• November 8, 2016

GLOBAL CITIES, DEMOGRAPHY & ECONOMIC GROWH

 

To better understand and comprehend the global competitive landscape and how businesses will be shaped in the future, it’s considerably enough to peruse how the future of cities will be shaped by population and how that affects the financial indices. The urban world will experience some demographic changes, and how does that affect the business environment.

The growth of cities from 2015 to 2030 will be broadly affected by four different factors;
1. Demographic footprints
2. Local birth rate
3. Net domestic migration
4. Net International migration

We will have to create a broad comparison among the three generations and try to also look broadly at how demographical changes have affected the global GDP. Unlike in the old decades, the days of easy growth in the world’s cities seems over, and affirmatively, one can say that how big cities respond to the changes in demography will alter its wealth and financial status- ultimately the economic realities of its citizenry.

75% of the global GDP is generated by large cities like Newyork, Lagos, and Paris. And between 2015 and 2030, this number will rise to 86% due to population growth and rise per capital income. Population growth accounts for 58% of this experience while per capital income accounts for 42%. Yet, these population growth isn’t linear as the big cities are faced with more demographical challenges and the days of easy growth are over!

Past: Cities expand by largely because of their population growth which is influenced by two conditions.

A. High birth rate
B. Mass Migration from rural areas.

Present:
The two sources of population growth(birthrate and migration) are now decreasing. The global population is slowing due to fertility rate and aging.
As the population growth slows down because of fertility and aging, the rural-to-urban migration has also reached a state of little or no change.

This is a new reality and cities must adapt, react and ultimately prepare for the effect of this global phenomenon. The reason this is critically important is because over the years many Nations have relied heavily on this growth for their economic sustenance- and Nations need to be prepared for this demographical adjustment.

Past: So, this double hit of slowing growth caused by the earlier described effect of fertility and age, coupled with the plateauing of urban migration caused the population to decline in 6 percent of the world’s largest cities—with the largest share in developed economies—between 2000 and 2015.

Future: From 2015 to 2025, our best projection is that population will decline by 17% in large cities of developed countries.

Past: For instance, in the United States and Canada, the population grew at a compounded annual rate of 2.2 percent between 1950 and 1970.

Present: The annual compounded population growth rate also dropped to only 1.0 percent from 2010 to 2015.

Future: This compounded annual population growth rate is expected to persist until 2025 and then to decline even further, to 0.8 percent from 2025 to 2035.

Please note that this change in demography is more advanced in the developed world than the emerging economies.

How does this affect business and National growth dependencies?

Remember that the past 50 years have been historical for many big economies due to the demographic boom, and the large cohorts of working-age population fueled the growth of cities. The more people working, the geometric increase in tax payment and innovation. Urbanization was the currency for growth.

But in this new era, we can trust that three things will happen:

1. Fragmentation of urban landscape
2. Decline population growth

The two factors will be caused by the factors I described in the introduction.

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