With Great Demographics Comes Great Power

Why Population Will Drive Geopolitics

Nicholas Eberstadt | July/August 2019 | Foreign Affairs

Demographics may not be destiny, but for students of geopolitics, they come close. Although conventional measures of economic and military power often receive more attention, few factors influence the long-term competition between great powers as much as changes in the size, capabilities, and characteristics of national populations.

The United States is a case in point. In 1850, the United States was home to some 23 million people, 13 million fewer than France. Today, the U.S. population is close to 330 million, larger than the British, Dutch, French, German, and Italian populations combined. For more than a century, the United States has had the world’s largest skilled work force, and by measures such as mean years of adult schooling, it has long had among the world’s most highly educated populations. These favorable demographic fundamentals, more than geography or natural resources, explain why the United States emerged as the world’s preeminent economic and military power after World War II—and why it still occupies that position today.

Yet past performance is no guarantee of future results. Thanks in large part to demographics, rival states such as China have become genuine great-power competitors over the past few decades. The United States, meanwhile, has eroded or squandered its demographic edge in a number of ways, even as its traditional allies in Europe and Asia have struggled with population stagnation or decline. So far, the damage to U.S. power has been limited by the fact that the United States’ main geopolitical rivals face serious demographic problems of their own. Gazing further into the future, however, population growth and rising levels of education may propel new countries toward great-power status.

Demographics offer a clue to the geopolitical world of the future—and how Washington should prepare for it. To maintain the United States’ edge, American leaders must take steps to slow or reverse the negative demographic trends now eating away at the foundations of U.S. power. They must also begin to rethink Washington’s global strategy, recognizing that the future of the U.S.-led international order lies with the young and growing democracies of the developing world. With wise domestic policy and farsighted diplomacy, U.S. leaders can ensure that their country’s still considerable human resources reinforce American power long into the coming century.

PEOPLE POWER

For premodern empires and kingdoms, a larger population meant more people to tax and send off to war. But thanks to modern economic development, demographics are more important now than ever before. Since the Industrial Revolution, technological innovations and other improvements in human productivity have led to a long-term decline in the price of natural resources and basic commodities such as food. At the same time, they have greatly increased the returns to skilled labor. In fact, most global economic growth since World War II can be attributed to two factors: improvements in human capital—a catchall term for education, health, nutrition, training, and other factors that determine an individual worker’s potential—and favorable business climates, which allowed the value of those human resources to be unlocked. Human capital, in particular, has an extraordinary impact on economies. For each year of increased life expectancy today, for instance, a country sees a permanent increase in per capita income of about four percent. And for each additional year of schooling that a country’s citizens obtain, the country sees, on average, a ten percent increase in per capita GDP.

Vast disparities between human capital development in different countries have produced gaps in economic productivity that are larger today than at any previous point in history. For example, in 2017, according to World Bank estimates, Ireland’s per capita GDP was roughly 100 times as high as that of the Central African Republic (when adjusted for relative purchasing power). Yet such disparities are not set in stone: thanks to technological breakthroughs, nations can now augment their human capital faster than ever before. It took Sweden from 1886 to 2003 to raise its life expectancy from 50 years to 80 years; South Korea accomplished the same feat in less than half the time, between the late 1950s and 2009.

Despite the possibility of such rapid and often unexpected improvements in human capital, demography as a whole is a fairly predictable social science. Unlike economic or technological forecasts, population projections tend to be reasonably accurate for at least a few decades, since most of the people who will be living in the world of 2040, for example, are already alive today. And although such projections cannot predict the future, they can offer a rough guide to the emerging contours of international politics—the changing realm of the possible in world affairs. Policymakers who want to plan for the long term should be paying attention.

POPULATION PROBLEMS IN THE PRC

Today, the international arena is dominated by one superpower (the United States) and two great powers (China and Russia). Recent U.S. misadventures abroad and political turbulence at home have naturally led some to suggest that American power is on the wane. A look at demographic projections for China and Russia, however, suggests that fears that the United States will lose its position of primacy anytime soon are misplaced.

