Monday, July 18, 2016

Demographics Apocalypse Now?

When I was a boy, I can remember the Zero Population Growth (ZPG) movement, which was a response to the Club of Rome's Limits to Growth Mathusian thesis of "the world has limited resources, but human population is rising exponentially and therefore ecological disaster looms". Somewhere along the way, birth rates fell in response to global industrialization, rising incomes and changing incentive structures. In an agrarian society, children are potential units of production. They can be put to work in the fields and support you in your old age. In an industrialized society, children are cost centers. It was no wonder that birth rates fell as the emerging market economies boomed.

Today, ZPG has been realized (and more). Human global population will stabilize and shrink some time in the 21st Century. In fact, global population is about to reach an inflection point in the not too distant future as the number of old people will soon exceed the number of young children (via Business Insider):

A demographic shift like this raises all sorts of questions. For investors, it brings into the question of future returns as Baby Boomer demand for retirement income starts to dominate capital market returns and strain government retirement benefits. For policy makers worldwide, the issues are how to fund retirement benefits, as well as how to structure policies to transition to an aging society.

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