Friday, September 01, 2006

Can India meet the Global Challenge of Declining Populations?

This is obviously a silly question since it would be unfair to put the solution of this solely on India's shoulders. But still the logic is worth pondering; as many Western countries step into a period with ageing populations and declining workforces one of the only sources of upward demographic stimulus comes from immigration and of course exploiting foreign labour locally. Now India has a huge and young population and many pundits are hailing India's future as resting on this very fact. So does it all add up then? Well actually if we look at it the numbers it fits ok ...

'As richer nations age, India is growing younger: 60 per cent of its current population is aged below 25, and the present working-age population (aged 15-59) is four times that of the United States, according to official and non-governmental organization (NGO) data.

A report by investment bank Goldman Sachs estimates that by 2020, the US, China, Japan and Russia would together face a shortfall of 42 million people of working age, while India would have a surplus of 47 million.'

But alas, this analysis does not hold up for scrutiny because if we look inside India we find that there are large boundaries for the effective deployment of the country's workforce.

'Despite an ambitious development agenda, the future does not augur too well. A study by the Vienna Institute of Demography concluded on the basis of the experience of the past decade that 30 per cent of Bihar and 20 per cent of Uttar Pradesh states would remain illiterate in 2026.

Bihar and Uttar Pradesh are among the five states with lowest development indicators that, according to demographic projections, will account for nearly 60 per cent of the increase in population by 2026.

Bringing the youth of these states into the loop would require huge investment in providing basic amenities like drinking water, sanitation, healthcare and primary education, experts maintain. But they add that there is no shortage of resources or capacity. The root cause of slow progress is the lack of political will.'

In fact, when we speak of India and demographics it is fruitful not to analyze the country as a whole but instead to look at bit more closely at what actually are the demographic realities of this country. To that end Edward had an informative post over at The Indian Economy Blog some time ago.

'The idea that India is not one country but two (or more?) is, of course, not a new one, but it does seem to me to be a thesis which is worth revisiting, in particular in the light of India’s current demographic realities. Chris Wilson in a paper (pdf) entitled “Implications of global demographic convergence for fertility theory” suggests that in order to understand anything which is worth understanding about India some type of regional dis-aggretation is vital since there is so much variance between states. In arguing this he makes the following seemingly valid point that.'

So what do we have here? Comparing numbers like I did initially above does not serve much purpose. We need to approach this in two steps.

1) Before we can understand how India's demographic development will interact with the rest of the world we need to understand that development. Here we can immediately make two points; firstly we must be aware of the demographic disparities within India and how the dynamics of immigration can potentially amend this. Secondly we must realize that merely resting one's analysis on the fact that India is passing through its demographic dividend with a favourable dependency ratio to follow is not quite enough. Whether India can actually exploit this is the real question and since I do not want to open Pandora's Box I will leave this question for now.

2) Once we have a bit more clear picture of the internal demographic dynamics of India we can begin to ponder about how and to what extent India's surplus of workers can offset the decline of workers elsewhere. Here the numbers seem to add up quite neatly and already the business-trend of offshoring to India is a part of every serious textbook on business strategics. In short, India has so much potential in its own right and for the rest of the world to draw upon but we cannot say for sure how far this will go in the future.


Randy McDonald said...

Bangladesh has been a major source of immigrants to India and Malaysia, too.

Maybe we should look to sub-Saharan Africa if we're talking about large-scale replacement migration.

Anonymous said...

India's TFR will drop below replacement level within the next decade.

Countries with declining populations should face up to the fact that if their problems are to be solved, it'll have to be internally, by changing their reproductive habits.

Admin said...

"Countries with declining populations should face up to the fact that if their problems are to be solved, it'll have to be internally, by changing their reproductive habits."

I think this is extremely unrealistic Stirling. Ex US and Israel there is very little even prima facie evidence of this happening, and even in the US case, as you know, I don't accept your interpretation. But leaving that on one side, if the reproductive process isn't going to adapt, the economic one will have to.

The first step will be more and more countries trying to live by running export surpluses to make up for deficiencies in internal demand, as we are already seeing in the cases of Germany, Japan and (possibly) Finland. Italy would very much like to join this group, but doesn't seem able to, hence the more chronic economic problems.

But, in the same way as you indicate that India and China cannot expect to live by attracting migrants (due to their size), we also cannot expect that the global economy will be able to accept in its present form these two countries trying to live by sustaining massive trade surpluses, so something somewhere has to give.

