technology
A population bust is coming—but maybe that's not a bad thing?
Philosophy, Cal State Fullerton
Author and Investor
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Genesis
Response
Penultimate
Finale
May 3rd, 2021
Fertility rates are falling below replacement level over the entire developed world and large parts of the developing world, including Brazil and China. The world’s population is on track to begin shrinking by the end of this century and has already started shrinking in many countries.
The weight of current opinion is that this is a bad thing. I believe otherwise.
There are obvious benefits to population decline. A smaller population has a smaller environmental impact, and population decline makes climate change (which is partly a product of population growth) that much easier to counteract. Lower population density reduces pressure on real estate and housing prices, with a beneficial effect on the cost of living. And there is much to be said for more space and less crowding overall.
There is no uncontroversial way to say what population level constitutes overpopulation, but given our existing environmental problems, I would say the world has been overpopulated for quite some time.
However, there are economic concerns. Capitalists will not want to invest if they think the future market will be smaller than the present one. A shrinking population produces excess productive capacity and competition over a shrinking market, with some firms failing. This could lead to a financial crisis or depression if capitalists find that they have overinvested in the future and don’t get the returns they planned on. Moreover, there will be less capital for innovation.
It’s hard to predict how rocky the economic transition to population decline will be, but, in the long run, this is more a crisis for capitalists than for capitalism.
First, from the standpoint of society (not investors), the kind of economic growth that matters is growth per person, reflected in rising productivity and rising incomes, not absolute growth per se. Growth per person does not require population growth.
Second, capital is invested for more than anticipated market growth; it’s also invested to replace and repair things, to increase productivity per worker, and to replace older tech with newer tech.
Moreover, if there is less capital investment because there is less need for it, that frees up wealth for incomes, public infrastructure, social services, and other uses.
There is a genuine problem concerning the elderly: population decline produces an older population, with fewer workers for each retired person, making it harder to sustain pensions and services for the elderly. Point taken; this will not be easy to adjust to.
But here is the bottom line: The world’s population cannot increase forever without making the world intolerably crowded. Therefore, at some point the world will need to adjust to population decline. That adjustment will not be easy, but postponing that day of reckoning so that capitalists can continue to profit from market increase due to increased population benefits a small wealthy class now at the expense of everyone else later. (Joseph Chamie calls this “ponzi demography.”) Why not get the adjustment over with now, and enjoy a more spacious, environmentally sound world?
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