Wednesday, August 08, 2007

Is de-population a threat or an opportunity?

India and China have been at the forefront on containing population growth. The latter was more successful than the former. But of late a different kind of thinking has permeated the collective consciousness at the higher levels in academia and bureaucracy which argues that population growth should not be seen as a negative sign but that the demographic dividend has to be harnessed properly.

Alok Sheel is a rare bureaucrat who keeps writing excellent and well researched articles on diverse subjects in ET. He argues that the long-term threat to the human species may well be from de-population rather than overpopulation. Read the full article here if you have patience. The impatient can have a look at a couple of excerpts from it below.

He says that the population scare in developing countries was actually generated by the Club of Rome (a global think tank that deals with a variety of international political issues) and scholars like Paul Ehrlich. It was preceded centuries ago by something similar in Europe. As Europe entered the first stage of demographic transition, characterized by a sharp fall in death rates consequent on rapid improvement in public health, Thomas Malthus argued that human population growth would soon outstrip food supply, leading to catastrophic adjustment through war, famine and pestilence. But this did not happen as productivity growth exceeded population growth. Scholars like Ester Boserup argued that population growth provided the creative impulse that boosted agricultural productivity.

The second stage of demographic transition is marked by a sharp decline in poverty, rising living standards and female literacy. It is likely that most developing countries would gray at a far lower per capita incomes compared to the OECD countries. This would constrain the former’s capacity to transfer incomes to cope with ageing related crises in welfare.

Food supply continues to outstrip population growth. Unsustainable growth has less to do with population growth than with the consumption benchmarks set by the rich countries. As the ageing and welfare crises in the developed world unravel, migration can be expected to increase sharply, equalizing the global demographic structure over the long-term.

In the end, ageing and depopulation can have two possible consequences:

  1. On account of the strong correlation between affluence and ageing, poorer countries will age later, and could become nodes of growth as more affluent societies slow down.
  2. As globalization has increased inequalities by increasing the rewards to capital relative to labour, ageing could reverse this equation. With asset prices falling, a growing number of retirees will sell assets to a shrinking base of workers.