How Demographics Are Changing the World

Last month, we discussed how demographics have changed the U.S. voting and political scene. It is appropriate to look at the world’s demographic changes, especially since global population is believed to have crossed eight billion people last month.  This is an increase of 3.2 times since the end of World War II in 1945. The vast majority of this population growth has come from two continents, namely Asia and Africa.

According to this projection, the world’s population will peak around the year 2086 at 10.4 billion people. What is more interesting than global population, however is the expected changes in the geographic and socio-economic makeup of the world as we progress through the 150 years under review.

For example, Africa’s population is expected to grow from 9% of global population in 1950 to ~38% in 2099. This 30-percentage growth comes largely at the expense of Europe, which is expected to drop from 22% of the global population to 7% and Asia which is expected to decline from 55% to 45%.

After WWII ended in 1945 and for the following 25 years, the world’s economic and political thinking was dominated by the U.S., with support from Western Europe, all of which are wealthy nations.

Over the last 50 years, we have seen a dramatic decline in the power of the “West” as first Japan and then China and more recently India, have taken their place on the world stage and are now the 2nd, 3rd and 6th largest economies.  Japan is a wealthy economy, but China and India were both poor economies until thirty years ago when China started to industrialise and has now joined the ranks of lower-middle income countries. The economies of these countries are major factors in the investment plans of most large investors and the returns available in these countries are likely to outperform those of the declining western nations.

Until now, Africa has barely factored in this equation as Nigeria and South Africa rank 31st and 32nd in global GDP respectively. It is hard to imagine that this situation will continue. Africa is rich in resources and has a young and fast-growing population that if properly nourished and educated, could make the African economy important in a global context.

Europe will continue to decline in population and together with North America, which will barely increase in population, they will likely comprise barely 10% of the global population by the end of the century. In contrast, Asia and Africa will be home to ~85% of the global population.

Many forecasters expect China to be the overall winner in wealth and power over the next seventy years, but its demographics make this unlikely as it has the fastest aging population in the world, largely because of Chairman Mao’s one child policy.  The result of this policy has been a surplus of 30 million young males and a massive shortage of women of child baring age. The decline in the Chinese population will be staggering, and detrimental to its economic prospects over the next fifty years. India is expected to surpass China in population within the next two years and economically, will catch up soon after.

Nigeria will soon become the country with the third largest population and may well overtake China by the end of the century. Can it grow its economy is the question investors must ask?

Whatever the answer turns out to be, it is safe to say that these demographic shifts are bound to have significant economic, political, and social outcomes.

Disclaimer:  Please note that the publication is designed to provide general information only. It reflects the thoughts and opinions of Logan Wealth Management and should not be construed as financial advice, nor should the information be considered a substitute for personal advice. Information used in this publication has been gathered from sources believed to be reliable. Logan Wealth Management is not responsible for and assumes no liabilities or responsibility for any loss or damages suffered as a result of the use or misuse of, or reliance on the information or content of this publication. Please consult your financial adviser to determine whether the information is applicable to your personal situation.