Demographic Dangers

Updated: May 19 2003, 05:30am hrs
There are global demographic shifts that can prove ominous for growth and welfare. Martin H Barnes of BCA Research, a Montreal based investment advisory firm, in a study projects a higher rate at which the working age populations of Europe and Japan may continue to decline in the future. This is because of the low fertility in these countries. The United Nations 2002 Population Report projections say the ranks of 15-60 year-olds in Japan, Germany, Italy and Russia will decline by 10-20 per cent by 2025. This means that there will be fewer workers in the future. Productivity will suffer and slower growth may affect demand for consumer goods. Barnes fears that Europes potential GDP growth rate will fall from an average 2.2 per cent a year in the 1990s to 1.4 per cent by 2025.

Barnes study does not examine Indias demographic structure per se. But it is fair to say that India may not suffer from a falling rate of working population till 2013. The share of working population in the age group 15-60 years has steadily grown from 57.9 per cent in 1991 to 58.1 per cent in 2001 and is projected to rise to 63.5 per cent by 2013. This means that the Indian economy neednt have any fear of falling productivity due to a falling working age population. The problem is one of inefficient utilisation of resources. Also, growing joblessness and attendant social turbulence may become real dangers.

The US need not fear either. High fertility and immigration will ensure a steady growth of its working force in the future. Its major worry relates to a sharp rise in the aged population that may entail social expenditure. The US has more to fear from terrorist attacks. The growing numbers of jobless youth can provide cannon fodder for terrorist organisations. Yet as Barnes observes, Americas unique demographic profile among major industrial nations suggests that its position as the worlds main economic and political power will become even stronger.

Economist Gary S Becker is also worried over the impact of terrorism on movement of capital and people in the long run with sinister implications for economic growth. He says the movement of capital and people over the past 50 years helped world trade grow by 5 per cent per year. World population more than doubled during this period but per capita income on an average grew by about 2 per cent. The uneven growth across regions has meant that the least developed countries have suffered the most. This is also because populations grew much more rapidly in those countries. Terrorism may worsen their plight.