Unfavorable demographic trends are creating heavy headwinds for the Chinese economy.

China is the United States’ main international rival, and at first glance, it is an impressive rival indeed. It is the world’s most populous country, with almost 1.4 billion people, and over the past four decades, it has seen the most rapid and sustained burst of economic growth in human history. Adjusting for relative purchasing power, the Chinese economy is now the largest in the world. China’s growth since the 1970s is usually attributed to the policies of Deng Xiaoping, who pushed the country in a more market-friendly direction after becoming the paramount leader in 1978. But demographics also played a critical role. Between 1975 and 2010, China’s working-age population (those aged 15–64) nearly doubled, and total hours worked grew even faster, as the country abandoned the Maoist policies that had made paid labor both less available and less appealing. Overall health and educational attainment rose rapidly, as well.

Given this impressive record, many—apparently including China’s leadership—expect that China will surpass the United States as the world’s leading power sometime in the next two decades. Yet the country’s longer-term demographic prospects suggest otherwise. Over the past two generations, China has seen a collapse in fertility, exacerbated by Beijing’s ruthless population-control programs. The one-child policy, introduced in 1979, was ended in 2015, but the damage had already been done. China’s total fertility rate (TFR) has been below the replacement level of 2.1 children per woman since at least the early 1990s. According to the UN Population Division, China’s TFR now stands at 1.6, but some analysts, such as Cai Fang, a Chinese demographer and member of the Standing Committee of the National People’s Congress, believe it may be as low as 1.4—more than 30 percent below replacement. In major cities such as Shanghai, fertility may stand at one birth per woman or less.

With decades of extremely low fertility in its immediate past, decades more of that to come, and no likelihood of mass immigration, China will see its population peak by 2027, according to projections by the U.S. Census Bureau. Its working-age population has already been shrinking for the past five years, and it is set to decrease by at least 100 million between 2015 and 2040. The country will see a particularly large decline in its working-age population under 30, which may plunge by nearly 30 percent over these years. Although this rising generation will be the best educated in Chinese history, the country’s overall growth in educational attainment will slow as the less educated older generations come to make up a larger and larger share of the total population. The Wittgenstein Centre for Demography and Global Human Capital estimates that by 2040, China’s adult population will have fewer average years of schooling than that of Bolivia or Zimbabwe.

As China’s working population slumps, its over-65 population is set to explode. Between 2015 and 2040, the number of Chinese over the age of 65 is projected to rise from about 135 million to 325 million or more. By 2040, China could have twice as many elderly people as children under the age of 15, and the median age of China’s population could rise to 48, up from 37 in 2015 and less than 25 in 1990. No country has ever gone gray at a faster pace. The process will be particularly extreme in rural China, as young Chinese migrate to the cities in search of opportunity. On the whole, China’s elderly in 2040 will be both poor and poorly educated, dependent on others for the overwhelming majority of their consumption and other needs.

Taken together, these unfavorable demographic trends are creating heavy headwinds for the Chinese economy. To make matters worse, China faces additional adverse demographic factors. Under the one-child policy, for instance, Chinese parents often opted for an abortion over giving birth to a girl, creating one of the most imbalanced infant and child sex ratios in the modern world. In the years ahead, China will have to deal with the problem of tens of millions of surplus men, mostly from disadvantaged rural backgrounds, with no prospects of marrying, having children, or continuing their family line.

China will also face a related problem over the next generation, as traditional Chinese family structures atrophy or evaporate. Since the beginning of written history, Chinese society has relied on extended kinship networks to cope with economic risks. Yet a rising generation of urban Chinese youth is made up of only children of only children, young men and women with no siblings, cousins, aunts, or uncles. The end of 2,500 years of family tradition will be a departure into the unknown for Chinese civilization—and Beijing is manifestly unprepared for this impending great leap.

