Scripps Howard News Service
Population Trends Will Shape Global Sustainability

By Fariborz Ghadar

CEOs need to ready their industry for global tectonics - underlying trends that, while gradual and often below the radar screen of business executives, have a significant impact on corporate strategy and managers' ability to implement them over the next two decades. Like the movement of tectonics, these trends will eventually cause major quakes.

Those four issues are population growth, aging, immigration and urbanization.

While the rate at which humanity is growing has been dropping over the last four decades - and is expected to continue into the foreseeable future - the world is still growing at an astonishing rate. At present the world stands at about 6.2 billion people, growing at a rate of about 1.2 percent, which means an annual growth of about 77 million people, or about 147 people per minute. But this growth isn't even close to being evenly spread out over the globe. More than half the world's population lives in Asia, with China and India accounting for nearly 2 of every 5 people on Earth.

Sub-Saharan Africa, specifically Nigeria, will see even higher levels of expansion and become the world's fastest growing region. The Near East, the Middle East and North Africa will see the largest increase in their population size relative to the rest of the world, fueled mainly by population booms in Saudi Arabia, Iran and Egypt.

The world population distribution will continue to shift more toward the less developed nations of the world, while more developed nations will continue to see their populations increasingly marginalized.

As the relative size of a nation's population shifts compared to the rest of the world, so will its age distribution. While across the board nations will become older due to advances in medicine, the relative size of their working populations will see dramatic alterations. Latin America, Sub-Saharan Africa and the Middle East will experience "youth bulges" in their demographics, growth spurts in population that can cause problems with employment and resource allocation.

This does serve to increase the relative size of the working population and in turn increase the potential for economic growth. In other areas, specifically Western Europe and Japan, their aging population will soon prove to be a massive liability due to healthcare and pension funds.

Immigration can help to relieve some of the woes created by a disproportionate age distribution within a country. The United States will be able to maintain its global population standing not by its own fertility, but by its relative open immigration policy.

The same applies for Canada, Australia and New Zealand.

Legal and illegal immigrants now account for more than 15 percent of the population in more than 50 countries, and this number will only grow in time. More developed countries and their aging work force need to replace their retirees with immigrant labor if they wish to prolong their economic vitality and avoid labor shortages. For less developed countries, emigration will be a double edged sword: while it will relieve pressure on unemployment and infrastructure requirements, it will also deprive these nations of their best and brightest.

Urbanization will be an increasing trend in how the world organizes itself. It's expected that by the year 2025 over 60 percent of the world's population will be in an urban setting, as opposed to 47 percent now. The biggest change will be the rise of mega-cities, those metropolitan areas consisting of over 10 million inhabitants. While some of the traditional candidates will remain like New York, London , and Tokyo, more often than not they will be junior partners to the likes of Lagos, Nigeria; Jakarta, Indonesia; Shanghai, China; and Mumbai, India. This increased emphasis on urban settings will represent a significant challenge to the local governments to provide adequate infrastructure and municipal services.

Global strategy or management teams must prepare for these tectonic shifts. While it is impossible to make an exact prediction, firms should develop scenarios of what their business environment is likely to look like in a few years.

After developing the scenarios, firms need to determine strategies to adapt to each prediction. Population growth, aging, immigration and urbanization are four speed bumps on the path of global population that the international business community will have to recognize in order to insure a smooth ride for their global operations.

(Dr. Fariborz Ghadar is Director of the Center for Global Business Studies at Penn State University. He specializes in global corporate strategy and implementation, international finance and banking, and global economic assessment.)

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Penn State's Smeal College of Business offers highly ranked undergraduate, MBA, executive MBA, Ph.D., and executive education opportunities to more than 5,500 students at all levels. Featuring academic departments of accounting, finance, marketing, insurance and real estate, management, and supply chain and information systems, the college is also home to major research centers such as the Center for Supply Chain Research, the Institute for the Study of Business Markets, the eBusiness Research Center, the Farrell Center for Corporate Innovation and Entrepreneurship, the Center for Global Business Studies, and the Center for the Management of Technological and Organizational Change.

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