021 for the first time since the aftermath of the second world war, with Europe’s total population actually falling during the coronavirus pandemic, according to a recent United Nations report. That is the lowest global population growth in more than 70 years.
The populations of at least 61 countries are forecast to decrease by at least 1% between 2022 and 2050, and the associated low fertility rates will also combine with better healthcare to accelerate the aging of societies.
As the figures were released in the UN’s recent World Population Prospects Report, António Guterres, UN Secretary-General, focused on the benefits of healthcare rather than declining fertility and hailed the “advancements in health that have extended lifespans and dramatically reduced maternal and child mortality rates.” More and more people are living to age 65 and beyond, and this trend is expected to accelerate, as you can see below.
However, the rising proportion of older people in many countries is predicted to hit economic growth and public finances and is already posing growing political challenges. As the world population ages, it will not be good for the global economy since the elderly tend to spend less on discretionary goods and services.
While the global population is still rising, albeit more slowly, it is the falling fertility rate which concerns demographers. The fertility rate has been quite low in almost all European countries for many years, and that means there aren’t lots of young people. Europe’s population is expected to continue to contract until 2100, with Germany and other countries joining a trend already established in eastern and southern European countries such as Poland and Italy.
Two-thirds of global citizens live in a country where the fertility rate is less than 2.1 births per woman, roughly the level required for populations to remain stable if mortality rates remain steady. “In countries with a falling population, unless you get a productivity miracle, overall economic growth will fall,” said Charles Goodhart, emeritus professor at the London School of Economics and co-author of The Great Demographic Reversal.
In Asia, Japan’s population has been shrinking since 2010, South Korea’s fell in 2020 and China’s is forecast to do the same this year. China’s population is forecast to decline by about 6 million annually by the mid-2040s and by 12 million a year by the late 2050s – the world’s largest-ever drop. If you look at a map of the world of countries that are going to decrease in population size, it basically starts in central Europe and goes east all the way to Japan and across Russia and China.
Africa overtook Asia in 2020 to become the main source of population growth. The UN reports that more than half of the projected population increase up to 2050 will be concentrated in just eight countries, mostly in Africa, with the rapid growth threatening their infrastructure and development goals. By mid-century Nigeria is projected to be as populous as the US, closing the current 121 million gap between the countries.
Professor Goodhart acknowledges that increased productivity, automation and longer working lives can help reduce the impact of an aging population. The question is whether these advancements happen fast enough to avoid a serious global economic slowdown.
Shrinking populations tend to do poorly, economically, socially and militarily. One need only look to China, where its one-child policy has produced a huge overhang of pensioners with not enough people to support them. China has dropped its one-child policy for obvious reasons. Or to Japan, where the average age keeps climbing while young people seem to lack direction and confidence, to see what lies in our future.
The bottom line is, the global population growth rate slowed to only 1% in 2020 and 2021. It could easily go negative in the next few years. This trend, if it continues, will have major implications, not only for societies but also markets.
As investors, we need to be aware of these trends. I’ll have more to say on this topic in the weeks and months ahead.
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