THE RUSSIAN PARADOX

For Russia, the demographic outlook may be even worse. The Kremlin sees itself as helming a global power, yet its grandiose self-conception is badly mismatched with the human resources at its disposal. From the standpoint of population and human capital, Russia looks like a power in the grip of all but irremediable decline.

In some respects, Russia is a typical European country: it has an aging, shrinking population and difficulties assimilating the low-skilled immigrant work force on which its economy increasingly depends. When it comes to human capital, however, Russia faces an acute crisis. After fully half a century of stagnation or regression, Russia has finally seen an improvement over the last decade in the overall health of its people, as evidenced by measures such as life expectancy at birth. But the situation is still dire. In 2016, according to the World Health Organization, 15-year-old Russian males could expect to live another 52.3 years: slightly less than their counterparts in Haiti. Fifteen-year-old Russian females, although better off than the males, had a life expectancy only slightly above the range for the UN’s roster of least developed countries.

In addition to its health problems, Russia is failing in knowledge production. Call it “the Russian paradox”: high levels of schooling, low levels of human capital. Despite an ostensibly educated citizenry, Russia (with a population of 145 million) earns fewer patents each year from the U.S. Patent and Trademark Office than the state of Alabama (population: five million). Russia earns less from service exports than Denmark, with its population of six million, and has less privately held wealth than Sweden, with a population of ten million. And since Russia’s working-age population is set to age and shrink between 2015 and 2040, its relative economic potential will diminish, too.

Ambitious revisionist states such as Russia can, for a time, punch above their weight in international affairs. Yet for all of Russian President Vladimir Putin’s foreign meddling and military adventurism, his country is facing demographic constraints that will make it extraordinarily difficult for him and his successors to maintain, much less seriously improve, Russia’s geopolitical position.

THE AMERICAN ADVANTAGE

Relative to its principal rivals, the United States is in an enviable position. This should come as no surprise: the United States has been the most powerful country in the world since World War II, and its demographic advantages—its large and highly educated population, relatively high fertility rates, and welcoming immigration policies—have been crucial to that success.

The United States’ most obvious demographic advantage is its size. It is the world’s third most populous country, and it is likely to remain so until 2040. No other developed country even comes close—the second and third largest, Japan and Germany, have populations that are two-fifths and one-fourth the size of the U.S. population, respectively. Between 1990 and 2015, the United States generated nearly all the population growth for the UN’s “more developed regions,” and both UN and U.S. Census Bureau projections suggest that it will generate all of these regions’ population growth between 2015 and 2040. In fact, excluding sub-Saharan Africa—the only region where the rate of population growth is still increasing—the U.S. population is on track to grow slightly faster than the world population between now and 2040.

The United States benefits from what might be called “American demographic exceptionalism.” Compared with other developed countries, the United States has long enjoyed distinctly high immigration levels and birthrates. Between 1950 and 2015, close to 50 million people immigrated to the United States, accounting for nearly half of the developed world’s net immigration over that time period. These immigrants and their descendants made up most of the United States’ population growth over those decades. But U.S. fertility is also unusually high for an affluent society. Apart from a temporary dip during and immediately after the Vietnam War, the United States’ birthrates after World War II have consistently exceeded the developed-country average. Between the mid-1980s and the financial crisis of 2008, the United States was the only rich country with replacement-level fertility. Assuming continued levels of immigration and near-replacement fertility, most demographers project that by 2040, the United States will have a population of around 380 million. It will have a younger population than almost any other rich democracy, and its working-age population will still be expanding. And unlike the rest of the developed world in 2040, it will still have more births than deaths.

