Editor's Note: In the coming year, RANE will analyze the implications of shifting demographic trends around the world. This series will be published periodically throughout the remainder of 2026; you can find all parts here.
Demography, derived from the Greek words for "description of people or society," is the statistical study and analysis of populations, including their changing structure (age, gender, education, etc.) and size. Demographic change is notoriously slow and often imperceptible, but its long-term impact is significant, affecting domestic and international political stability, economic growth and financial wealth. The key analytical question is how, and under what circumstances and mechanisms, demography impacts social outcomes.
Historians and political scientists have argued that the Roman Empire fell in part because of demographic decline. More recently, French demographer Emmanuel Todd correctly predicted the Soviet Union's collapse in the 1980s, arguing that differential birth rates diverted resources from the core to the faster-growing periphery. However, over the centuries, many have also incorrectly predicted disaster from rapid population growth. This includes Thomas Malthus (in his 1798 book "An Essay on the Principle of Population") and Paul Ehrlich (in his 1968 book "The Population Bomb"), whose forecasts of food scarcity and resource depletion never materialized.
But while demographic effects may be difficult to predict, informed analysis of these trends remains worthwhile, because demography is a powerful lens for understanding international and domestic politics and economics.
The Impact on Domestic Politics
A country's demography can significantly impact its domestic political and security climate.
First, a rapidly expanding young population with limited economic opportunities, known as a "youth bulge," is often linked to political instability, as seen across sub-Saharan Africa and parts of the Middle East. Research also suggests that young males — particularly those concerned about their limited economic wealth — are more prone to violence. Additionally, countries where young people are better educated but underemployed, and frequently use social media to commiserate with their peers, face a higher risk of such demographically driven violence, including domestic crime.
Second, geographical and cultural sorting can intensify political polarization. In the United States and Europe, for example, the urban-rural divide is not just socio-political but generational, with younger, more liberal populations often concentrated in urban areas and older, more conservative populations in rural areas.
Third, aging societies may become more conservative, creating a "gray majority" of older voters who resist policy changes that threaten their interests, such as social security reform, thus shifting the economic burden to an electorally diminishing younger population. This majority can, in turn, introduce a status quo bias, hindering government spending on investment, education or defense, and contributing to increased government debt. This status quo bias can hinder government spending on investment, education or defense, and contribute to increased debt levels by shifting the economic burden to an electorally diminishing younger population.
Countries with aging populations are also more likely to pursue immigration efforts to offset labor declines, which can fuel identity politics, political polarization and even radicalization, as seen with the MAGA movement in the United States and the Brexit movement in the United Kingdom.
Finally, differential demographic growth rates between ethnic/political or religious/secular groups can cause political tensions and instability. When one group expands faster, the declining group may fear losing influence, potentially leading to violence or civil war unless the political system ensures accommodation and participation for diverse groups.
The Impact on International Politics
Beyond a country's homeland, demographic trends and changes have also been hypothesized to affect international politics.
The "geriatric peace" hypothesis posits that aging populations are faced with increasing social welfare spending, making it more difficult to expand defense spending. This reduces the political appetite for financially costly armed conflict. As a result, the governments of "older" countries may be more risk-averse and opt for targeted, short-term interventions rather than long-term, attritional conflicts. According to this hypothesis, the reverse would also hold true, with "younger" countries more prone to engage in international armed conflict, all other things equal. For example, the strong demographic expansion of 19th-century Europe may have contributed to overseas expansion and imperialism.
Additionally, inter-ethnic divisions and large-scale migration can lead to tension and conflict within and between states. For example, one country may back a vulnerable ethnic minority in another country to cause destabilization and potentially create proxy groups by, for example, supporting domestic insurgencies. This strategy recently emerged via reports on March 4 that the United States planned to support attempts by the Kurdish minority in Iraqi Kurdistan to conduct an uprising against the Iranian regime. Countries can also leverage demographically driven migration pressures as foreign policy instruments to extract economic or political concessions from countries reluctant to accept large migration flows. For instance, Turkey has tightened security at its northern border to prevent Syrian refugees from migrating to the European Union in return for concessions from the bloc. Conversely, migration management can be applied as a diplomatic tool to impose costs on or destabilize another country, as seen when Belarus sponsored migrants from the Middle East to cross into eastern Europe in 2021.
Demographics can also affect international politics when a declining pool of young and middle-aged individuals increases competition between the civilian economy and the military, often leading to recruitment shortages and higher defense expenditure. Such shortages are more challenging for land powers than sea powers, as land armies require much more manpower. While technology and investment in weapons systems can help offset this issue, as, for example, able-bodied 25-year-olds are not required to fly unmanned drones, shortages of younger personnel are more difficult to overcome in other contexts, such as defending an extensive front line.
Finally, greater demographic size, all other things equal, equals greater national power, which is understood as a composite indicator including economic size, per capita income, technological capabilities, and the ability to convert wealth into military, economic and diplomatic power. However, in practice, the extent to which demographics translate into national power depends on many variables besides population size. China, for instance, is projected to see its working population decline by nearly 250 million by 2050. While this will lead to economic challenges, China's national power will continue to grow if the country keeps upgrading its civilian and military technology, as it likely will. Meanwhile, India will add a projected 150 million people to its working-age population over the next 25 years. This population growth should help increase India's overall national power, but its power relative to other countries will only increase if India also manages to upgrade its military forces and economy.
