Economy
Global fertility has collapsed, with profound economic consequences
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In the roughly 250 years since the Industrial Revolution the world’s population, like its wealth, has exploded. Before the end of this century, however, the number of people on the planet could shrink for the first time since the Black Death. The root cause is not a surge in deaths, but a slump in births. Across much of the world the fertility rate, the average number of births per woman, is collapsing. Although the trend may be familiar, its extent and its consequences are not. Even as artificial intelligence (ai) leads to surging optimism in some quarters, the baby bust hangs over the future of the world economy.
In 2000 the world’s fertility rate was 2.7 births per woman, comfortably above the “replacement rate” of 2.1, at which a population is stable. Today it is 2.3 and falling. The largest 15 countries by GDP all have a fertility rate below the replacement rate. That includes America and much of the rich world, but also China and India, neither of which is rich but which together account for more than a third of the global population.
The result is that in much of the world the patter of tiny feet is being drowned out by the clatter of walking sticks. The prime examples of ageing countries are no longer just Japan and Italy but also include Brazil, Mexico and Thailand. By 2030 more than half the inhabitants of East and South-East Asia will be over 40. As the old die and are not fully replaced, populations are likely to shrink. Outside Africa, the world’s population is forecast to peak in the 2050s and end the century smaller than it is today. Even in Africa, the fertility rate is falling fast.
Whatever some environmentalists say, a shrinking population creates problems. The world is not close to full and the economic difficulties resulting from fewer young people are many. The obvious one is that it is getting harder to support the world’s pensioners. Retired folk draw on the output of the working-aged, either through the state, which levies taxes on workers to pay public pensions, or by cashing in savings to buy goods and services or because relatives provide care unpaid. But whereas the rich world currently has around three people between 20 and 64 years old for everyone over 65, by 2050 it will have less than two. The implications are higher taxes, later retirements, lower real returns for savers and, possibly, government budget crises.
Low ratios of workers to pensioners are only one problem stemming from collapsing fertility. As we explain this week, younger people have more of what psychologists call “fluid intelligence”, the ability to think creatively so as to solve problems in entirely new ways .
This youthful dynamism complements the accumulated knowledge of older workers. It also brings change. Patents filed by the youngest inventors are much more likely to cover breakthrough innovations. Older countries—and, it turns out, their young people—are less enterprising and less comfortable taking risks. Elderly electorates ossify politics, too. Because the old benefit less than the young when economies grow, they have proved less keen on pro-growth policies, especially housebuilding. Creative destruction is likely to be rarer in ageing societies, suppressing productivity growth in ways that compound into an enormous missed opportunity.
All things considered, it is tempting to cast low fertility rates as a crisis to be solved. Many of its underlying causes, though, are in themselves welcome. As people have become richer they have tended to have fewer children. Today they face different trade-offs between work and family, and these are mostly better ones. The populist conservatives who claim low fertility is a sign of society’s failure and call for a return to traditional family values are wrong. More choice is a good thing, and no one owes it to others to bring up children.
Liberals’ impulse to encourage more immigration is more noble. But it, too, is a misdiagnosis. Immigration in the rich world today is at a record high, helping individual countries tackle worker shortages. But the global nature of the fertility slump means that, by the middle of the century, the world is likely to face a dearth of young educated workers unless something changes.
What might that be? People often tell pollsters they want more children than they have. This gap between aspiration and reality could be in part because would-be parents—who, in effect, subsidise future childless pensioners—cannot afford to have more children, or because of other policy failures, such as housing shortages or inadequate fertility treatment. Yet even if these are fixed, economic development is still likely to lead to a fall in fertility below the replacement rate. Pro-family policies have a disappointing record. Singapore offers lavish grants, tax rebates and child-care subsidies—but has a fertility rate of 1.0.
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Unleashing the potential of the world’s poor would ease the shortage of educated young workers without more births. Two-thirds of Chinese children live in the countryside and attend mostly dreadful schools; the same fraction of 25- to 34-year-olds in India have not completed upper secondary education. Africa’s pool of young people will continue to grow for decades. Boosting their skills is desirable in itself, and might also cast more young migrants as innovators in otherwise-stagnant economies. Yet encouraging development is hard—and the sooner places get rich, the sooner they get old.
Eventually, therefore, the world will have to make do with fewer youngsters—and perhaps with a shrinking population. With that in mind, recent advances in ai could not have come at a better time. An über-productive AI-infused economy might find it easy to support a greater number of retired people. Eventually ai may be able to generate ideas by itself, reducing the need for human intelligence. Combined with robotics, ai may also make caring for the elderly less labour-intensive. Such innovations will certainly be in high demand.
If technology does allow humanity to overcome the baby bust, it will fit the historical pattern. Unexpected productivity advances meant that demographic time-bombs, such as the mass starvation predicted by Thomas Malthus in the 18th century, failed to detonate. Fewer babies means less human genius. But that might be a problem human genius can fix. ■
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Prices have collapsed in the vital date industry, the latest economic sector to become a casualty of war in the northeast African country.
Every autumn, until this September, date farmers in northern Sudan pulled their harvests down from palm trees, securing a living for months to come.