Yet the United States’ demographic advantage is not merely a function of numbers. For over a century, the United States has benefited from a large and growing cadre of highly skilled workers. Research by the economists Robert Barro and Jong-Wha Lee on educational attainment suggests that between 1870 and 2010, Americans were the world’s most highly educated people in terms of average years of schooling for the working-age population. In 2015, by their estimate, 56 million men and women in the United States aged 25 to 64 had undergraduate degrees or graduate degrees: twice as many as in China and almost one-sixth of the global total. The United States leads the world in research and development, as measured by international patent applications and scientific publications, and in wealth generation, with Americans having accumulated more private wealth since 2000 than the Chinese have in recorded history.

THE TASK AHEAD

Despite these advantages, all is not well for the United States. Warning lights are flashing for a number of key demographic metrics. In 2014, U.S. life expectancy began slowly but steadily dropping for the first time in a century. This drop is partly due to the surge in so-called deaths of despair (deaths from suicide, a drug overdose, or complications from alcoholism), especially in economically depressed regions of the country. Yet even before the decline began, U.S. progress in public health indicators had been painfully slow and astonishingly expensive. Improvements in educational attainment have also been stalled for decades: as of 2010, American adults born in the early 1980s had, on average, 13.7 years of schooling, only fractionally higher than the average of 13.5 years for their parents’ generation, born in the early 1950s. Meanwhile, employment rates for American men of prime working age (25–54) are at levels not seen since the Great Depression.

Further, it is possible that consensus projections for U.S. population growth are too optimistic. Such projections generally assume that U.S. fertility will return to replacement levels. But U.S. fertility fell by about ten percent after 2008 and shows no sign of recovering. According to the Centers for Disease Control and Prevention, in 2017, the United States’ TFR stood at 1.77, the lowest level since the 1970s and below those of European countries such as France and Sweden. Most demographic projections also assume that the United States will maintain net immigration at its current level of roughly one million per year. But immigration is an intrinsically political phenomenon. In the past, the United States has decided to all but shut off immigration in response to domestic turbulence, and it may do so again.

Even with these troubling signs of decline, no rival is likely to overtake the United States in terms of raw human potential anytime soon. China and India, for instance, may have more college-educated workers than the United States does by 2040, but the superior quality of U.S. higher education will weigh heavily in the United States’ favor, and the United States will almost certainly still have the world’s largest pool of workers with graduate degrees. If U.S. demographic and human resource indicators continue to stagnate or regress, however, Americans may lose their appetite for playing a leading role in international affairs. Isolationism and populism could thrive, and the U.S. electorate could be unwilling to bear the considerable costs of maintaining the international order. There is also a nontrivial risk that the United States’ relatively disappointing trends in health and education will harm its long-term economic performance.

To avoid these outcomes, the United States will need to revitalize its human resource base and restore its dynamism in business, health, and education. Doing so will be immensely difficult—a far-reaching undertaking that is beyond the powers of the federal government alone. The first step, however, is for Americans of all political persuasions to recognize the urgency of the task.

AGING ALLIES

Even as they try to put U.S. demographic trends back on track, American policymakers should also begin considering what U.S. strategy should look like in a world in which demographic advantages no longer guarantee U.S. hegemony. One appealing solution would be to rely more on traditional U.S. partners. Japan’s GDP is nearly four times as large as Russia’s on an exchange-rate basis, and although its total population is slightly smaller than Russia’s, it has a larger cadre of highly skilled workers. The current population of the EU is around 512 million, nearly 200 million more than that of the United States, and its economy is still substantially larger than China’s on an exchange-rate basis.

The trouble is that many of Washington’s traditional allies face even more daunting demographic challenges than does the United States. The EU member states and Japan, for instance, all have healthy, well-educated, and highly productive populations. Yet the EU and Japan have both registered sub-replacement fertility rates since the 1970s, and their fertility rates began to drop far below the replacement level in the 1980s. In both the EU and Japan, deaths now outnumber births. Their working-age populations are in long-term decline, and their overall populations are aging at rates that would have sounded like science fiction not so long ago. The main demographic difference between the EU and Japan is that Europe has embraced immigration and Japan has not.

