The demographic lessons of BRICS
April 2, 2013, 1:37 pm

I’ve long been conflicted about the BRICs as a grouping. On the one hand the Russian, Chinese, Indian, and Brazilian economies really were major drivers of global growth over the past decade, surging forward at rates that far surpassed those of developed counties. From a very high level, it thus made sense to focus on the BRICs because they increasingly determined the nature and trajectory of the global economy. The BRICs were, each in their own way, intimately associated with all of the most important economic trends of the past decade, whether it was the sustained increase in commodity prices (Brazil and Russia) or offshoring and globalization (India and China). If there was an important economic story to tell, it was a safe bet that it involved one or more of the BRICs.

And the economic salience of the BRICs has, if anything, grown since the onset of the global economic crisis. When compared to the developed countries of the OECD, and particularly when compared to Europe, the BRICs have rebounded from the 2008-09 global crisis much more robustly with more rapid growth, much lower debt to GDP ratios, and lower unemployment.

Demographically, the BRICs are worlds apart

There has always been a tension to the BRICs grouping, though, because the countries that comprise it are so diverse. Nowhere is this tension starker than demography.

First, and most obviously, the BRICs vary enormously in the total size of their populations. China and India are, by a wide margin, the world’s two most populous countries. Brazil and Russia, although large in their own right, pale in comparison. Here’s what has happened to the populations of the BRICs since the year 2000: the gaps between China and India and Brazil and Russia hardly need to be highlighted.

What is even more interesting is that the demographic differences between the BRICs are just as vast even if we adjust for population size. India, in particular, is growing far more rapidly than any other BRICs not just in absolute but in relative terms. At the opposite end of the spectrum, Russia’s population was actually in sustained decline until just a few years ago.

And if you look at the total fertility rate (TFR), the number of children that, on average, each women has during her life, you will see that India’s demographic advantage over the other BRICs is only going to grow larger. At the moment, India is the only BRIC that has fertility above the “replacement rate” the rate at which a population naturally sustains itself:

Brazil, China, and Russia appear to be converging at a TFR of roughly 1.6-1.7 child per woman. This is reasonably high by developed world standards, but is nonetheless below the replacement rate. More interestingly, such fertility rates are extremely low when compared with the past experiences of most developing countries. Although Russian fertility has long been at or near the level characteristic of developed countries, both Brazil and China had rates above 4.5 child per woman as recently as the early 1970’s. That gives some indication of the sheer magnitude of the fertility decline they’ve experienced. Since then a fertility decline has consistently shocked even those demographers who track the issue closely.

India ascendant?

There are many analysts who would look at the data that I have presented so far and conclude that India will, in the not too distant future, be the undisputed master of the world. India, after all, will continue to reap a “demographic dividend” for the foreseeable future. Its population of workers will remain large and growing while its population of retirees will remain proportionally very small. Brazil, Russia, and China, in contrast, will have shrinking or stagnant workforces and ever-larger numbers of retirees.

If India had a population that actually corresponded to the descriptions of it, “young, healthy, and growing,” that most commonly litter the business press, then it would absolutely be the safest long-term bet. After all, a growing population is better for an economy than a shrinking population because, at the absolute least, it suggests growing long-term demand: if there are going to be more people in the future one can feel pretty safe in predicting that there are going to be more houses, more cars, more schools, more businesses, more restaurants and so on (conversely, if there are going to be fewer people in the future, demand will be expected to shrink).

So is that the entire story? India will inherit the earth and the other BRICs pale in comparison? Not exactly.

The more closely you look at it, the more India’s growing population looks like an economic anchor rather than an asset. Consider, for a moment, the shocking extent of extreme poverty in India. Here’s a graph of World Bank data showing the percentage of a country’s population living on less than the equivalent of $2:

Almost seven in ten Indians live on less than two dollars a day. It’s true that India has made some progress in combating extreme poverty, but this progress is paltry when compared to China’s far more rapid drop. And it looks like the Indian government is really struggling with its welfare programs, such as offering the poor free or heavily subsidized food, riddled as these programs are with corruption and a crippling public distribution service.

India’s struggles with combating extreme poverty:

Despite India’s growing economy and its blossoming international clout, more than 250 million of its citizens remain severely malnourished. This figure has barely budged despite substantial growth in agricultural production and extensive government efforts to more aggressively subsidize food for the poor.

For the past several decades India has consistently spent almost an entire percentage point of GDP on food subsidies. India is a laggard not only compared to Brazil or Russia, which have effectively eliminated malnutrition, but even compared to China. According to the Global Hunger Index, in 2012 India’s hunger problem was substantially worse than China’s was all the way back in 1990 (this, despite the fact that India’s 2012 PPP adjusted per capita income was more than three times greater).

Since the normal expectation is that hunger and malnourishment decline as a country gets wealthier, India’s underperformance is all the more mystifying. It is beyond the scope of this article to prove precisely why Indian malnourishment is so severe, but there is something about the Indian political and economic model which means that malnutrition is a lot more prevalent than it should be. Considering the enormous economic costs associated with malnutrition (particularly among infants) this is a major problem.

A diversity of demographic outcomes

As I hope has been conveyed above, there are few easy answers when it comes to the BRICs and demography, no trite slogans that predict exactly what is going to happen. Russia’s population, buoyed by substantial migration from the former Soviet republics in Central Asia, is once again growing, albeit at an extremely slow pace. Whether it will continue to do so is an extraordinarily complicated question that can only be answered by a close demographic, economic, and political analysis of not only Russia but the countries, such as Kyrgyzstan, Tajikistan, and Uzbekistan, which have sent it so many migrants over the past 10 years.

Similar to Russia, Brazil and China will have to find a way to attract migrants from other countries if they want to avoid population decline in the future: their fertility rates are simply too low to sustain their current populations. The idea of either Brazil or China being destinations for migrants might sound strange, both countries have traditionally been large exporters of people, but many countries in Europe have rapidly made the same transition and the Brazilian and Chinese economies are much stronger than others in the same region. Although it’s not what Westerners think of when they talk of “labor migration,” they should get used to the idea of Bangladeshis going to China to work in agriculture, or Bolivians going to Brazil to work on soybean plantations.

The real wild card is India. If it is somehow able to bring extreme poverty down to a more acceptable level, and if it is also able to more effectively reduce malnutrition, then it is likely to experience a sustained economic boom similar to the one that China experienced from the 1980’s until now. However India needs to be careful that it’s burgeoning population yields a “demographic dividend” and not a “demographic liability.”

To put it succinctly, India’s growing ranks of young men and women aren’t being put to productive work in factories or agriculture. Instead they’re stewing in unemployment, extreme poverty, and hunger. One does not need to be a particularly astute student of history to see just how dangerous such a situation is: burgeoning population growth among the rural poor is a situation that rarely ends well.

But while I believe that skepticism over India’s “demographic dividend” is warranted, we should remain open to new evidence, new data, and new interpretations. It would be a huge mistake to simply write off India as eternally doomed to suffer from overpopulation and hunger. India might pull off a Brazil in lifting millions of people out of poverty in the near future. Many years of closely watching Russian demography rapidly improve, when all of the serious projections from the UN, the WHO, and the US Census Bureau were for continued decline and disaster, have instilled in me a certain amount of intellectual humility.

It has also driven home the lesson that one needs to pay very close attention to a country’s demographic indicators and constantly incorporate new observations. Small changes in health or population trends can have enormous implications if they are sustained for any length of time, and we should closely watch all of the BRICs as they navigate their distinct demographic challenges.

To read the orignal article and other in-depth features, visit The BRICS Age Magazine.