Over the last two centuries, demographic changes have affected our world in ways never before seen in human history. Ever since the mass urbanisation of the nineteenth century, the changing size and nature of populations have presented huge challenges for governments, households and businesses, while also creating transformational opportunities. The next 100 years are likely to bring more of both, from tackling climate change to feeding an ever increasing population. What will these huge changes mean for investors?
Size matters
The current world population stands at 7.2 billion people. This represents an almost three-fold increase in population since 1950. By 2100, the United Nations estimates that the global population will be 10.9 billion, which means there will be 3.7 billion more consumers in the global marketplace, most of them born into low income countries. According to UN forecasts, the largest country in the world will be India (1.6 billion people) which will eventually overtake China (1.1 billion) as that country eventually feels the effects of an ageing population.
In recent decades, population growth has played a crucial part in transforming emerging markets like China into economic powerhouses, lifting millions out of poverty in the process. But there are also risks. The events of the ‘Arab Spring’ four years ago, where large, restive populations of young people spontaneously rose up against governments across the Middle East, illustrate the challenges posed by population growth for countries with poor levels of governance and weak job creation.
The biggest shift is likely to take place in Africa. Nigeria, for instance, is expected to see an explosion in population growth, adding over 700 million people to take its population to roughly 900 million by 2100. Other African countries are also expected to see big increases. This has profound implications for a continent where conflict and drought have often occurred in tandem, and which is likely to be further affected by of climate change. Yet in countries where consumerism, banking and telecommunications are taking off simultaneously, the potential opportunities for investors could be huge.
Growing older
While the world population is growing, it is in fact decelerating from the rate achieved in previous decades. The developed countries are growing older, and demographers project that global fertility rates are set to decline, particularly in countries which limit immigration. According to research by Evercore ISI, excluding the Anglo-Saxon countries population growth across the developed world is concentrated entirely among those over the age of 50. This has big implications for consumption trends. Older people are more likely to purchase services such as financial advice, health care and travel, as opposed to goods. By contrast, many manufactured products could experience a demographic headwind.
But it’s not just the developed world that is getting older. China is also ageing at a rapid pace. According to ISI, one third of the Chinese population — 437 million people — will be over the age of 60 by 2050. This presents a challenge as the Communist Party attempts to rebalance the economy towards domestic consumption, and may increase the pressure on China’s nascent healthcare system and other social services.
Into the city
In 1950, just 30% of the world’s population was urban. By 2050, almost two-thirds of the world’s population is expected to live in cities. This potentially throws up significant hurdles for governments seeking to ensure these burgeoning urban areas are able to support their populations and provide them with energy, food and clean water.
Moreover, the concentration of increasing urbanisation is likely to happen in developing economies. Just three countries — India, China and Nigeria — together are expected to account for 37% of the projected growth of the world’s urban population between 2014 and 2050. India is projected to add 404 million urban dwellers, China 292 million and Nigeria 212 million.
In 2014, the world saw an example of the dangers posed by rapid urbanisation in cities with limited public health infrastructure. Outbreaks of the Ebola virus threatened to create pandemics in Lagos, Freetown and other cities in Sub-Saharan Africa, before finally being contained after a concerted public health response. On the other hand, growing cities offer opportunities to expand access to jobs, health care and education, for large numbers of people in an economically efficient manner. The rapid economic progress enjoyed by high growth zones such as the coastal cities of China illustrates the transformative effects urbanisation can bring.
Conclusion
It has been said before that “demography is destiny”. Certainly, demographics will be a driving force for human beings on this planet, whether for good or ill. At Jupiter, we attempt to identify the long-term trends that population change is driving and the companies that are best exposed to take advantage of them.