Monday, September 1, 2014
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The Challenging Billions

CAMBRIDGE – The world is in the midst of the greatest demographic upheaval in human history. Although the human race took perhaps one million years to reach one billion people (around the year 1800), we have been adding successive billions every 10-20 years since 1960. The world’s population now stands at seven billion and is projected to reach 9.3 billion by 2050.

In other words, between now and 2050, the world is likely to add to its population almost as many people as populated the entire planet in 1950. Or think of it as adding another China and another India. Feeding, clothing, housing, and otherwise providing for this massive net addition to the global population is one of the main challenges facing humankind.

If we use as our guide average material progress over the course of centuries, it might seem that necessity will again serve as the mother of invention, and that we will meet the population challenge, just as we have met previous challenges, through technological and institutional innovation.

But long-term averages can mask significant volatility over time and variation across countries. We know for certain that there is great risk in the population growth that lies ahead, as nearly all of it will occur in the world’s most economically, politically, socially, and environmentally fragile countries.

A failure to absorb large numbers of people into productive employment could lead to mass suffering and myriad catastrophes. The continuation of extreme cross-country income inequality could deter international cooperation, stalling or even reversing globalization, despite its potential to improve everyone’s standard of living. Rapid population growth also tends to accelerate the depletion of environmental resources both locally and globally, and can permanently undermine the prospects for their recovery.

Some developing countries have addressed these population challenges well. For example, the East Asian “Tigers” cut their birth rates precipitously in the 1970’s and 1980’s, and used the resulting demographic breathing room to stunning advantage through judicious education and health policies, sound macroeconomic management, and careful regional and global economic engagement.

At the other end of the spectrum, countries in sub-Saharan Africa have fared much worse developmentally, in no small measure due to their inability to escape the crushing burden of rapid population growth and youth dependency.

Although developing countries are the primary sites of the world’s most threatening population problems, the wealthy industrial countries face some rather vexing problems of their own. From a purely demographic perspective, the advanced economies’ productive capacity has reached a plateau of slightly more than two working-age people per dependent. But that indicator is projected to plummet to 1.36 by 2050, posing a threat to the sizable demographic dividend that these countries have enjoyed in recent decades.

Moreover, the rich countries can expect a massive expansion in the proportion of elderly people in their populations, owing to increased longevity, continued low fertility, and the progression of baby-boom cohorts through the population pyramid. Although economic performance in the context of population aging is substantially uncharted territory, it is not hard to understand fears about the fiscal integrity of pay-as-you-go pension and health-care systems, and about growth slowdowns in the face of contracting workforces.

There are many policy suggestions to address fiscal sustainability and workforce shortages already under consideration, including higher retirement ages and mandatory contributions, together with lower benefits. Liberalizing international migration could be another response, though it would be unlikely to offer appreciable relief, owing to social and political opposition to increased immigration in most developed countries.

We can, however, count on rising rates of female labor-force participation (spurred by continued low fertility), increased levels of effective labor as educational attainment continues to rise, and higher savings rates in anticipation of greater longevity and longer retirements.

In the end, it is unlikely that the worst fears associated with our graying populations will be realized. But a great deal of analysis, debate, behavioral adaptation, and policy reform – in both the public and private spheres – will have to take place before we can be sure.

Although the issues immediately confronting developing countries are different from those facing the rich countries, in our globalized world, demographic challenges anywhere are demographic challenges everywhere. And, while the challenges posed by population change are formidable, they are most likely surmountable. It would be irresponsible to neglect those challenges and submit humankind, unnecessarily, to the great perils that we can already reliably foresee.

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