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Sunday, March 02, 2003

Population: Switchback Divergence Bigtime

The initial highlight results of the 2002 Revision of official world population estimates and projections, prepared by the Population Division of the United Nations, has just been published. The full results of the 2002 Revision will appear later in a series of three volumes which are currently being prepared. Notwithstanding the fact that we will have to wait to read the fine print in the full results, the report makes sombre reading. First the good news, fertility is declining across an ever wider range of Less Developed Countries (LDC's). In fact it is falling so fast and so much that by 2050 3 out of 4 LDC's will have below replacement fertility. This result needs to be nuanced by two important details: firstly, the numbers are characterised by increased an increasing divergence beween the majority who are achieving big reductions and a small minority who continue to have exploding populations (I still can't help feeling that this is the real 'divergence big time' that lies behind the famous Lance Pritchett paper), and, secondly, this reduction in fertility to below the replacement level will mean that the vast majority of countries follow the economically developed countries down the road of rapidly aging populations. There will in fact be a symmetrical switch from a high (youth) dependency ratio to a high (elderly) one. The economic consequences of this are, however, far from symmetrical. Young people remember face an entirely different future income potential to that of old people. Young societies, for example, can face credit driven expansions (like the current US or UK ones) whilst old societies obviously cannot.

Secondly, things are going to get worse before they get better. population lags are even longer than economic ones, so many countries, despite the drop in fertility, will still have steadily growing populations for many years to come. Thirdly there are the estimations of the impact of the HIV/AIDS epidemic. The UN projections here are extremely bleak, attributing the same downward impact on their 2050 provisions to AIDS related deaths as are attributed to increasing fertility reduction. And, as they don't cease to stress there could be enormous and incalculable unforeseen upside to these estimates. Finally there is the news that there no less than 33 developed countries are expected to experience population decline (NB decline and increasing age dependence), with an anticipated 22 per cent drop, and (watch out) anywhere between 30 and 50% drop in the so called Eastern Europe 'Transition Economies'. Clearly this transformation is unprecedented historically, and will brings with it consequences which are now barely imaginable. My expectation, for what it's worth, is that this will mean a big deflationary tonic all round, negative growth in most of the developed world, and an enormous window of opportunity for those LDCs about to pass through 'critical population growth mode'. As Joel Mokyr has reminded us time and again, one of the key features of the transition from traditional to industrial society was the changing role and importance of fixed capital formation. The information age, in contrast, seems likely to be characterised by human capital formation. This is going to be the century of human capital, the premium is going to be on youth (don't believe all those old wives tales about embodied workforce experience: just take a glance at Germany and Japan), and we are likely to see divergence switchback BIG TIME. Oh, and yes, when we find the time to get round to it, we may have to come up with something in the way of an alternative economic system, since the one we have now feeds on growth, and growth is one thing that's going to be kinda hard to come by in a world which is both shrinking and aging at the same time. There have long been substantial criticisms of Adam Smith's market as 'hidden hand', on the grounds that the market, for all its virtues, is a mechanism which seems to be unable in and of itself the conditions of its own existence. The example of the 'population slowdown' is then just one more philosphical nail in the coffin, unless that is we broaden the idea to encompass emergent, 'order for free', autopoeic processes, in which case, unfortunately the modern market finds itself reduced to just one more 'contingent' phenomenon.

The 2002 Revision of the official United Nations population estimates and projections breaks new ground in terms of the assumptions made on future human fertility and the impact of the HIV/AIDS epidemic. For the first time, the United Nations Population Division projects that future fertility levels in the majority of developing countries will likely fall below 2.1 children per woman, the level needed to ensure the long-term replacement of the population, at some point in the twenty-first century. By 2050, the medium variant of the 2002 Revision projects that 3 out of every 4 countries in the less developed regions will be experiencing below-replacement fertility.

A second important change in the 2002 Revision is that it anticipates a more serious and prolonged impact of the HIV/AIDS epidemic in the most affected countries than previous revisions. The impact of the disease is explicitly modelled for 53 countries, up from the 45 considered in the 2000 Revision. The dynamics of the epidemic, as estimated by UNAIDS, are assumed to remain unchanged until 2010. Thereafter prevalence levels are assumed to decline in a manner consistent with modifications of behaviour that reduce the rates of recruitment into the high risk groups as well as the chances of infection among those engaging in high risk behaviour. The resulting HIV prevalence levels remain relatively high until 2010 and then decline, but are still substantial by mid-century.

As a consequence of these changes, the 2002 Revision projects a lower population in 2050 than the 2000 Revision did: 8.9 billion instead of 9.3 billion according to the medium variant. About half of the 0.4 billion difference in these projected populations results from an increase in the number of projected deaths, the majority stemming from higher projected levels of HIVprevalence. The other half of the difference reflects a reduction in the projected number of births, primarily as a result of lower expected future fertility levels.

The results of the 2002 Revision confirm key conclusions from previous revisions and provide new insights into the sensitivity of population projections to future trends in fertility and mortality. The main findings of the 2002 Revision are summarized below.

1. Despite the lower fertility levels projected and the increased mortality risks to which some populations will be subject, the population of the world is expected to increase by 2.6 billion during the next 47 years, from 6.3 billion today to 8.9 billion in 2050. However, the realization of these projections is contingent on ensuring that couples have access to family planning and that efforts to arrest the current spread of the HIV/AIDS epidemic are successful in reducing its growth momentum. The potential for considerable population increase remains high. According to the results of the 2002 Revision, if fertility were to remain constant in all countries at current levels, the total population of the globe could more than double by 2050, reaching 12.8 billion. Even a somewhat slower reduction of fertility than that projected in the medium variant would result in additional billions of people. Thus, if women were to have, on average, about half a child more than according to the medium variant, world population might rise to 10.6 billion in 2050 as projected in the high variant. The low variant, where women have, on average, half a child less than in the medium variant, would result in a 2050 population of 7.4 billion

2. World population is currently growing at a rate of 1.2 per cent annually, implying a net addition of 77 million people per year. Six countries account for half of that annual increment: India for 21 per cent; China for 12 per cent; Pakistan for 5 per cent; Bangladesh, Nigeria and the United States of America for 4 per cent each.

3. The increasing diversity of population dynamics among the countries and regions of theworld is evident in the results of the 2002 Revision. Whereas today the population of the more developed regions of the world is rising at an annual rate of 0.25 per cent, that of the less developed regions is increasing nearly six times as fast, at 1.46 per cent, and the subset of the 49 least developed countries is experiencing even more rapid population growth (2.4 per cent per year). Such differences, although somewhat dampened, will persist until 2050. By that time, the population of the more developed regions will have been declining for 20 years, whereas the population of the less developed regions will still be rising at an annual rate of 0.4 per cent. More importantly, the population of the least developed countries will likely be rising at a robust annual rate of over 1.2 per cent in 2045-2050.

4. As a result of these trends, the population of more developed regions, currently at 1.2 billion, is anticipated to change little during the next 50 years. In addition, because fertility levels for most of the developed countries are expected to remain below replacement level during 2000-2050, the populations of 33 countries are projected to be smaller by mid-century than today (e.g., 14 per cent smaller in Japan; 22 per cent smaller in Italy, and between 30 and 50 per cent smaller in the cases of Bulgaria, Estonia, Georgia, Latvia, the Russian Federation and Ukraine).
Source: UN Population Division

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