The Economic Impact
Demography, particularly demographic change, is an important driver of long-term economic growth, primarily through the supply of labor and particularly if properly harnessed by appropriate policies.
Economic output is broadly a function of the number of workers and their productivity. As a result, an expanding working-age population can boost economic growth, while a shrinking working-age population (common in Japan and most of Europe) can drag on growth. However, these demographic impacts can be offset by faster productivity growth, as in the case of technological advancement, increased working hours or additional labor force mobilization.
Additionally, "young" countries moving into middle age benefit from a so-called demographic dividend. This occurs when a country's working-age population increases relative to dependents (children and seniors). This "sweet spot" can lead to a surge in savings and investment, which increases productivity. On the other hand, a higher proportion of dependents, whether due to an abundance of youth or old age, limits the amount of savings that can be generated, all other things equal, and will weigh on growth, as lower savings will translate into lower investment. Additionally, a larger share of non-working individuals means fewer people are contributing to the economy overall.
Compounding this issue, when a high proportion of dependents in a country is driven by an aging population, several patterns tend to emerge. Namely, people of working age are forced to directly or indirectly support retired individuals. This usually puts pressure on public finances, requiring higher taxes or reduced government services to fund pensions and health care, or reduced defense expenditure. A "fiscal lock" then emerges, where it becomes politically difficult to reform social safety nets despite rising debt. Economically, declining savings (increased consumption) and declining investment will weigh on productivity and economic growth, all other things equal.
Meanwhile, younger populations are often associated with higher rates of innovation and entrepreneurship, including technology adaptation, than older populations, which may be less prepared to embrace disruptive technologies, at least at the consumer level. There are arguments on both sides in terms of innovation, however, as an aging society faced with a declining labor pool may experience greater pressures to innovate to offset demographic drag on economic growth.
Differential rates of demographic expansion and shifting age structures are also relevant in the context of global supply chains, including trade, at least in labor-intensive sectors. For example, as China ages rapidly, the workforce is declining and labor costs are increasing, incentivizing multinational companies to move labor-intensive production to other countries, such as India and Vietnam, where the working-age population is expanding and education levels are increasing rapidly.
Combining the various ways in which demographic aging affects headline economic growth, "young" countries tend to generate much higher growth overall, if not necessarily per capita, than older countries. Advanced economies, which tend to have older populations, typically grow 2.0% or less annually, while emerging markets, which tend to have younger populations, generally grow 2.5%-5%. Developing economies sometimes grow even more rapidly, although political instability, civil strife or economic crises can stymie this growth.
The Financial Impact
As demographic change affects economic growth, it is unsurprising that demographics likewise impact financial markets.
These impacts can be seen in the relationship between savings and interest rates. All other things equal, an increasing share of working-age people will lead to increased savings, possibly reducing equilibrium interest rates. The inverse is also true; as a population ages and savings are spent, interest rates may face upward pressure.
Asset prices are similarly affected. As the share of workers, especially middle-aged individuals (aged 40-60), increases, the share of people in their "peak earning years" will tend to make financial investments, driving prices up and reducing yields and interest rates. On the other hand, as the share of seniors increases, retirees begin to draw down their assets, leading to selling pressure and putting downward pressure (relatively speaking) on asset prices and upward pressure on interest rates. Moreover, older investors tend to be more risk-averse, shifting their portfolios from stocks to bonds, thus putting further downward pressure on yields, while lifting the "equity risk premium," as the market requires higher returns to entice people to hold risky stocks.
Changing savings and investment dynamics may also drive global current account imbalances. The so-called savings glut in Asia has increased Asian countries' exports without an accompanying surge in imports, exacerbating current account surpluses that stoke geopolitical tensions with their trading partners. This "glut" also puts downward pressure on global real interest rates, a phenomenon that has occurred in the past two decades or so, in part driven by high savings rates in China.
Lastly, demographic change can be hypothesized to affect economic sectors differently. Aging countries will see above-average growth in sectors like health care, pharmaceuticals and wealth management, while younger countries tend to increase spending on technology, education and consumer discretionary sectors. For example, aging populations in Europe, North America and East Asia are the primary consumers of high-margin medical technology.
Demographics Is Not Destiny
Demographic changes and demographic differences between and within countries impact domestic and international politics as well as the economy and finance. However, the degree of this impact will always depend on other factors. As a result, analyses surrounding demographics should be treated as working hypotheses to inform case studies, rather than deterministic predictions.
To this point, while demographics can influence whether a larger workforce leads to higher savings, investment and growth, other factors, such as political and economic stability and economic policies aimed at exploiting the increased savings potential, are also crucial to monitor; government policies and other factors can "spoil" or maximize the demographic dividend. Likewise, not all countries faced with a sharp increase in young people will experience domestic political instability, let alone international conflict, as sound government policies can and do help keep a lid on the former, while a relatively powerless country is unlikely to attack its much bigger neighbor just because many of its young men are unemployed.
Demography is not destiny. But it is generally an important, if slow-moving background condition, often compared to tectonic plates, that impacts politics, the economy and financial markets over time.
