The demographic change of the century

Extraordinary numbers of retirees will be dependent on a shrinking number of working-age people to support them. In all of recorded history, no country has ever been as old as these nations are expected to get.

The New York Times | July 2023

These ageing populations – in North America, most of Europe, and in China and South Korea – are older, richer, and on the way to the demographic shock of their lives.

This change will impact many of the policies their citizens have taken for granted – pensions, retirement ages, and tight immigration policies. For decades, the world’s dominant powers have benefited from large working-age populations that have helped drive economic growth.

By 2050, those over 65 will be around 40% of the population in Europe and some parts of East Asia. This unprecedented number of retirees will depend on a shrinking number of working-age people to support them.

The demographic change megatrend is like a set of imbalanced scales with other parts of the globe experiencing the opposite scenario: growing young populations. Most of Africa, along with South Asia and the Middle East, will have the most ‘balanced’ work forces where there are more people of working age supporting an aging population. This is the ‘ideal’ triangle population model which historically has driven economic growth.

However, as the NYT article points out – demography is not destiny. This economic dividend is not automatic. If ‘young’ nations aren’t able to offer their youth good education and sufficient jobs, population growth can promote instability rather than economic bounty.

This demographic change also informs the economic power shift megatrend in the following way: as the century progresses and populations age, today’s wealthier countries will make up a smaller share of global GDP. Asia will host the largest trading region and the economic influence of the G7 countries will shift to the emerging 7 – Brazil, China, India, Indonesia, Mexico, Russia and Turkey.

This reshaping of global economic growth will also reshape the world’s geopolitical power balance.

This century’s shifting population patterns are the fuel that will power significant economic change. The change will occur within nations and between nations. The choices that must be made are not just individual state concerns. A demographic and economic shift of this magnitude will also challenge the operation of the international organisations (IMF, WTO, WHO to name a few) that have navigated international economic, legal and political issues post WW2.

Living longer is a great achievement and having children as a choice is also a positive improvement for individual human rights. Managing the wider consequences of these advances will determine if an older world will also be a prosperous place.

Image: Tijs van Leur