Kristin R. MoyerOne of the most dramatic social changes in history is brewing according (see entire article in The Economist: “Go Forth and Multiple a Lot Less”). At some point in the next several years, the fertility rate of half of the world will be 2.1 or below. This is replacement level fertility, where people only have enough children to replace the population.
Iran is an example of the social change that comes through replacement fertility. In 1984, fertility rates were 7, but by 2006 they fell to 1.9 (and just 1.5 in Tehran). That is a huge amount of change in just 22 years. The riots in Iran this year showed the social change that comes lower fertility rates. According to The Economist, about 1/3 of the population is 15-29 years old – they are better educated than previous generations (something that happens with falling fertility rates) and therefore had different expectations than previous generations with regard to elections. The result – a major clash against traditionalists.
What is the impact on banking? Fewer potential customers than if fertility were above replacement level. But that’s not a bad thing. A “bulge” of working adults (which The Economist refers to as a “Goldilocks” generation) fuels economic growth. In 2008, for example, household savings in China reached almost 25% of GDP. It also enables more rapid accumulation of capital per head.
Where should banks look for the Goldilocks generation? In places many banks in established markets have recently exited: Asia, Latin America.
The implications for the environment, unfortunately, are bleaker (because richer countries pollute more). But I’m a banking analyst, so that’s a discussion to have over a pint sometime rather than here.
Category: operations Tags: replacement level fertility
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2 Per Olsson November 6, 2009 at 1:22 am
Perhaps is good that fertility is on replacement level now and a couple of years forward since the world economy needs to stabilize a bit before it starts growing again?
And its interesting that there seems to be a parallell between good education and low fertility levels, what do that say about us as the animals we are whose only purpose according to mother nature is to have kids.
3 Kristin Moyer November 6, 2009 at 1:02 pm
Hi Per, thanks for the comment. I thought the same thing, too, about the parallel between good education and low fertility levels. From what I’ve read, in agrarian societies, children are needed for labor (“helping hands” on the farm essentially). So back then (and still now in more agrarian oriented societies), I guess the old mother nature rule holds. Now, education is just too expensive (and becoming a lot more expensive in some regions, for example the US). I can vouge for that!