There is an inconspicuous migration occurring, slowly and “sleepily”, and the sheer scale of it is mind boggling.
Think about the city around you. If you are reading this, it is likely you are in a relatively populated area. Populated areas—now that’s a trend you don’t think about every day.
In 1800, the global population was approximately 1 billion. Today the global population is approximately 7.8 billion. Approximately 150 million persons are born each year, and approximately 65 million die each year, resulting in net population growth of 1%, give-or-take.
One of the more inconspicuous data points that is changing the world, next to population growth, is urbanization. Given the scale of our 7.8 billion populace, a slow migration of persons from rural to urban areas, amounts to astounding numbers. In 1950, the world was approximately 30% urbanized. Today, the world is just over 50% urbanized. According to the United Nations, the world is expected to be 75% urbanized by 2050.
Geoffrey West, the renowned theoretical physicist discussed this best in his book Scale, stating:
“to get an idea of what this implies, consider the following: today is August 22; by October 22 there will be the equivalent of another New York metropolitan area being added to the planet every couple of months. And note that we are talking a New York metropolitan area consisting of 15 million people, not just New York City, which has only 8 million.”
This is mind boggling. The implications of this migration are astounding, and the global transformation and infrastructure needed to accommodate such a migration are too.
China has undergone the most astonishing transformation in history, whereby it has increased its urban population from 18% in 1878 to 60% in 2020. Over that time it has been estimated that about 600 cities have been built from the ground up within China. Over the past five years, its estimated over 100 million have migrated to cities. There are about 15 megacities in China, each between 8 million and 20 million of population. But it doesn’t stop there, China’s infrastructure plan is to build 300 new cities. Their infrastructure building has been so rapid, that they have been quoted to have built too much, too fast. As China has about 50 “ghost cities” whereby they are fitted to house millions, but only a few hundred thousand live there. It is likely that many of these cities will one day be vibrant and will grow quickly. China’s population at 1.4 billion will continue to urbanize and based on current trajectory it is possible that over 200 million people will migrate to urban areas, or 15% of the population, over the next 25 to 50 years.
To further understand China’s sheer scale of infrastructure spend, according to the The Organization for Economic Co-operation and Development (the “OECD”), China is spending approximately 5.5% of its GDP on infrastructure, or approximately $700 billion of its $14 trillion GDP). The second highest country as a percentage of GDP is Australia at 1.69%.
Other developing areas, India (1.4 billion population) and Africa (1.3 billion population) are not far behind. India and Africa’s urbanized percentages sit at 34% and 40%, respectively. A 20% migration for these regions amounts to over 500 million people.
And the kicker to think about, is these numbers do not account for global population growth. Raising our original example of 25% of the global population becoming urbanized, or 1.9 billion people of our 7.8 billion population, does not account for the expectation of global population growth. The United Nations estimates that the global population will reach 9.7 billion in 2050 and 10.7 billion in 2100, outlining a declining rate of population growth. This declining rate in growth is true today, whereby population growth was approximately 2.0% in the 1960s and has declined to approximately 1.0% today.
With such strong growth through urbanization, economic drivers are making companies think of ways to assist and capitalize on the growing trend of urbanization, especially in developing countries where investment today will lead to decades of runway. Brookfield Asset Management, the Canadian infrastructure and alternative investment manager, has invested over $20 billion into India over the past decade and is increasing its allocations toward India each year. FairFax Financial, the Canadian global insurance company has invested billions across India and Africa through its India-and-Africa focused investment vehicles. Singapore’s GIC and TPG Investment, along with Facebook and others, have invested billions in Reliance Retail in India. In China and Hong Kong, e-commerce giants such as Alibaba, JD.com and Tencent have built and are continuing to build a physical and digital infrastructure to provide access to their services globally, creating an interconnected system.
Geoffrey West on interconnected systems:
“We need to understand how the dynamics of innovation, technological advances, urbanization, financial markets, social networks, and population dynamics are interconnected and how their evolving interrelationships fuel growth and societal change—and, as manifestations of human endeavors, how they are all integrated into a holistic interacting systemic framework… and whether such a dynamically evolving system is ultimately sustainable.”
There are many dynamic systems working together to accomplish and ensure a sustainable transition to a (mostly) urbanized world. As such, infrastructure firms, governmental bodies, and technology firms, among many other entities must work together to maintain and create a sustainable system.
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