Just as people move through predictable stages of their lives - progressing through youth, the working years, and retirement - so too do entire countries. Developing countries tend to have extremely young populations, with the overwhelming majority of their populations in the “youth” stage of ages 0-19. These young countries tend to be characterized by dictatorial and authoritarian governments, as they need “parental” direction to enjoy even marginal political stability. Unfortunately, this quasi-stability can often be fleeting, as coups and countercoups routinely happen at this stage, and power vacuums often ensue after the death or ousting of a strongman.

These countries often enjoy very high growth rates, but they also suffer from volatile booms and busts – not unlike a moody teenager.  These economies also suffer from high inflation, though often benefit from surges of creativity and innovation.  They are economies attempting to “find their way” in the world.  This is the stage in which we find most of the developing world.

Then there is the stage of early adulthood where economic growth accelerates due to the establishment of effective political, legal and financial systems.  China has clearly emerged well into this stage.  Countries that are just beginning to emerge include India, South Africa, Brazil and Vietnam.  Many countries never reach this enviable stage and stay mired in a cycle of poverty and instability that retards economic growth.  It remains to be seen which of the countries in the youth stage will “grow up” to join these ranks. And this is very important to future global growth as a near majority still live in this less developed stage.

Countries dominated by people in their working years of 20-64 are countries in their prime, or maturing adulthood.  During this phase, the country has generally achieved a high standard of living and political stability.  Growth rates start to slow from the rapid emergence phase, but economic life is much less volatile.  New innovation slows, but innovations from prior years are fully absorbed into the economy.  Inflation slows, and productivity increases.  The country has reached “middle age” in its development.  The United States, Australia and New Zealand are in the later years of this state today.  South Korea is an example of a country that is still in the earlier period of this stage.

Finally, once countries reach a certain level of affluence and urbanization, children become almost cost prohibitive to raise, and education, career, and leisure opportunities compete with childrearing.  In this stage, birthrates fall dramatically and the percentage of the population that is elderly and retired begins to noticeably rise with further rises assured well into the future.  In this stage, deflation becomes a real threat, and innovation slows even more.  These older societies take fewer risks and become more conservative, both socially and economically.  Rather than aggressively grow the economy, the aging population is content to live off of savings and past successes.  This is the stage that Japan is in and much of Europe and Russia are just entering, as will the US, Canada, Australia, New Zealand, Singapore, Hong Kong, South Korea, Taiwan, and even China in the decades ahead. 

Using demographic data provided by the United Nations, we have forecasted the movements of virtually every country in the world through these economic lifecycle stages.  It is optimum to see the workforce ages of 20 – 64 near 60% or higher.  A youth proportion (0 – 19) under 20% means little present innovation and future growth potential. And retirement age populations above 20% reflect a substantial drain on society and little room for innovation and growth.

Changing Demographics: Age Distribution of the Population

* this index is non sortable by design