What that something will be I don't think anyone as yet knows. In part I guess this is why this blog exists, to try and discover what those changes are going to be as they happen.

Anonymous said...

In the long run, sub-replacement fertility is not sustainable; simple arithmetic makes that plain.

Unless the human race is going to become extinct, which I think we can rule out!

So it's "unrealistic" to suppose there will _not_ be a change in reproductive behavior.

There has to be or there eventually won't be any human beings left.

Equally, in the long run (many generations) the problem will be self-correcting.

Genetic and cultural evolution will select for people with a high propensity to reproduce.

This could, for example, function by eliminating the gene-complex associated with high IQ. Or it could simply select for an 'instinct' to strongly desire lots of children.

(As one biologist put it, if birth-control pills had been around in prehistoric Africa, we'd now have an instinct to fear them as we do snakes.)

Or it could operate by meme selection, favoring tightly segregated subcultural groups with high fertility and a high ability to hold onto their young.

Even if these individuals or groups are small to begin with, differential fertility acts by geometric progression. Shifts may be small at first, but they gather speed until they have unstoppable momentum.

You might call this the "World Of Ultra-Orthodox Jews and Amish" hypothesis, in a North American context. With Mormons also a presence.

(I leave aside 3rd-world groups with currently high fertility because modernization will presumably have the same effect there as elsewhere -- see the article here about fertility in Morocco. Groups like the Amish or the ultraorothodox, on the other hand, have demonstrated that they can maintain a high-fertility regieme in the heart of the modern world.)

The question is what is to be done in the meantime.

It's obvious that very low birthrates have severely negative consequences in almost every sphere you can name.

And even worse, since declines are uneven regionally, they impact relative standing between groups.

Suitably drastic resource transfers to larger families would probably work -- but they'd have to be _quite_ drastic, involving large-scale social reorganization.

Total tax exemption for families of 4 or more, for instance, which in a European context would effectively double their incomes if they were at the median or higher.

This would require ruthlessly "starving" other claims on public funds.

Admin said...

"In the long run....Unless the human race is going to become extinct, which I think we can rule out!"

Well Keynes, as you will know, famously said that 'in the long run we are all dead', maybe this was what he meant :).

But more seriously when we get to the longer long run (I mean for economists the long run is probably anything over 5 years) it is very difficult to say what is going to happen.

I think you and I would agree that at the moment most of the world is in denial that this is any kind of problem. At some point, somewhere, some kind of s**t is going to hit some kind of fan.

My guess is that this somewhere will be Italy, simply because the economics of the situation are so stacked up against Italy. Germany and Japan are pretty rich, and quite good at exporting, so in some ways they are more 'durable'.

Obviously eventually places like Belorussia and Latvia are going to implode eventually, but this is probably a slow drip death, and anyway they have a much lower public profile.

But really, who knows. I think though that there will be a high profile 'event', and this 'event' will then put the fear of god in all the rest (not meant as a religious metaphor, but it could be if you are right about the Amish).

So after this event we could see changes.

"Genetic and cultural evolution will select for people with a high propensity to reproduce."

This argument is of course impeccable in terms of Darwinian theory, but as we know this kind of adaptive evolution needs many generations to have an effect, and my guess is that we will see a lot of other things happening which are going to affect all this before we get through too many more generations.

You are a science fiction writer I think, and truth, as we know, is often stranger than fiction, wouldn't it be more probable that some 'big brother' type government (of the kind many US religious fundamentalists already fear exists in Washington) could develop the the bio-technology to breed humans with this trait (I think a technique using something called RNAi which is currently very popular with experiments on model organisms could be adapted for use to mass produce 'knock-out' humans). But as I say, this is probably for a science fiction futureworld.

"Suitably drastic resource transfers to larger families would probably work -- but they'd have to be _quite_ drastic, involving large-scale social reorganization."

I think this is the important point. Market mechanisms and individual pursuit of self-interest aren't going to resolve this, Adam Smith's 'hidden hand' seem to have left this bit out.

The point about all the groups you mention is that they have a strong collective identity and sense of group solidarity. So really adapting to all this (since as you say we don't want to face extinction) means either centralised bio-tech manipulation or the evolution of societies with the kinds of collective mechanisms which have been rather out of fashion in recent years, ones where altruism to some extent triumphs over self-interest.

In the meantime I am not optimistic, things will get better before they get worse, and I think at some point we will get to hear that 'loud sucking sound': implosion.