Africa: 800 Million Jobs Needed

African economies are in a race to get ahead of the demographic boom.

“Let us share without fear the journey of migrants and refugees.” Pope Francis (@Pontifex) tweet on 27 September 2017.

While some people in the United States are sweating the presence, against the backdrop of a demographically stagnant white population, of the 11 million undocumented immigrants or of the 30+ million other foreign-born residents, there are far bigger numbers brewing in other parts of the world, numbers that are so large that they could affect, decades from now, the life of an American citizen far more than would the rare determined Mexican or Guatemalan who manages henceforth to scale President Trump’s purportedly impenetrable border wall.

In the next decades as was so often the case in history, the future shape of the world could once again be decided in Europe and by Europe’s and the West’s handling of Africa’s incipient demographic boom.

In fact, if you are a generous-minded European who shares the Pope’s noble sentiment and who views the ongoing wave of migrants coming into your country as a benign and positive development; or, if you believe that borders are outdated constructs and that all refugees and other immigrants should be welcomed into the rich world; indeed, if it is your view that anyone who stands in the way of this openness is misguided by racist and nefarious motives, then it behooves you to test the strength of your belief by examining the larger demographic data coming out of Africa and Asia. Read more

Capitalism Did Not Win the Cold War

This article first appeared at Foreign Affairs.

Why cronyism was the real victor.

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 >>>

The Economics of Dependency

This article first appeared at Foreign Affairs.

How countries hit the demographic sweet spot.

Demographics are among the most important influences on a country’s overall economic performance, but compared with other contributors, such as the quality of governance or institutions, their impact is underappreciated. Demographic factors, such as the age structure of a population, can determine whether a given economy will grow or stagnate to an even greater extent than can more obvious causes such as government policy.

One of the most consequential aspects of demographics as they relate to the economy is a phenomenon known as the “demographic dividend,” which refers to the boost to economic growth that occurs when a decline in total fertility, and subsequent entry of women into the work force, increases the number of workers (and thus decreases the number of dependents) relative to the total population. The demographic dividend has contributed to some of the greatest success stories of the twentieth century, and countries’ ability to understand and capture this dividend will continue to shape their economic prospects well into the future. Continue reading at Foreign Affairs >>>

The Bridge from Laissez-Faire to Socialism

Cronyism remains unchecked in the world’s largest economy.

We might object to the phrase crony capitalism for two reasons:

First, because cronyism is in some ways the antithesis of capitalism. The freedom to compete and the freedom to fail that are central tenets of capitalism are severely compromised by cronyism when in the former case powerful politicians intervene to shield their friends in business and finance from competition, and in the latter intervene again to save them from bankruptcy or occasionally from criminal prosecution. Of course, these friends in turn are no disloyal slouches and they later show themselves to be supremely appreciative by underwriting, financially and otherwise, those same politicians who had all but guaranteed their continued dominance in normal times and their survival against bad odds in times of distress. Read more

A Rough Estimate of GDP Growth in Africa and Asia

It is morally right that every child should be given the best chance to survive, eat well, stay healthy, and receive an education. Now we also know that it is among the best investments we can make. Healthy, well-educated kids grow into productive adults, capable of providing a better future for their own children, creating a virtuous circle that can help build a better, more prosperous world.   Bjorn Lomborg, Copenhagen Consensus.

In coming years, the global economy is going to need all the help that it can get. All countries of the West face a severe demographic challenge from the twin effect of an aging population and a large inflow of foreign migrants. Technology and innovation will continue to be powerful drivers of the economy but they will only partially offset the sluggish aggregate demand seen in richer countries. Read more

Rise of the Rest: A Vision Deferred

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

China’s Demographics at a Turning Point

For decades, the decline in China’s birth rate was a big boost for the economy. What now?

This week, schadenfreude could have been a word invented for China experts if you judge by some of the commentary surrounding the country’s lifting of its one-child policy. Most got it right that the legacy of the one-child policy is now a problem for the Chinese economy because of a rapidly rising old-age dependency ratio (green line in the first chart below). This was tacitly acknowledged by the lifting of the policy. Read more