Why Demographics Matter More than Anything to the Future of the World - and Your Business
This article in strategy+business covers an important, yet still highly underappreciated, trend whose ramifications will shape the world for the next half-century, and that is the shift in demographics, driving an aging population in the developed world and continued rapid population growth in the developing world. Far more than global warming, this trend has the potential to destabilize existing economies and upset the "world order," with all the potential chaos and, far too likely, violence that such change portends.
You can't fight demographics, and the figures that will shape the next 50 years have already been established. Japan, Europe, and (to a lesser extent - only because of higher immigration) the US will see an aging population, creating huge burdens on government coffers and the younger workers who will be expected to provide the tax revenue. This has been discussed for years but, since the consequences are still many years out and the elderly form such a powerful consumption and voting block, it is difficult to formulate a strategy to respond.
The interviewees discuss a range of ideas but only a few touch on the need to provide incentives to change behaviors. It is only through firm incentives that people, businesses, and government will change their everyday choices. Some practical (if admittedly difficult) ideas offered include:
• Delaying benefits from social insurance to encourage people to work later in life
• Encouraging retirees to move to lower cost-of-living regions to stretch the impact of their retirement benefits (though encouraging them to leave the country sounds a bit harsh)
• Using tax incentives to encourage larger families (to increase the future working population)
• Loosening up immigration policies
• Improving (perhaps subsidizing) child care coverage to encourage women to remain in the workforce
• Providing credits to encourage the hiring of older workers (where the alternative may be offshoring, where there are insufficient younger workers fill the necessary jobs)
And if you think that sounds challenging for the developed world, consider the challenges of developing economies, whose resources are, in many cases, insufficient to support their existing population. Some of the statistics shared are frightening:
• The population of Yemen will more than double from 17M to 39M people by 2020.
• Pakistan will add one-half the current population of Germany, or 38M people, over the next decade.
In such countries that already fight to maintain stability (and, in Yemen's case, lose), the potential for unrest is enormous. It is only by eventually moving beyond China and India and finding opportunities in Africa and the Middle East (which will represent over 20% of global population by 2050) that we can hope to provide an environment in which such countries can grow without violent disruption. This is not an altruistic wish, and it is my hope that the necessity of finding new markets will drive businesses and governments to focus their future efforts on Africa.
