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How Demographic Changes Will Affect Economic Activity over the Next Decade or Two? Report (Assessment)

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There is no doubt that the world is witnessing a large and unprecedented demographic transition in which not only the population growth is slowing, but the age structure of the contemporary population is also decreasing. However, over the next few years, the elderly population will continue to grow with a decline in the youth population.

World Economic Outlook (2004) while analyzing the relationship between population growth and the economy, suggests that policymakers like Thomas Malthus interpret in his work Essay on the Principle of Population in 1798, that the rate of population growth was determined by setting in equilibrium by the pace of economic growth. Too rapid population growth will result in the depression of wages and the consequences would be diseases to raise mortality, lesser marriages, and decreased childbearing (World Economic Outlook, 2004).

On the other hand, rapid economic expansion will bring an increase to prosperity, fertility and the population would then set a new equilibrium. Many scholars believe that the theories proposed by Malthus are reversely related to the contemporary world. In this scenario where economic prosperity has been proportional to fallen fertility rates resulting in slower population growth and aging, what can we expect within the next few decades?

Economic activity in the next stage of the transition will witness tremendous shifts from this industrial fertility and mortality to post-industrial low fertility and mortality. Such a transition will result in declines in mortality, especially infant and child mortality, which will further mark a new beginning of almost all demographic transitions, and the age structure will be strongly influenced since most of these declines in mortality are enjoyed by infants and children (Birdsall et al, 2001, p. 106).

Different components of the demographic changes will have different negative influences on economic growth. The population growth rate would influence economic growth in context with the age distribution factor. Ansley Coale and Edgar Hoover in 1958 used the word ‘dependency rate’ to interpret future findings that predicted industries as low saving, low investment, and slow educational capital-deepening institutes (Birdsall et al, 2001, p. 106).

A growing concern is that population growth will cause natural resource pressures and environmental threats, which will further bring political instability in most developing countries. Kahl (2002) mentions that impending environmental crises will be escorted by a future plagued by endless resource wars which will deepen non-traditional security issues, including the potentially destabilizing effects of dramatic demographic and environmental change.

Neo-Malthusians argue that population growth, though at a slower pace will impact resources in scarcity and will continue to be the catalysts of political crises and conflict in developing countries. Contemporary neo-classical work indicates that the scarcity in the environmental sources has inverted the neo-Malthusian position, for which an abundance of natural resources, will be the main reason for provoking armed conflicts in the future. This will cause absolute deprivation between people’s needs and wants and what they think they deserve.

Demographical resource scarcity and economic marginalization will escort to two types of deprivation. First, it will increase hardship so as to ensure the supply of economic and natural resources to every citizen in order to avoid unequal distribution of resources. Secondly, demographic shifts will deprive youth of education, employment, frustrated youth who feel both absolutely and relatively deprived. Social grievances will be increased with a lowered standard of living and degraded quality of life. So, managerial decisions will be based upon keeping ahead of a deprived society.

References

Anonymous. (2004). Chapter III: How Will Demographic Change Affect the Global Economy? World Economic Outlook. p. 137. International Monetary Fund.

Birdsall Nancy, Kelly, C. Allen & Sinding Steven. (2001). Population Matters: Demographic Change, Economic Growth, and Poverty in the Developing World: Oxford University Press: New York.

Kahl Colin. (2002). Demographic Change, Natural Resources and Violence’ the Current Debate. Journal of International Affairs, 56(1), 257.

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