But five months into the war between Sudan’s rival generals, the country’s economic infrastructure has been destroyed and “buyers are scared”, farmer Al-Fatih al-Badawi, 54, told AFP.
Sudan is the world’s seventh-largest producer of dates, growing more than 460,000 tonnes per year, according to the United Nations Food and Agriculture Organisation.
How much of that figure will be available this year remains to be seen, but farmers in northern Sudan are lucky they could manage a harvest at all.
In Karima — a town on the Nile River about 340 kilometres (210 miles) north of the capital Khartoum — the groves bustle with young men climbing date palms, dropping bunches of the brown fruit, beloved by Sudanese, onto white sheets below.
Farmers who depend on the date industry face colossal challenges moving their products across the country, as do those in other agricultural sectors.
Along with insecurity, wartime fuel shortages have severely hindered the ability to transport goods.
Before the war, nearly all trade in highly centralised Sudan went through Khartoum.
But constant air strikes, artillery blasts and street battles have left the capital largely off-limits to traders, who fear for their safety or are turned back by fighters at checkpoints.
“Our main market was Khartoum”, Badawi said. Without it, trade is at a standstill and the price for his crop is in freefall.
Land left fallow
In Sudan, one of the world’s most underdeveloped countries, dates and other agricultural products were a foundation of the pre-war economy.
The agriculture sector employed more than 80 percent of the workforce and accounted for 35 to 40 percent of gross domestic product, according to the United Nations.
But now, in much of the country including southeastern Gedaref state, known as Sudan’s breadbasket, the land has been left fallow.
Processing factories have been razed or looted.
Smallholder farmers have no access to financing, traders have no guarantees of viable markets and industry heavyweights have given up.
In May, Haggar Group — one of the agriculture sector’s largest employers — suspended operations and laid off thousands of labourers.
Even before the war began, one in three people were in need of humanitarian aid and the country’s farmers — unable to meet domestic food security needs — struggled to break even.
The date sector in Karima had been in urgent need of “guidance and agricultural policy”, as well as resources to reduce high rates of waste, said Al-Jarah Ahmed Ali, 45, another farmer.
Now the challenges have only worsened.
Since April 15, fighting between army chief Abdel Fattah al-Burhan and his former deputy, Mohamed Hamdan Daglo, commander of the paramilitary Rapid Support Forces, has torn Sudan apart.
Fighting has killed nearly 7,500 people, according to a conservative estimate from the Armed Conflict Location & Event Data Project.
More than 4.2 million people — most of them from the Khartoum area — have been displaced within Sudan, and another 1.1 million have fled the country, according to the International Organization for Migration.
Agricultural workers are among those joining the exodus, and while they may find relative safety in northern Sudan, whether they can earn enough to survive in a collapsing date market is questionable.
Among them is Hozaifa Youssef, a 26-year-old radiologist who left Khartoum to rejoin his family in Karima, where he is helping with the date harvest.
“I was going to India to get my master’s degree,” but that goal is now on hold, Youssef said.
The veteran farmer, Badawi, has not lost hope.
“We’re trying to find new markets, even though it’s going to be more expensive. Hopefully, the price will adjust and it will all work out.”
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(Bloomberg) — More Chinese travelers are delaying outbound plans amid economic uncertainty, according to a new survey, potentially rough news for countries depending on one of the world’s biggest source of tourists.
A September survey by consultancy Oliver Wyman found that 54% of respondents — all experienced travelers who had been abroad before the pandemic shut Chinese borders — said they planned to travel in 2023, down from 62% polled in June.
Some 22% said they didn’t have plans to venture overseas for the next three years, up from just 6% in June.
Respondents needed to meet a minimal monthly household income of 30,000 yuan ($4,105), representing the country’s middle class — a key driver being counted on to help boost China’s post-Covid consumption recovery. While spending on experiential services like travel and eating out has been resilient this year, questions have risen about whether that’s sustainable.
“While Chinese travelers are returning, it’s taking longer than we expected when the border reopened,” said Imke Wouters, an Oliver Wyman partner who led the research.
The survey also showed 32% of respondents saying their willingness to travel abroad had decreased amid the current economic downturn and political situation, while only 19% said they were more inclined to take international trips.
Enthusiasm for domestic travel remained strong, meanwhile, with 35% saying they were more disposed to journey within China, and just 14% decreasing.
China’s economy picked up steam in August as a summer travel boom and stimulus push boosted consumer spending and factory output, adding to nascent signs of stabilization. Still, the upcoming 8-day Golden Week holiday will be another test of whether Beijing’s recent efforts to bolster the economy are starting to bear fruit.
More than 21 million people are expected to fly during the holiday, starting from this Friday, sending airfares climbing. Domestic tourism spots — and short-haul Asian destinations such as Thailand, Japan and Korea — are among the top choices.
Read more: Millions to Take to Skies as China Gears Up for Long Golden Week
And it’s not just travel: the middle class’s worries about the economy may also be reflected in their luxury expenditures. Of the casual luxury shoppers polled by Oliver Wyman — those who spent less than 40,000 yuan this year — 16% expected to increase their luxury spending, while some 30% considered cutting back.
Big spenders — people who spent more than 40,000 yuan — remained more resilient and positive.
©2023 Bloomberg L.P.
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