The Rise and Fall of Nations: Forces of Change in the Post-Crisis World

by Ruchir Sharma

For countries confronting a rapidly aging and declining workforce, it doesn’t matter whether immigrants arrive as “economic migrants” seeking opportunity or as “political refugees” fleeing war or persecuti...

The pressure to attract or retain workers will be particularly acute in the emerging world, where fertility rates have fallen faster and life expectancy has increased much faster than they did in the past, when wealthy countries like Britain or ...

To get a better handle on how demographics will limit national economies in coming years, I studied population trends in the countries on my list of postwar growth miracles—the fifty-six cases in which a country sustained an average economic growth of at least 6 percent for at least a decade.

I found that during these booms the average growth rate of the working-age population was 2.7 percent. In other words, a significant part of the growth in these miracle economies could be explained by the fact that more and more young people were reaching working age. This clear connection between a population explosion and an economic miracle has played out in dozens of cases, from Brazil in the 1960s and ’70s to Malaysia from the 1960s through the 1990s.

Population decline is now high on the list of reasons, alongside its heavy debts and excessive investments, to doubt that China can sustain rapid GDP growth. Since 2010 a credit binge has run up China’s debts to around 300 percent of GDP, which has been widely discussed. The investment boom that was driving China’s rapid growth has started to unravel and is now leaving development ghost towns all over the country. But the fallout from the depopulation bomb is at least as damaging to growth.

To produce strong economic growth in a country with a shrinking population is close to impossible, or as the European Commission warned in 2005, “Never in history has there been economic growth without population growth.”

Based on the record for nearly 200 countries going back to 1960, there are 698 cases in which data for both population growth and GDP g...

Among these cases, there were 38 in which a country’s working-age population was shrinking over the course of the decade, and the average GDP growth rate for these countries was just 1.5 percent. And in only three of the 698 cases did a country with a shrinking...

All three were small countries bouncing back from a period of political turmoil, postwar chaos, or post–Soviet collapse: Portugal in the 1960s, and G...

This record suggests that an average growth rate of 6 percent or more is extremely unlikely in China, even though the official t...

In a few other populous countries, the number of working-age people is growing at a rate near or above 2 percent, including the Philippines and some emerging countries with economies too small to make the top ...

These populations are also forecast to keep growing rapidly for the next decade, so they have a demographic edge on the competition. For them, the trick is to avoid falling for the fallacy of the “demographic dividend,” the idea that population growth pays off automatically in rapid economic growth. It pays off only if political le...

In the 1960s and ’70s, rapid population growth in Africa, China, and India led to famines, high unemployment, and civil strife. Rapid population growth is often a precondition for fast ec...

In most countries, before the 2000s, strong population growth was the norm but typically did not produce an economic miracle. In my study, more than 60 percent of the 698 cases had a working-age population growth rate of more than 2 percent, but only a quarter of those population booms led to an econ...

The countries where a population boom failed to produce an economic miracle include Turkey in every decade between 1960 and 2000, and the Philippines in every decade between 1960 and 2010. Today not even Kenya can assume that its world-leading population growth rate—projected at 3 perce...

Though discussions of rapid population growth tend to focus on big emerging countries, a rising number of workers is also critical to economic growth in developed countries. In recent decades, the United States has come to see itself as by far the most dynamic and flexible of the developed economies, far more innovative than Europe, far less hidebound than Japan. But much of its recent advantage could be traced to the fact that more young people were entering the workforce.

Over the past thirty years, the working-age population has been growing much faster in the United States than in its major industrial rivals: twice as fast as in France and Britain, five times faster than in Germany, and ten times faster than in Japan. That demographic boost helps explain faster U.S. economic growth over the same period.

In Germany and Britain, for example, factoring out their slow-growing populations, per capita income has been growing as fast as that of the United States. Over the last thirty years, the U.S. economy expanded at an average rate that was 0.9 percentage points faster than Germany’s, and its working-age population ...

Population forecasts for the developed world are quite discouraging for the 2015–20 period. Among the ten largest developed economies, the number of working-age people is expected to remain static in France, shrink a little in Spain, and contract at a ra...

The U.S. forecast was less bleak, with a positive population growth rate of 0.2 percent, about the same as those of Britain and Canada. The best news for developed countries was confined unfortunately to smaller ones, led by Singapore and Australia. There the populations are still growing at a good pace, but for the global economy,...

The worldwide movement of women into the workforce that energized much of the postwar era has stagnated in the past twenty years, with the average female labor force participation rate stuck at around 50 percent.

To get a sense of which economies have the most—or the least—opportunity to generate growth by building up the female labor force, one can compare countries in the same income class. Among rich countries, according to a 2015 study by Citi Research, female labor force participation ranges from nearly 80 percent in Switzerland to 70 percent in Germany and less than 60 percent in the United States and Japan.

In Canada, an effort to open doors to women produced quick results. Only 68 percent of Canadian women participated in the workforce in 1990; two decades later that figure had increased to 74 percent, largely on the back of reforms including tax cuts for second earners and new childcare services.

No matter how aggressive these campaigns get, all countries have a higher male than female participation rate, though this gender gap varies widely by country. The countries with the smallest gender gap, less than 10 percent, include Norway, Sweden, Canada, and Vietnam.

