Let's dig deeper now into population trends in the world. The study of population trends is called demography. And in this segment, we're going to go into the details as to what's changing in the world that might affect markets, that might affect politics, that might affect societies around the world. First of all, I'd like to bring to your attention why demography matters from an economic point of view. Let's just start by thinking about the production of goods and services. Well, if we have more people in the world, that means we're going to have more abundant labor that could be used for manufacturing or for producing services. The economic consequence might be, most likely, that wages will go down. And also that as wages go down in certain parts of the world more quickly than others, because they have more population, then companies will shift their production to those locations. It is also important to keep in mind that the participation of women in the labor force is another very important demographic phenomenon and we will be analyzing this trend as well in future weeks. But let's also think about the implications of demographic changes for consumption, for consumer markets. The size of markets depends on, well, the size of the population, but not only that. It also depends on the age structure of the population. Some countries in the world have relatively older populations than others. And this has a very large impact on the demand for education, for instance, or for financial services, for healthcare, for leisure and many other kinds of goods and service. Demographic trends also impact savings. The age structure of the population here is very important. Older populations tend to save less than populations that are younger. And of course, the fact that we have different age structures of the population in different parts of the world means that there will be flows of capital from countries where savings rates are very high to countries where savings rates are much lower. Now demography or population also has an impact on politics and we will be analyzing the consequences of demographic change for political systems around the world. Think about, for example, the fact that different parts of a given country, like different states here in the United States, have different degrees of representation in the US Congress, in the parliament. That depends mostly on the size of the population in the different states or in the different districts. But you should also think about how demographic trends may be affecting voting behavior. We know that people change their attitude towards politics and politicians as they grow older, and we also know that people born in different decades or belonging to different cohorts and generations behave differently politically. That is to say, people born in the 1960s, for instance, may be voting very differently than people who are born in the 1980s. It is also important to consider that demographic trends may have another effect which is international migration from countries that have very high rates of fertility, of people being born, towards other countries where those numbers of people who are being born are much, much lower. International migration, of course, can change the composition of the population in the receiving country. And also has implications or consequences for the country of origin of those migrants. And lastly, another very important political implication of population trends has to do with the rise of nationalism, mostly linked to rising levels of international migration. In many parts of the world, political parties that are defending lower rates of migration are attracting more voters. This is especially the case in Europe where xenophobic parties are now poised in some of these countries to even be part of the government. We will be analyzing many of these political trends as a result of demographic change in the world. I would also like to bring to your attention the consequences of population changes for the welfare state and for all of the services that governments typically offer their citizens. In the rich parts of the world, such as the United States or Europe, what we've seen over the last few years is that there are fewer babies born. And at the same time, people are living longer. Well, this surely has an impact on the ability of governments to offer the same level of services, especially welfare services, such as education or healthcare. Another area that is very directly affected by population dynamics is the ability of the government to offer old-age pensions for those people above a certain age. Demographic changes in the world are also putting a lot of pressure on pension systems, especially those pension systems that are pay-as-you-go or defined benefit systems. In these systems, what happens is that workers who are presently employed pay taxes and those taxes are used to pay for the pensions of people who are in retirement. These system are very different from the defined contribution problems where workers, essentially, set aside part of their wages throughout their lifetime, so that they have money at their disposal for retirement. Now, I would also like to share with you some thoughts about the geopolitical impact of demographic changes in the world. The size in terms of population of different countries in the world certainly has an impact of how much leverage, how much influence or even how much power those countries can exert. Obviously, a country with a very large population has a better chance of being a global power, especially if the economy is very developed. I would like to, in particular, bring to your attention that there are very few countries though, in the world that have managed over, let's say, the last 20 or 30 or 40 years to change the living standards of their populations in a dramatic way. And they tend to be relatively small countries, such as Singapore or Hong Kong or Taiwan. South Korea is little bit bigger and it's also one of these countries that has developed very quickly over the last 30 or 40 years. Over the last 10 or 15 years, China, India and Brazil have grown very quickly. And we are going to be analyzing in this class how exactly the economic growth in those economies has changed the global balance of power, given that these countries, India, China and Brazil are also very large from the point of view of population. I would like you to think about the following question. To what extent are population size and also the density of population per square mile or per square kilometer, in what ways are they relevant to the geopolitical balance of power in the world? We are going to be analyzing in-depth this question over the next few weeks of class. Lastly, I would like to be a little bit more precise here as to exactly what demography can do for us when it comes to analyzing global trends. So as I told you earlier, demography is the study of human populations. It's the systematic, often statistical study of those populations, especially regarding their size and density, their distribution and vital statistics. Keep in mind that very, very small demographic changes can cause very large transformations if those changes persist over many years. But also keep in mind, the demographic reversals take years to occur. That is to say, for a dramatic change in population, you always need to wait at least 10, 15 or 20 years. And also keep in mind that governments try to have an influence on demographic trends. But population policies are very difficult to design, extremely difficult to implement and they only have effects that one can see, and one can measure years into the future.
