The 19th-century philosopher Auguste Comte is often credited with coining the aphorism “demography is destiny.”

If so, he had a point. Certainly, shifts in populations – caused by births, deaths, and immigration – can herald transformative societal and economic change. But the interconnectivity among population, innovation, and productivity can make the ramifications of that change difficult to forecast. For years, many believed overpopulation was a looming crisis – that competition for resources would drive us toward a Malthusian dystopia of war, famine, and disease.
Now we worry that declining birth rates and rising longevity in developed and the more advanced emerging market economies may signal the end to almost 80 years of nearly continuous economic growth.
The trends that brought about low birth rates in the developed world – the increasing cost of raising children, improved access to education for girls and women, and female participation in the workforce – are unlikely to be reversed. Instead, they are taking root in many emerging economies too, and at a faster clip. If anything, we have learned that our ability as a global society to affect these developments is limited. And today, with nearly all developed world populations and many of the large emerging market populations already shrinking or set to shrink, countries may hope, in a zero-sum world, to win a relative demographic game – see chart below.

John Apruzzese describes the U.S. demographic outlook in his article, Where Are the Kids? Demographics in the United States; here’s a brief look at a few countries already confronting the challenges associated with dramatically aging populations.


In China, until recently the engine of global growth, the unintended consequences of China’s one-child policy (1980-2016) are now playing out. The fertility rate, measuring the number of children per woman, is just 1.2, among the lowest in the world and far below the 2.1 replacement rate. In addition, China is left with a rapidly aging society, described by some observers as the world’s largest nursing home. The average age is about the same as in the United States, at almost 38 (see the chart below) but is set to rise at a much faster rate, partially due to the shortage of young women. Immigration, the other driver of demographics, is unlikely to be enough to correct the imbalance in such a large and historically insular country.

The Chinese government is addressing these challenges by focusing attention on supporting the technology sectors that will help enhance national productivity, including clean energy, robotics, and biological medicine, as demonstrated by the huge rise in patent activity in the last decade. The government also appears intent on boosting China’s ties with the large and growing populations of Africa and the Middle East, outsourcing manufacturing know-how and technology to enhance their manufacturing capabilities and grow their markets. Policy efforts to encourage further urbanization could also help continue to grow per capita GDP, cushioning some of the negative demographic impact. On balance, however, it seems likely that China’s contribution to global growth will continue to deteriorate along with its population.
If you missed our recent webinar on China with Evercore ISI analyst Neo Wang and would like to view it, please contact your Evercore Wealth Management advisor.


Japan has a long experience of demographic decline and has learned to live with a shrinking labor force and population. The country has the oldest population in the developed world, but its standard of living has continued to rise, partially due to its reliance on emerging market workforces. This reliance has enabled the government to retain its domestic focus on creating higher-value jobs and services. Japan is also stemming its labor force shrinkage at present by recalibrating its hitherto unwelcoming policy on immigration and female participation in the workforce. Unfortunately, the latter has coincided with a further decline in the fertility rate, making it clear that there is no easy solution to demographic decline.
In the face of the inevitable acceleration of population decline, many prefectures and cities in Japan are starting to think about how to sustainably shrink infrastructure, including housing stock, retail footprint, rail lines, and healthcare systems. There is little doubt that in Japan, already a technologically forward nation, innovation will be a big part of any solution to demographic challenges. If managed thoughtfully, a shrinking citizenry may not be all bad for this densely populated country.
As more and more of the world faces the same demographic challenges, high-quality labor forces from lower income countries will become harder to source, making it unlikely that the Japan model will be scalable.


This past May, Pope Francis pleaded with the Italian government to enact more pro-growth population initiatives to stem one of the steepest population declines in the world. In the latest count, there are just seven births for 12 deaths; Italy’s fertility rate is the lowest in Europe, and its population among the oldest. Similar to Japan, Italy has been attracting migrants for the past few years, even as its jus sanguinis (“right of blood”) traditions have been hard to shed. As in all developed countries, the high cost of childcare is an impediment, discouraging young couples from having children. Prime Minister Meloni’s administration has proposed lower taxes for households with children, help for married couples purchasing their first homes, and initiatives for free childcare at the community level to allow parents to return to work, but the jury is still out as to their effectiveness.
The European Union has badly lagged Asia and North America in terms of patents and tech start-ups, boding ill for the region’s relative long-term economic growth.
China, Japan and Italy are previews of a global trend. Populations are rapidly aging just about everywhere in the developed world. This will likely result in a shrinking global labor force and declining economic growth. Policies encouraging net migration, female labor force participation (as described in “Womenomics” in the United States by Judy Moses here), and economic incentives for having children are in aggregate unlikely to turn the tide in any specific country, much less around the world. The most successful societies likely will be those that harness new technology to limit the potential inflationary (or deflationary) swings associated with shifts in the relationship between supply and demand in the labor force.
The United States should be among these successes. Although our median age is quite high and our fertility rate is low, the United States has historically – if not recently – excelled (despite recent policy challenges) in accepting and integrating immigrants, and in innovation. Today’s great global technology companies are nearly all founded and domiciled in the United States; many of their founders, not incidentally, are immigrants or the children of immigrants. That technological proficiency could deliver efficiency and productivity gains that will allow easier adaptation to a rapidly changing world.
As long-term investors, we are continually thinking about how demographics will impact the economic landscape. This means focusing on U.S. investments that benefit from the building of much-needed new housing stock (to support Millennial household formation), discretionary consumer spending (aging Baby Boomers), and healthcare (also aging Boomers). Demographic trends inform in part our underweight exposures to Japan, Europe, and China.
Healthcare and the developing technologies that are underpinning most innovations are undoubtedly the big medium-term opportunities. Through individual securities, a dedicated healthcare innovation mutual fund, and venture capital investments, we believe we have found attractive opportunities to invest in healthcare and technology, in both public and private markets.
There’s another way for us all to think about this shift from overpopulation to potentially declining population. If current trends continue, humans will eventually need to find ways to sustainably transition the global economy away from dependence on increasing population. Hopefully, this will be possible through the thoughtful and responsible use of productivity-enhancing technology. If we get it right, we could achieve a better balance between humans and our environment, as well as continued economic growth.
Brian Pollak is a Partner and Portfolio Manager at Evercore Wealth Management. He can be contacted at