Such restrictions are particularly prevalent in the Middle East and South Asia, the regions with the world’s lowest rates of female labor force participation, 26 and 35 percent respectively. The gender gap exceeds 50 points in Pakistan, Iran, Saudi Arabia, and Egypt, and the hurdles to working women often involve a combination of written laws and cultural norms. In a New Yorker magazine piece, Peter Hessler profiled a Chinese entrepreneur who opened a cell phone factory in Egypt but had to shut it down within a year partly because his female employees—despite a strong work ethic—were compelled by Egyptian cultural norms to refuse night shifts and to quit once they got married.

One basic driver of population growth has remained steady in recent decades. Since 1960 the global fertility rate has plummeted, and life expectancy has extended from 50 years to 69 and is still rising, but the rate of migration has stayed pretty much the same.

Half a century ago migrants accounted for about 3 percent of the global population, and in 2012 they still accounted for about 3 percent. And for all the fear generated in 2015 by the surge of more than one million refugees into Europe from war-torn Syria, Iraq, and Afghanistan, these surges are likely to last only as long as the localized violence.

The more powerful underlying trend is the collapse of working-age population growth in the emerging world, which is already decreasing flows of economic migrants from these countries to the developed world. Between 2005 and 2010 net migration from developing to developed countries totaled 16.4...

In fact, at least before anti-immigrant movements took off in Europe and the United States in 2015, the competition to attract foreign workers had been heating up. According to the United Nations, the number of countries that had publicly stated plans to try to increase the size of their populations “via immigr...

To get a sense of which countries are doing well in attracting migrants, watch for which nations have been gaining or losing the most in population, as a result of net migration. Between 2011 and 2015 among the biggest gainers in the develop...

While the inflow of migrants was a big plus for the German economy, it was still relatively small compared to the pace of population decline. Between 2014 and 2015 the number of new arrivals spiked more than eightfold to about one million, but Germany would have to accept even more—about 1.5 million—every year between 2015 and 2030 in order to maintain its current balance of working-age people to retirees.

That is not to suggest that Germany can or should simply accept more than a million refugees a year, because the challenges of integrating that many people into the economy quickly are real. It is only to dramatize the scale of Germany’s aging problem, in which the imbalance between old and young is unfolding even faster than the refugees were arriving in 2015.

This situation is typical for many industrial countries: Even a huge increase in the number of migrants they accept will only par...

Outside of the refugee crisis, Canada and Australia have seen even bigger migration-driven boosts to their population than Germany, with total increases of 3...

In recent years Australia’s population has grown faster than that of any large developed country mainly because it has been open to orderly immigration. Two-thirds of the country’s population growth is accounted fo...

Australia’s population is aging and its economic growth slowing, but if it keeps its doors open—which is far from certain in 2015, as an anti-immigrant movement gains momentum—the economic deceleration...

Japan has been the anti-Australia, closing its doors about as tightly as a modern nation could. Less than 2 percent of its population is foreign born, compared to 30 percent of Australia’s. Until recently this insularity was considered a competitive advantage; in the 1980s analysts inside and outside Japan saw the “harmony” of a m...

Some high government officials still take that line, but their views have collided with a widening realization in the Abe administration that Japan is going to be one lonely, shrinking civilization if it does not welcome economic migrants.

Prime Minister Abe has increased the number of visas available to these new arrivals, and the numbers are picking up. But right now Japan has a net annual gain from migration of about fifty thousand people a year, and it would have to increase that number roughly tenfold to make up for its projected population decline through the year 2030. In other words, Japan would have to become a lot more like Australia.

South Korea is another ethnically uniform culture that once embraced its homogeneity as a source of cohesion in politics and discipline in the workforce. But it has been changing much faster than Japan in the face o...

The shock of the Asian financial crisis of 1997–98 forced South Korea to rethink its cloistered ways. While there were about a quarter-million immigrants in South Korea before the crisis, since the year 2000 the immigrant population has increased 400 percent...

South Korea’s government now promotes multiculturalism as official policy. Immigration services officials boast of their far-reaching efforts to lure talent, and the United Nations has lauded South Korea’s system of providing fore...

Though the working-age population is already shrinking, it would have been shrinking four times more rapidly without the influx of migrants. Further, since taking office in 2013, President Park Geun-hye has promised new moves to address the agi...

These campaigns to recruit economic migrants contrast with the disorganized efforts of nearby Thailand, now known as the “Old Man of Southeast Asia” because it is the only country in that region in which the working-age...

Led by a proselytizing bureaucrat who came to be known as Mr. Condom, Thailand in the 1970s pushed a birth control program that was, some now argue, too successful. Cops handed out condom...

Mr. Condom—his real name was Mechai Viravaidya—offered free vasectomies at his restaurant chain Cabbages and Condoms and developed an international reputation by bri...

The fertility rate fell sharply, from 6 children for the average woman in 1970 to below the replacem...

Women aren’t the answer for Thailand, because its female labor force participation rate is already more than 70 percent—by far the highest among countries at Thailand’s i...

Compared to others in Southeast Asia, this laid-back Buddhist society is also unusually open to foreigners, with nearly four million immigrants comprising more than 5 percent of its population, versus...

It is common in Thailand to meet foreign executives running major companies—something that rarely happens in more nationalist nei...