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Population bomb ticks to our peril (2)

By David Bloom (Shanghai Daily)

17:00, August 30, 2011

Great risk

But long-term averages can mask significant volatility over time and variation across countries.

We know for certain that there is great risk in the population growth that lies ahead, as nearly all of it will occur in the world's most economically, politically, socially, and environmentally fragile countries.

A failure to absorb large numbers of people into productive employment could lead to mass suffering and myriad catastrophes.

The continuation of extreme cross-country income inequality could deter international cooperation, stalling or even reversing globalization, despite its potential to improve everyone's standard of living. Rapid population growth also tends to accelerate the depletion of environmental resources both locally and globally, and can permanently undermine the prospects for their recovery.

Some developing countries have addressed these challenges well.

For example, the East Asian "Tigers" cut their birth rates precipitously in the 1970s and 1980s, and used the resulting demographic breathing room to stunning advantage through judicious education and health policies, sound macroeconomic management, and careful regional and global economic engagement.

At the other end of the spectrum, countries in sub-Saharan Africa have fared much worse developmentally, in no small measure due to their inability to escape the crushing burden of rapid population growth and youth dependency.

Although developing countries are the primary sites of the world's most threatening population problems, the wealthy industrial countries face some rather vexing problems of their own.

From a demographic perspective, the advanced economies' productive capacity has reached a plateau of slightly more than two working-age people per dependent. But that indicator is projected to plummet to 1.36 by 2050, posing a threat to the sizable demographic dividend that these countries have enjoyed in recent decades.

Moreover, the rich countries can expect a massive expansion in the proportion of elderly people in their populations, owing to increased longevity, continued low fertility, and the progression of baby-boom cohorts through the population pyramid.

Although economic performance in the context of population aging is substantially uncharted territory, it is not hard to understand fears about the fiscal integrity of pay-as-you-go pension and health-care systems, and about growth slowdowns in the face of contracting workforces.

Policy suggestions

There are many policy suggestions to address fiscal sustainability and workforce shortages already under consideration, including higher retirement ages and mandatory contributions, together with lower benefits.

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