Evercore Wealth Management, LLC ("EWM") is an investment adviser registered with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940. EWM prepared this material for informational purposes only and should not be viewed as advice or recommendations with respect to asset allocation or any particular investment. It is not our intention to state or imply in any manner that past results are an indication of future performance. Future results cannot be guaranteed and a loss of principal may occur. This material does not constitute financial, investment, accounting, tax or legal advice. It does not constitute an offer to buy or sell or a solicitation of any offer to buy or sell any security/instrument, or to participate in any trading strategy. The securities/instruments discussed in this material may not be suitable for all investors. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Specific needs of a client must be reviewed and assessed before determining the proper investment objective and asset allocation which may be adjusted to market circumstances. EWM may make investment decisions for its clients that are different from or inconsistent with the analysis in this report. EWM clients may invest in categories of securities or other instruments not covered in this report. Descriptions provided in this material are not substitutes for disclosure in offering documents for particular investment products. Any specific holdings discussed do not represent all of the securities purchased, sold or recommended by EWM, and the reader should not assume that investments in the companies identified and discussed were or will be profitable. Upon request, we will furnish a list of all securities recommended to clients during the past year. Performance results for individual accounts may vary due to the timing of investments, additions/withdrawals, length of relationship, and size of positions, among other reasons. Prospective investors should perform their own investigation and evaluation of investment options, should ask EWM for additional information if needed, and should consult their own attorney and other advisors. Indices are unmanaged and do not reflect fees or transaction expenses. You cannot invest directly in an index. References to benchmarks or indices are provided for information only. The securities discussed herein were holdings during the quarter. They will not always be the highest performing securities in the portfolio, but rather will have some characteristic of significance relevant to the article (e.g., reported news or event, a new contract, acquisition/divestiture, financing/refinancing, revenue or earnings, changes to management, change in relative valuation, plant strike, product recall, court ruling). EWM obtained this information from multiple sources believed to be reliable as of the date of publication; EWM, however, makes no representations as to the accuracy or completeness of such third party information. Unless otherwise noted, any recommendations, opinions and analysis herein reflect our judgment at the date of this report and are subject to change. EWM has no obligation to update, modify or amend this information or to otherwise notify a reader thereof in the event that any such information becomes outdated, inaccurate, or incomplete. EWM’s Privacy Policy is available upon request. EWM is compensated for the investment advisory services it provides, generally based on a percentage of assets under management. In addition to the investment management fees charged, clients may be responsible for additional expenses, such as brokerage fees, custody fees, and fees and expenses charged by third-party mutual funds, pooled investment vehicles, and third-party managers that may be recommended to clients. A complete description of EWM’s advisory fees is available in Part 2A of EWM’s Form ADV. Trust services are provided by Evercore Trust Company, N.A., a national trust bank regulated by the Office of the Comptroller of the Currency and/or Evercore Trust Company of Delaware, a limited purpose trust company regulated by the Delaware State Bank Commissioner, both affiliates of EWM. Custody services are provided by Evercore Trust Company, N.A. The use of any word or phrase contained herein that could be considered superlative is not intended to imply that EWM is the only firm capable of providing adequate advisory services. This material does not purport to be a complete description of our investment services. This document is prepared for the use of EWM clients and prospective clients and may not be redistributed, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of EWM. Any unauthorized use or disclosure is prohibited. The Chartered Financial Analyst and CFA trademarks are the property of CFA Institute. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™ and CFP® in the U.S.

IRS Circular 230 Disclosure:

Pursuant to IRS Regulations, we inform you that any U.S. Federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for (i) the purpose of avoiding IRS imposed penalties or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. This information is provided for information purposes only and does not constitute financial, investment, tax or legal advice.

©2016 Evercore Wealth Management LLC. All rights reserved.