Hamish McRae: In a world with seven billion people, the power balance will shift

Asia and Africa will determine what happens with population growth

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The Independent Online

Seven billion. Next week the world's population will, according the UN, reach seven billion and a baby born somewhere in the world will be designated the seven billionth baby – just as Adnan Nevic, now a healthy 11-year-old living in Bosnia, became the six billionth when he was born just after midnight on 11 October, 1999.

There is, of course, a spurious precision about this. We may have passed seven billion already – there are some suggestions we got there three months ago – or if the US Census Bureau is right, it will not happen until next March. But the detail does not matter.

What matters is that we are adding more than the population of Britain to the world every year and, while the rate of growth is slowing somewhat, it seems likely that eight billion will be reached sometime in the 2020s.

This is such a huge subject that anyone commenting on it can do little more than set out a check-list, a template into which people can fit their own information and ideas. But that surely is useful if only because it helps to clarify people's ideas.

The starting point must be to look at where this growth occurs. It is entirely a phenomenon of the emerging world. Not a single developed country has a fertility rate above the replacement rate of 2.1 babies per mother. A few, notably the US but also the UK, are experiencing population growth, but that is the result of net migration. Most of Europe, plus Russia and Japan, face population decline. It may seem harsh but what we think, do or say about population growth is not important. Asia and Africa will determine what happens.

The two Asian giants, China and India, have different profiles. China's one-child policy has brought fertility rates down to developed country levels and, in some places, below them. Shanghai's rate of 0.8 babies per mother is the lowest of any large city in the world. China is currently at a growth "sweet spot" with a large working population relative to its children and old people and, for purely demographic reasons, its present growth rate will slow in the years ahead.

India's fertility rates are falling too but more slowly, with the result that India will pass China in population within a generation, though in terms of income per head it is likely to lag well behind.

In Africa the fall in fertility rates has been much slower, with, for example, Nigerian mothers estimated to have on average 5.4 babies. The growth of the population in Africa will inevitably give the continent a larger place in every debate about the future of humankind, with the obvious challenge of how to give them an improving standard of living and acceptable quality of life.

There are other parts of the world where population is rising very rapidly, much of the Middle East for example, but Africa's sheer numbers make its future hugely important to the future of the world as a whole.

Population change affects economic size which in turn affects power. As a result, Europe and the US's relative power will inevitably decline. Most predictions have China as the world's largest economy and India the third largest (with the US as number two) within 20 years.

We have to accept that. But developed countries can retain relevance in many ways. One is to cope as well as possible with our own demographic challenges, by, for example, making sure that our young people are well-educated, that older workers are used wisely, that we set aside resources to care for retirees and so on. Another is to develop technologies that enable a larger world population to improve living standards without placing too great a burden on the planet's resources.

Still another is to apply our science towards improving crop yields so that we can feed people better. In short, we retain relevance not by what we say, but what we do – but please, don't let's kid ourselves that what we think matters much.

High inflation means even lower growth

The week's principal domestic economic story is the inflation figures. September's numbers matter particularly, because they are the base for pensions, benefits and other index-linked government disbursements. But the worries are far deeper than that.

In the short run, the higher the inflation rate the lower the growth. This is a simple mathematical truth, because to calculate real growth you deduct inflation from nominal growth, but it is also a practical truth because more money spent on filling the car tank is less spent in the shops.

One reason why the economy is growing so slowly is that we have let inflation run much faster than in the US or Europe.

That leads to a longer-term issue, which we cannot, as a country, avoid much longer. It is whether we have an acceptable structure for monetary policy.

Most of us felt that the independent Bank of England, with its monetary policy committee setting interest rates and writing to the Chancellor when the inflation target was missed, was by and large a well-designed system. It is hard to believe that now.

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