More emerging market turmoil is coming in 2015, according to recent note from Bank of America/Merrill Lynch research. And one likely source of short-term instability in particular is largely underappreciated: a huge male youth boom.
There’s a close relationship between surging populations of young men and “revolutions, wars and upheavals,” argue Ajay Kapur, Ritesh Samadhiya, and Umesha de Silva. The Bank of America/Merrill Lynch analysts cite “civil war in medieval Portugal (1384), the English Revolution (1642-51), the Spanish conquistadores ravaging Latin America were secundones (second sons), the French Revolution of 1789, and the emergence of Nazism in the 1920s in Germany.”
Similar problems may be developing in emerging markets right now. While the analysts point out that the ratio of young men to older men has peaked in most emerging markets—generally a good sign for political stability—the raw number of males aged 15-29 is “massive.”
When there aren’t enough jobs to employ the supply of young men, that can galvanize conflict, argue the analysts—as can stagflation, rising income inequality, unaffordable property, and other problems facing emerging markets. Particularly if they’re unmarried, these young men have less to lose by banding together and committing crimes, unrest or violence.
The latter point is a particular concern in China and India, where a cultural preference for boy children has led to sex selection of infants that now means there are tens of millions more young men than young women. Jiang Quanbao, a professor at Xi’an Jiaotong University and a leading Chinese demographer, found that the number of marriageable Chinese males has been increasing more rapidly since 2010. The spread between males and females in the 20-49 age bracket will blow past 20 million in 2015 (paywall). India currently has about 17 million more young men than women. Here’s China:
The more angry young men there are to fight over opportunities and marriageable women, the worse off equity markets tend to be, as Kapur and Samadhiya have argued in the past (pdf, p.7.) A better outcome would be to have these young men “become middle-aged with a larger risk appetite and the resources to satisfy it.”
Much harder done than said, though. Valerie Hudson and Andrea Den Boer, authors of Bare Branches: The Security Implications of Asia’s Surplus Male Population, say that a common government response is simply increased authoritarianism. Their conclusions have implications that go well beyond emerging-market stock markets. “At some point, governments consider how they can export their problem, either by encouraging emigration of young adult men or harnessing their energies in martial adventures abroad,” they wrote in the Washington Post in 2004.