What makes an effective politician? Politicians come from all walks of life but the vast majority of them do not have any formal training in political science or in government or in the tasks and tools of being a politician. Renova, an innovative non-partisan non-profit organization in Brazil, seeks to change that and to also improve governance, by training aspiring political candidates. In this podcast, Sami J. Karam speaks to founder and chairman Eduardo Mufarej about Renova’s mission, its training curriculum and its prospects.
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This is an update of a similar post from 2015. The UN projections have changed but only by small numbers. The main observations are the same as six years ago (click table to enlarge in a new tab).
The working age population (WAP, those aged 15 to 64) of sub-Saharan Africa continues to grow rapidly. It has more than doubled since 1990 from 252 million to 609 million, and is expected to more than double again by 2050 to 1.3 billion. If the reality turns out to be anywhere near these projections, it will be a significant challenge for African economies to absorb and to employ productively this enormous amount of new human energy.
India faces a similar challenge with its WAP growing from 928 million now to 1.1 billion in 2050. Though daunting, this represents a slowdown in the rate of growth from the previous thirty-year span 1990-2020.
The WAP of Europe, China and Japan have already peaked and will be declining for the rest of the century, per UN projections. Europe’s decline from near 500 million in 2005 to a projected 407 million by 2050 is mainly due to eastern and southern Europe. The WAP of France and the United Kingdom will flatline to 2050 while those of Germany and Russia decline.
In the United States, the steady growth in the WAP between 1960 and 2005 combined with a falling dependency ratio to fuel strong economic conditions. Growth in the WAP is expected to be more muted in the decades ahead.
Compared to the late 20th century and the first decades of this century, the future growth in the WAP will taper off or even turn negative in several regions and countries. Sub-Saharan Africa stands out as the exception that will maintain strong WAP momentum through at least 2050.
When the Soviet Union collapsed 26 years ago, it was generally agreed that the West had won the Cold War. This was affirmed by the prosperity and possibilities awaiting citizens of Western countries, as opposed to the political and economic stagnation experienced by those in Communist states. A natural conclusion, much repeated at the time, was that capitalism had finally defeated communism.
This sweeping statement was only partially true. If one took capitalism and communism as the only two protagonists in the post–World War II struggle, it was easy to see that the latter had suffered a mortal blow. But there was a third, stealthier protagonist situated between them. This was a system best identified today as cronyism. For if capitalism did win over the other two contenders in 1991, its victory was short-lived. And in the years that have followed, it is cronyism that has captured an ever-increasing share of economic activity. A survey of the distribution of power and money around the world makes it clear: cronyism, not capitalism, has ultimately prevailed. Continue reading at Foreign Affairs >>> or read the pdf below.
Changing demographics and the commodities crash have slowed down the development of poorer countries.
Perhaps it all started with a turn in China’s demographics. Demand growth for commodities has declined sharply from recent years and has resulted in a crash of global prices. Copper is down 54% from its post 2008 peak and down 25% this year alone. Crude oil is down 67% and 39% in the same time spans. In addition to softer demand, prices were negatively impacted by jumps in supply, most notably from shale energy producers in the United States. Read more →
A fast growing economy usually requires a growing working-age population. It is informative in this regard to look at the size of the working-age population (wap) for different regions and countries of the world.
The growth prospects of Brazil, Russia and China are dimming, while those of India are flaring.
If one is a lonely number, then ‘I’ could be a lonely letter, at least when it comes to the ‘I’ of the BRIC countries. Brazil, Russia and China all face mounting challenges in 2015 but the road ahead seems wide open for India. The main concern with this opening statement is that it seems to be the view of a large majority of observers.
Still, a majority is not the same as a consensus and certainly not the same as an extreme consensus. In investing, the consensus view is often right but the extreme consensus is absolutely and always wrong. For example, the consensus to buy tech stocks in 1997 was right but the extreme consensus to sell all non-tech and buy only tech in early 2000 was very wrong. When it comes to India, we are with the majority view, edging into consensus territory, but still far from extreme consensus. There remain enough doubters to ensure that this story still has plenty of time to play out.
Our approach to the topic is resolutely from the point of view of demographics. Demographics are not the be all and end all of an economy, but they are a very important vector, one of three very important vectors, the other two being innovation and institutional strength. Looking at the BRIC countries, the demographics of Russia and China are poor and those of Brazil are neutral. By contrast, the demographics of India, though challenging due to the large population size, could hold much promise if this huge newly created human energy can be harnessed and channelled in the right directions.
In general, the best demographic profile for an economy would be a rising population coupled with a declining dependency ratio (the ratio of dependents to workers). The increase in population means that demand for goods and services continues to grow. And the declining dependency ratio means that there is plenty of discretionary capital for consuming and for investing.
The US, Europe and China were in this sweet spot until six or seven years ago. Indeed, much of the world was in this sweet spot, a fact which largely explains the enormous creation of wealth and improvement in living conditions for billions of people in the past few decades. Things got more challenging in the middle of the last decade when dependency ratios in several countries bottomed out and started to rise.
BRIC Countries Total Dependency Ratios
We can’t blame the 2008 crisis on demographics alone. There were many abuses and excesses in the system which brought about the crisis. But it is worth noting that the crisis struck about the same time that a big reversal in demographics was taking place. A crisis would have come any way but instead of 2008, perhaps it would have come in say 2012 if the dependency ratio had bottomed four years later than it did.
