Discussing population dynamics in elite (or is that elitist, let's just call it Wall Street) circles has always had an aura of taboo about it, due to the inevitable degeneration of any conversation into Malthusian rhetoric, especially if one of the speakers had had a little too much to drink. And for better or worse, name-dropping Malthus does not garner brownie points, nor will it lead to another horrendous straight to HBO faux morality tale about this or that. That stigma, however (and luckily) has not prevented Deutsche Bank's Sanjeev Sanyal (yes, there are people at DB who do think originally and whose day is not taken up by trips to and fro Englewood Cliffs) from penning a must read macro analysis titled "The End of Population Growth" which we will discuss more in depth shortly, but wanted to bring readers' attention to one particular chart: namely that comparing world fertility rates in 1950-1955 and 2010-2015. The surprising implication of the below chart leads Sanyal to declare that the period set to begin in just 10 years "will be one of the most important turning points in history" simply because: "the human race will no longer be replacing itself by the early 2020s. Population growth will continue for a few more decades because of momentum from the age structure and people living longer but, reproductively speaking, our species will no longer be growing." And since global reproduction will not be net additive, it will be net subtractive... and on a long-enough timeline the world's population will drop to zero...

From Deutsche Bank:

Some fascinating clarification:

A theme that is common to the latest census data for almost all countries is that population growth is slowing for almost all countries. The population growth rate of the United States during the decade of 2000-2010 was 0.9% per annum, down from 1.2% during the nineties. In comparison, Japan and Germany saw almost zero population growth during the last decade. Nonetheless, it is the emerging economies that have seen the most dramatic deceleration in population growth. China saw its population growth rate fall to 0.56% per annum over the last decade compared to a rate of around 1% in the nineties and over 2% in the sixties and early seventies. Similarly, India’s population growth rate fell to 1.6% from a peak of 2.3% in the seventies. The growth rate for the last decade in Brazil was 1.1% and for Russia minus 0.4%. Note that these are averages for the last decade and the current pace is significantly lower in almost all cases.

At its simplest, demographic dynamics is about the relative relationship between birth rates and death rates. Typically, death rates fall first as people live longer due to improvements in nutrition, public health, medicine and so on. Birth rates fall more slowly when social attitudes gradually change, especially for women. The chronological gap between the two rates causes a population boom. Over time, however, the birth rate catches up and, in most developed countries, keeps falling past the level required to stabilize population. As being witnessed now in Japan, the population then ages rapidly and shrinks in size.

Let us look at how this cycle played itself out over the last two hundred years. For most of history, the years of life expected at birth were around 24-28years. This began to change in Europe from the late eighteenth century. By 1820, life expectation in the United States and many Western European countries has drifted up to 37-40 years range. It then drifted up to the 47-50 years range by 1900 and further to 65-70 years range by 1950. In contrast, the life expectancy in India and China barely budged from the pre-industrial equilibrium till well into the twentieth century. In 1950, China had a life expectation of 41 years and it may have been as low as 38 years in India. They now stand at around 74 and 65 years respectively. Both have some more scope for improvement as life expectancy is now in the late seventies or early eighties in most developed countries.

The decline in birth rates also began in Western Europe at the time of the Industrial Revolution. Many interrelated changes affected this – urbanization, attitudes, aspirations, literacy, female work participation and so on. France was the first place where this change took place. The number of births per 100 population dropped from 3.2 in 1820 to 2.2 in 1900. Other Western Europeans followed soon. Today, the birth rate per 100 stands at around 1 for most Western European countries. The United States had a much higher starting point and, despite sharp declines, still has a level higher than for most developed countries. In contrast, Japan had a relatively high birth rate of 3.24 in 1900 but now is at a mere 0.75 – one of the lowest in the world.

One useful way to think about trends in birth rates is to look at what is called the Total Fertility Rate (TFR). This is the average number of live births per woman over her lifetime. It is usually estimated by sampling women of child bearing age (usually defined as 15-44 years). In the long run, a population is said to be stable if the TFR is at the “replacement rate”. This is usually said to be 2.1 births per woman but in reality only developed countries can hope to keep their population stable with such a level. For developing countries, the required replacement rate is much higher because factors such as infant mortality and maternal deaths at childbirth. Thus, the replacement level of TFR is a little above 2.3 for the world as a whole.

The TFR for most developed countries now stands well below replacement levels. The OECD average is at around 1.74 but there are countries like Germany and Japan that produce less than 1.4 children per woman 5. According to the OECD’s latest estimates, South Korea has a TFR of barely 1.15 – a level that foretells rapid aging and a sharp decline in population from the 2020s. However, the biggest TFR declines in recent years have been in emerging economies. According to the UN’s population division, the TFR in China and India were 6.1 and 5.9 respectively in 1950. The ratio has now fallen to 1.8 in China due to the aggressive one-child policy and to 2.6 in India due to a steady change in social attitudes. Similarly, Brazil’s TFR has fallen to 1.7 from 6.2 in 1950. These are large declines but there is reason to believe that the underlying dynamics are driving actual birth rates down even faster than suggested by the headline TFR.

China and, to lesser extent, India have skewed gender ratios. The Chinese census suggests that there are 118.6 boys being born for every 100 girls, worsening from 116.9 in 2000. Similarly, India has a gender ratio at birth of around 110 boys for every 100 girls with large regional variations. Compare this with the “natural” ratio of 105 boys per 100 girls (notice that even the natural ratio is not exactly 1:1). A cultural preference for boys is usually held responsible for the deviation. Since it is women who give birth and not men, the future scarcity of women implies that the effective reproductive capacity for both countries is below what is suggested by the unadjusted TFR reading. After making the adjustment for the gender imbalance, China’s Effective Fertility Rate (EFR) is around 1.5 while that for India is around 2.45 – both below what is widely discussed. In other words, the Chinese are already far from replacing themselves while the Indians are only slightly above the replacement rate.

If we make the same adjustment for the world’s fertility rate, we now have an EFR of around 2.4 which is almost at the replacement rate. In our view, the human race will no longer be replacing itself by the early 2020s. Population growth will continue for a few more decades because of momentum from the age structure and people living longer but, reproductively speaking, our species will no longer be growing. This will be one of the most important turning points in history.

Much more shortly