Both approaches have their drawbacks. For EU members, immigration has postponed the shrinking of their work forces and slowed the aging of their populations. Yet the EU’s record of integrating newcomers, particularly Muslims from poorer countries, is uneven at best, and cultural conflicts over immigration are roiling politics across the continent. Japan has avoided these convulsions, but at the cost of rapid and irreversible population decline. As in China, this is leading to an implosion of the traditional Japanese family. Japanese demographers project that a woman born in Japan in 1990 has close to a 40 percent chance of having no children of her own and a 50 percent chance of never having grandchildren. Japan is not just graying: it is becoming a country of elderly social isolates, with rising needs and decreasing family support.

Population decline does not preclude improvements in living standards, but it is a drag on relative economic and military power. According to the U.S. Census Bureau, the United States’ working-age population is set to grow by about ten percent between 2015 and 2040. Over the same period, Germany’s and South Korea’s working-age populations are expected to shrink by 20 percent, and Japan’s, by 22 percent. The number of young men aged 15 to 24, the group from which military manpower is typically drawn, is projected to increase over that period by three percent in the United States but to fall by 23 percent in Germany, 25 percent in Japan, and almost 40 percent in South Korea.

This decline, combined with the budgetary politics of the modern welfare state—borrowing money from future generations to pay for the current benefits of older voters—means that most U.S. treaty allies will become less willing and able to provide for their own defense over the coming decades. The United States, in other words, will become ever more valuable to its aging security partners at the same time as they become less valuable to Washington—all while the United States’ own demographic advantage is beginning to erode.

MAKING NEW FRIENDS

Yet even as population trends sap the strength of traditional powers in Europe and East Asia, they are propelling a whole new set of countries, many of them potential U.S. allies and partners, toward great-power status. By courting these rising powers, U.S. policymakers can strengthen the international order for decades to come.

Washington should begin by turning its attention to South and Southeast Asia. As Japan and South Korea lose population, for instance, emerging democracies such as Indonesia and the Philippines will continue to grow. By 2040, Indonesia could have a population of over 300 million, up from around 260 million today, and the Philippines’ population could reach 140 million—which would be possibly larger than Russia’s. Both countries, moreover, are young and increasingly well educated. In 2015, China had almost four times as many people aged 20 to 39 as Indonesia and the Philippines did combined; by 2040, it is projected to have only twice as many. Both Indonesia and the Philippines are likely to come into increasing confrontation with an expansionist China, and as they do, they may discover an interest in deeper security cooperation with the United States.

Indonesia and the Philippines, however, pale in comparison to India. India is on track to overtake China as the world’s most populous country within the next decade, and by 2040, India’s working-age population may exceed China’s by 200 million. India’s population will still be growing in 2040, when China’s will be in rapid decline. By that time, about 24 percent of China’s population will be over 65, compared with around 12 percent of India’s. India has its own demographic and human resource problems—compared with China, it still has poor public health indicators, low average educational attainment, and egregiously high levels of illiteracy. Despite years of attempted reforms, India still ranks 130th out of 186 countries on the Heritage Foundation’s Index of Economic Freedom. Yet by 2040, India may have a larger pool of highly educated workers aged 20 to 49 than China, and its advantage will be increasing with every year. The United States and India have already begun defense cooperation in the interest of countering China; American leaders should make it a priority to deepen this partnership in the years ahead.

The United States today has many advantages over its international rivals, thanks in no small part to its favorable demographics. Yet U.S. power cannot be taken for granted. It would be a geopolitical tragedy if the postwar economic and security order that the United States built really were to fade from the scene: no alternative arrangement is likely to promise as much freedom and prosperity to as many people as the U.S.-led international order does today. Thankfully, it is a tragedy that can be averted. If the United States can begin to repair its human capital base and forge new alliances for the twenty-first century, it can strengthen—with the aid of demographics—Pax Americana for generations to come.

NICHOLAS EBERSTADT is Henry Wendt Chair in Political Economy at the American Enterprise Institute.