Nor should anyone be surprised that Japan peaked in the late 1980s and has been struggling since then. Its dependency ratio bottomed in the early 1990s. Or that China saw a huge boom since 1980 after it introduced its one-child policy, thus engineering a very steep decline in its dependency ratio. Or that the US recovery has been slow, given that its population growth has slowed down and its dependency ratio has been rising.
USA, Europe, Japan Total Dependency Ratios
As shown in the first chart above, India is the only BRIC country with a declining dependency ratio between now and 2030. Russia and China’s are already rising and Brazil’s will bottom and rise by the end of this decade. Russia seems to be in the worst shape since it has both a declining population and a rising dependency ratio.
Finally two quick words on the other big vectors of economic growth: innovation and institutional strength. Innovation in Brazil, China (ex-Taiwan) and Russia has been slow and cannot be considered a factor in future growth. There was plenty of excess capital to invest in new businesses when the dependency ratio was declining in all those countries but it went instead into real estate and other unproductive investments. Innovation has been slightly better in India and could take a big leap forward with more capital investments in the decades ahead. India also has an immeasurably greater competitive advantage compared to the other BRIC members: its population speaks English.
Institutional Strength can be the subject of endless debate, especially if we try to draw comparisons across countries. All emerging countries have to make significant progress on this account.
Below are charts of country and regional dependency ratios.
First some definitions:
The total dependency ratio is the ratio of the population aged 0-14 and 65+ to the population aged 15-64. They are presented as number of dependents per 100 persons of working age (15-64).
The child dependency ratio is the ratio of the population aged 0-14 to the population aged 15-64. They are presented as number of dependents per 100 persons of working age (15-64).
The old-age dependency ratio is the ratio of the population aged 65 years or over to the population aged 15-64. They are presented as number of dependents per 100 persons of working age (15-64).
In theory, the economy does better when the dependency ratio is falling and less well when it is rising. But, as discussed in this previous post, two important mitigating factors are a country’s rate of innovation and its institutional strength.
United States, Europe, Japan
Figure 1 shows the total dependency ratios of Europe, Japan and the US from 1950 to 2050.
Fig. 1. Total Dependency Ratio, Europe, Japan, USA
Key takeaways are:
The ratio bottomed in Japan two decades before it bottomed in Europe and the US, which may explain Japan’s stagnation relative to the US and Europe in the 1990-2008 period.
In the 1980s, 1990s and early 2000s, Europe and the US benefited from a declining ratio.
All three ratios will rise from now into the foreseeable future. But Japan’s ratio will rise faster due to its older population.
BRIC countries
Figure 2 shows the total dependency ratios of the BRIC countries: Brazil, Russia, India and China.
Fig. 2. Total Dependency Ratio, BRIC countries
Key takeaways are:
The ratios of Russia and China are both bottoming in the middle of the present decade and will rise for the foreseeable future.
Brazil’s ratio will bottom later this decade and will subsequently rise.
India’s ratio will continue to fall until about 2030 and will level off until 2050, which may help its economy grow faster.
Country Charts
Following are charts for a few individual countries and for Europe and Africa, showing all three dependency ratios as defined above. The blue line is the total ratio, the red is the child ratio and the green is the old-age ratio.
Fig. 3. Dependency Ratios, USA
In the case of the US, Europe, Japan and China, it is clear that the rise in the total dependency ratio is mainly driven by a rising old-age ratio. Japan has the fastest rising old-age ratio. None of these countries is expected to see a big rise in its child ratio.
Fig. 4. Dependency Ratios, Europe
Fig. 5. Dependency Ratios, Japan
Note the steep 40+ point decline in China’s total dependency and child dependency ratios between 1970-2010. It is due to the country’s one-child policy and it provided a big boost to the Chinese economy in recent decades.
Fig. 6. Dependency Ratios, China
The following chart compares the total dependency ratios of the US and China. China’s ratio fell faster and will also climb faster.
Fig. 7. Total Dependency Ratio, USA, China
India and Sub-Saharan Africa have a more promising demographic profile. A declining total ratio could markedly improve their economies, if other obstacles can be overcome. In addition, unlike other regions, Sub-Saharan Africa will not have a rising old-age ratio for the foreseeable future.
Addis Ababa, November 21, 2012 –The African Union Commission (AUC), the Food and Agriculture Organization of the United Nations (FAO) and Instituto Lula of Brazil announced today they were joining efforts to help eradicate hunger and undernourishment in Africa.
The decision was reached at a meeting between the Chairperson of the African Union Commission (AUC), Nkosazana Dlamini Zuma, FAO Director-General, José Graziano da Silva, and former Brazilian President Luiz Inácio Lula da Silva, Honorary President of the Institute bearing his name.
This effort brings together the AUC’s leadership, FAO’s technical expertise and renewed commitment to fight hunger as well as the political backing of former Brazilian President Lula Da Silva. Knowledge and support from other international, regional and national partners will also go a long way to enhancing this new partnership. READ MORE.
If you would like to get a firsthand peek at the bright future of Brazil, but you don’t have $7,500 for a business-class fare to Rio de Janeiro, you can learn almost as much, while having less fun, by making your way to Henry County, Ill., just east of Moline.
Drive around and take a good look at the worst drought in half a century. Remind yourself as you look at the desiccated fields that the U.S. Department of Agriculture (USDA) predicted a record corn crop for 2012.
It didn’t turn out that way. Current best estimates are that the U.S. corn crop will fall by one-sixth. As a consequence, the price of corn has risen by 60 percent to an all-time high. Meanwhile, this year’s corn crop in Brazil is up 27 percent year-over-year. Brazil’s farmers are growing rich as American farmers go broke. READ MORE.
