If Demography Is Destiny, Then India Has the Edge

Discussion in 'Economy & Infrastructure' started by kickok1975, Jan 16, 2011.

  1. kickok1975

    kickok1975 Stars and Ambassadors Stars and Ambassadors

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    Research from HSBC and Standard Chartered shows the U.S. and other industrialized nations slipping while some surprising leaders emerge [​IMG]

    What do Saudi Arabia, Egypt, Israel, Venezuela, and Malaysia have in common? Those five nations will experience the world's fastest growth in their working-age populations between 2010 and 2050, according to a new report by HSBC (HBC), the London-based bank. The next five on the list, which draws on U.N. projections, are India, Colombia, Argentina, Turkey, and Ireland.

    In the present, it's an odd combination of economic stars and stumblers: Egypt still struggles with poverty, while Venezuela just devalued its currency. Ireland is practically a ward of the European Union. Yet if demography is destiny, as the 19th century French social scientist August Comte supposedly said, then all of these countries bear watching for big things in the coming four decades.

    It's hard enough to predict gross domestic product a few quarters out. Undaunted, some economists are scanning the data for signs of the economic world order decades from now. The latest result is HSBC's Jan. 4 report, The World in 2050. After a period in which small, rich nations carried disproportionate clout, the dynamic is changing, according to HSBC. By 2050, says lead author Karen Ward, the bank's senior global economist, the emerging economies led by India and China will collectively be larger than the developed economies. Small European nations with low birthrates such as Austria, Belgium, Denmark, Norway, and Sweden will drop off the list of the 30 biggest economies.

    HSBC's archrival, Standard Chartered, makes the same point in a November 2010 Super-Cycle Report, which looks ahead to the year 2030. The Standard Chartered authors foresee a return to historical norms for the world economy. In the year 1000, China and India together accounted for three-quarters of global output, according to estimates by economic historian Angus Maddison. China and India's combined share of output shrank to a puny 5 percent by 2000; it will rebound to 34 percent by 2030, estimates Standard Chartered. The U.S. share will decline from 31 percent in 2000 to 12 percent in 2030, Standard Chartered predicts.

    Banks use scholarly reports such as these as calling cards for investment banking business, and the two banks' similar messages should go over well with their clients in emerging markets. Although both have headquarters in London, Standard Chartered gets 90 percent of its revenue from Asia, the Middle East, and Africa, while HSBC is the biggest bank in Hong Kong and the biggest international bank in mainland China.
    Standard Chartered says the world has entered the third "super-cycle" of the Industrial Age. In the first, from 1870 to the eve of World War I, the U.S. grew into the world's biggest economy. The second, from the end of World War II through the early 1970s, witnessed Japan's ascendance to second place behind the U.S. In the third, which Standard Chartered says began in 2000 and has no end in sight, China will vault into first place with 24 percent of world GDP by 2030, twice the U.S. share.
    While Standard Chartered is ebullient about prospects for emerging markets, HSBC is merely optimistic. Citing research by Harvard University economist Robert J. Barro, HSBC's Ward says that extrapolating from current investment rates in emerging markets "will tend to overstate growth." Investments hinge on the quality of human capital, Ward notes. "With the average person in China spending six years of life in education vs. 12 years in the U.S., that constrains how quickly labor productivity can catch up," she said in an interview.

    The surprise winner is India, which despite its red tape, corruption, and inefficient politics will eventually surpass China's GDP growth rate, both banks project. China's top-line GDP growth will be inhibited by its one-child policy, which will cause its working-age population to shrink starting in the 2020s decade, says HSBC. India's working-age population will grow throughout the forecast period, the bank predicts, although not as rapidly as Saudi Arabia's, which the bank says will leap more than 70 percent from 2010 to 2050

    Using working-age population growth to predict the future has its limitations. Saudi Arabia even now suffers from widespread unemployment among its young. It will take a great effort to mold this youthful energy into a source of economic power.
    Rich nations will grow more slowly than emerging ones, both banks say, because they generally have slower-growing populations. And they are already close to the leading edge of technology, so there are no easy leapfrog opportunities. Standard Chartered says that "the continuing success of developed countries will depend more than ever on creativity." As emerging markets become wealthier, their demand for the sophisticated goods and services produced by developed countries should grow, the bank says. That is, unless the emerging nations move so fast up the learning curve that they provide their own sophisticated goods and services. "It's a very tough question" how the U.S. and other rich countries will fare in the contest for high-end products, says economist David Mann of Standard Chartered.

    Both banks conclude that strong global growth won't exhaust natural resources. HSBC cites an International Energy Agency scenario that says the price of oil could actually fall by 2050 if the world invests an extra $46 trillion in energy efficiency, renewables, nuclear, and "clean" coal. Standard Chartered expects the prices of oil and other commodities to rise—an investment opportunity, but not enough to choke off economic growth.

    The bottom line: 21st century economic growth leaders will have fast-rising working-age populations. India will surpass China in population and growth
     
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  3. Phenom

    Phenom Regular Member

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    Demography is a good thing only when a country is capable of providing jobs for all the populace. If a country is unable to provide enough jobs then demography would actually become a threat. IMO, countries like Saudi Arabia, Venezuela and Egypt actually faces the danger of instability as these countries have so far not shown the capability to create so many jobs. I am hopeful about India's future, but I don't put to much faith in these long term predictions. There are too many variables that could happen within the next 40 years, so these projections are simply like shooting in the dark.
     
  4. kickok1975

    kickok1975 Stars and Ambassadors Stars and Ambassadors

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    Sure you are right. Population is a double edge knife. A country can fall into chaos if a significant part of its population doesn’t share economic benefit. It applies to both India and China.

    However I’m kind of optimistic about future because we have been most populous countries in last 1000 years and still was able to manage and maintain lead most of time. It’s time we should dream about getting back to our rightful position.
     

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