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carl mortished

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Noise about the population peril is getting louder. Whether the subject is feeding the planet or fuelling the planet, or even wrecking the planet with carbon emissions, the seed of worry that underlies the general anxiety is demographic expansion. We believe that there are just too many people, especially in poorer countries – but what if the reverse were true? What if the main problem that the global economy will face in 2050 is not starving millions but a shortage of workers? What if the great population crisis on the horizon is not an explosion but an implosion?

Could it be possible that the Malthusian dilemma of exponential population expansion is experiencing a correction? In many parts of the developing world, including China, birth rates have suffered dramatic declines over recent decades and are continuing to fall. In both China and India, falling birth rates are being accentuated by even lower female birth rates, due to cultural prejudice against girls.

These trends are rapidly pushing large parts of what used to be called the Third World to population plateau and decline by the middle of this century, predicts a self-confessed "rogue demographer" at Deutsche Bank. In research published this month, Sanjeev Sanyal challenges the latest population growth forecasts put out by the United Nations, which predict that human beings will increase in number from 7.2 billion today to 9.6 billion by 2050 and to 10.9 billion by 2100. Instead, he reckons that the consequence of declining fertility rates and urbanization will lead to a global population of 8.7 billion by 2050 and then a decline to 8.0 billion by 2100. Consider the numbers: we know that Russia is in a population downward spiral with a fertility rate of 1.5 per female – but were we aware that Bangladesh has probably reached tipping point at 2.2 births, when you consider higher child mortality rates and lower life expectancies? Brazil has already fallen below the bar with 1.8 births per female, while at 1.6 births per female, China is already far below the replacement rate.

The speed at which fertility falls in the emerging markets is truly striking. Average births per female have fallen in South Korea from 5 in the 1950s to today's level of 1.3 births. The rise of the Asian cities is in large part to blame for the shrinking trend; every society, regardless of culture, has experienced big declines in birth rates as people move to cities. "Urbanization is the strongest contraceptive known to mankind," says Mr. Sanyal.

This analysis will annoy the animal-loving crowd, not least the world's most cuddly environmentalist, Sir David Attenborough, who made the Life on Earth TV series. He is now courting controversy with comments in January that humans are "a plague on earth," and more recently, suggesting that sending food aid to Ethiopia was "barmy" because there are "too many people for too little land." Mr. Attenborough may be right that Ethiopia cannot grow enough food to support its population. Nevertheless, Deutsche Bank's analysis of fertility rates is quite compelling and Mr. Sanyal's prediction that the human fertility rate will fall to replacement rate by 2025 has huge implications for the global economy and global business.

In Sanyal's words: "Reproductively speaking, our species will no longer be expanding – a major turning point in history." Declining fertility has huge implications for the global workforce. We have already seen the impact of shrinking labour markets in countries such as Japan and Germany, but the biggest impact will be in China. Readers may already be aware of the IMF working paper which predicted that China had reached the "Lewis turning point," a watershed at which a nation makes the transition from a labour surplus to labour shortage economy. China is already suffering the impact of a shrinking labour market with soaring wage inflation and rapid staff turnover in the workshops of Guangdong and Shenzhen. According to Deutsche Bank, the Chinese adult workforce will shrink from 853 million in 2015 to 781 million by 2030 and to 650 million by 2050. It is a massive contraction which requires a huge transition towards offshoring of manufacturing to other countries, such as India, and a shift towards a service-driven economy.

These projections carry a health warning but the effects of demographic change on politics and the economy are only beginning to be understood. If we wonder why the Arab world is convulsed by civil unrest, it is surely no coincidence that these countries have a very large population bulge aged 18-25. Conversely, it can be no accident that the EU has been able to navigate a severe recession and mass unemployment with little civil unrest – a consequence of an aging population. The population crisis is indeed upon us, but not as we knew it.

Carl Mortished is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights.