16-12-2023
6 minutes

Demography is Changing Europe and the World

If one were to identify a factor whose significance in the context of ongoing socio-economic processes is most underestimated and overlooked, in my opinion, it would be demography. It exerts a substantial influence on the functioning of societies and economies. It’s one thing to disregard demographic issues when they shape up favorably. In such cases, they often act as an unrecognized driving force, like favorable winds. By not appreciating their significance, we often attribute a country’s expansion to either particular entrepreneurial spirit or government actions. However, we face a different scenario when demography begins to weigh down, like an anchor unwittingly thrown overboard, dragging along the seabed. It is then that the real quality – and foresight – of socio-economic policy is tested. This is exemplified by Japan, a country that was one of the first to enter the aging process of its society. Today, the high standard of living in Japan is largely maintained thanks to enormous profits generated by Japanese companies abroad. The Japanese understood in time that, with shrinking domestic resources, one way to maintain a high standard is to leverage the work (and consumption) of others and to locally harness the profits resulting from this strategy.

The demographic challenge particularly pertains to the so-called transitional period, where the social structure shifts from one equilibrium – with a growing or stable proportion of people of working age – to a new one, in which the proportion of people of working age gradually decreases. Poland, like an increasing number of countries worldwide, is currently in this transitional period, and the consequences are becoming increasingly palpable.

However, I do not wish to write about Poland this time. Demographic issues also have a global dimension, which I would like to focus on by comparing two thirty-year periods: 1990-2020 and 2020-2050, from the perspective of population changes. What has happened is based on actual data, while the projection into the future is based on the UN forecast (World Population Prospects 2022). Of course, like any forecast, it is based on certain assumptions, but unlike many other variables, we know more about demographic processes, after all, the future cohorts of 30, 40, 50, 60-year-olds are already living on our planet. For the sake of simplifying the picture, I have also adopted my own assumption (not entirely corresponding to reality) that the number of people aged 20-64 is a universal representation, common to all countries/continents, of the category of people of working age, those who typically sustain themselves through their own work.

What interesting insights can be gleaned from UN data? Firstly, it appears that global population growth will slow down. Between 1990 and 2020, Earth’s population increased by 2.5 billion, but from 2020 to 2050, it is expected to grow by only 1.9 billion. More significant, however, is the question of where the largest increase will occur; a new leader will emerge, which will be Africa (with an increase of 1.1 billion, i.e., 60% of the total global growth). Africa will take over from the Asian continent, which was the undisputed leader in the period 1990-2020 (with an increase of 1.5 billion). Europe is the only continent for which a population decline is forecast (over 40 million by 2050). It’s not surprising, as Europe is definitely the oldest continent – already over 20% of its inhabitants are 65 and older, twice as much as the global average. Although the aging process of societies will affect all continents – except Africa – (in 2050, 17% of the global population will be 65 and older), Europe will remain the leader in this respect; the share of those 65 and older will approach 30% by 2050.

From the standpoint of international division of labor, the growth of its resources, namely people of working age, is a very crucial issue. Here too, Africa will emerge as the clear leader (forecasts indicate that the number of people aged 20-64 will increase by 700 million), significantly outpacing Asia (projected increase of 280 million, compared to an increase of 1.1 billion in 1990-2020). It is evident that demographic changes were one of the significant factors behind the expansion of Asian economies over the past 30 years. The influx of young people entering the workforce supported the development of the supply side, but also generated strong increases in demand for housing and various types of products and services. In the coming years, this situation will change significantly, as the influx of new labor resources in Asia will greatly slow down, and its geographical distribution will change. India will remain the largest supplier of new labor, but China, which was second until now, will experience a huge decrease in the number of working-age people (over 190 million by 2050!), one could even speak of a collapse. Pakistan and the Philippines will find a place on the podium alongside India.

On other continents, increases in labor resources will be much smaller, and in Europe, they will shrink by over 70 million. This is a lot, representing a decline of 17% compared to the level in 2020.

Even based on this relatively small amount of data, several very important issues can be discerned from the perspective of our continent. Generally speaking, Europe faces a huge, multi-dimensional challenge related to demography. In the context of security (military, deterrence), this means the need to maintain a significant technological advantage. In the socio-economic dimension, there is a need to develop and implement strategies that ensure the capability of “servicing” aging societies, especially in terms of healthcare services, long-term care, etc. To keep the entire system going – that is, to ensure the maintenance of a high quality of life – a productivity leap is needed, thus Europe must become a leader in automation and robotization.

It is also in Europe’s interest to locate part of its production in Africa. One reason is to duplicate Japan’s strategy, and the other – perhaps even more important – is to create attractive job opportunities there, encouraging people to stay on the continent and thereby limiting the increasing migratory pressure. In the context of climate change impacts on the African continent, Europe must also engage in the development of infrastructure that supports adaptation to new conditions.

Europe also needs a smart immigration policy, an influx of ‘fresh blood’ to protect the continent from regression – as older people become the deciding force during elections, the importance of current transfers grows at the expense of investing in the future.

In summary, European demography will confront our continent with significant challenges, both those related to the course of global processes and internal ones. Whether these challenges will be confronted by individual countries or by an integrated Europe could be of great significance from the perspective of the chance of ultimate success.

 

 

Published: Parkiet, 09.12.2023

The image accompanying the text was generated by AI (DALL-E)

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