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The Slowing of Population Growth. What Does it Mean for Wealth Creation?

The effort to feed humanity is over…

-The first sentence of Paul Ehrlich’s The Population Bomb (1968)

Last month we talked about the unprecedented reduction in global warfare activity and its impact on global prosperity and wealth.  This month we will address another phenomenon that is equally unparalleled in human history, the slowing of population growth.  This too will drive a host of changes in public policy and how we live.  It will also help propel a vast increase in per capita wealth.

In just recent decades (when this author was in high school and college), an apocalyptic  explosion of population was considered inevitable.  Paul Ehrlich’s book, The Population Bomb, was one of the top-selling books of 1968 and 1969.  It’s “academic” companion, Population, Resources, and the Environment (also by Ehrlich and his wife, Anne) was a widely used college textbook in the 1970s.  The first sentence of the former, quoted above, pretty much gives you the gist of their argument.  [Other predictions included the UK and India being wiped out by 2000 and U.S. life expectancy falling to 42 as soon as 1982].  In 1974, this author heard Barry Commoner (a Columbia and Harvard-educated scientist regarded as the ‘father” of the environmental movement and a candidate for U.S. President in 1980, garnering 0.6% of the vote) tell a college audience that most of us would not survive the next two decades due to food shortages triggered by unchecked population growth.  The popular and Nebula Award-winning 1973 movie Soylent Green (starring Charlton Heston) depicts a globally warmed and environmentally devasted world in 2022 literally packed with people who eat government-issued Triscuit-like wafers that turn out to be made from people (the secret uncovered by Heston’s character, Detective Frank Thorn).  Well, it’s 2020 and …

In the past 20 years, concomitant with the significant reduction in global conflict, an equally unprecedented and revolutionary change has taken hold, declining population growth.  In developed and developing countries alike, falling birth rates have defied even recent predictions.  The fertility rate in the U.S. is at an all-time low.  Last year, fewer babies were born in Japan than in 1899, when the population was only one-third its size today; Japan has seen an absolute decrease in population for three years running and the trend is accelerating.  Many European countries have well-below replacement level birth rates as well.  It’s not our purpose to go into all the reasons for this in any detail here, but playing a role are certainly wider and cheaper access to effective birth control, better-educated populations, and less agrarian societies in which children are financial liabilities (who are expensive to feed, clothes, educate, and provide healthcare for) rather than assets (that is, farmhands).  Environmentally induced decreases in natural fertility also may be a contributing factor.

A staple of demography classes is the “population pyramid”, a form of which was exhibited by virtually every country up until very recently.  A population pyramid is simply a chart with stacked bars representing the number of people in a given age cohort (0-5, 6-10, 11-15, etc.).  As age rises the bars traditionally get smaller, the result looking like a pyramid (and, in fast-growing developing countries, more like an inverted French horn, due to very fast population growth producing huge young cohorts).  Many countries today exhibit population “columns” instead; and in some cases the pyramids are inverted, as younger cohorts are progressively smaller than older ones.  Italy, for example, has over twice as many 46-50-year-olds as children under 5.  Fertility rates below replacement level (2.1 children, which would eventually lead to a static population), are now found in over 25 countries.  The contrast to The Population Bomb scenario is striking and a good discussion of it can be found in Bricker and Ibbitson’s 2018 book, Empty Planet: The Shock of Global Population Decline.

 Since the publication of The Population Bomb the world’s population has more than doubled.  This will not happen again.  That said, the transition to a stable-to-lower population world will not come without some problems.  Societies will have to deal with caring for ever-larger numbers of the elderly with fewer young people.  This puts strains on retirement and health-care systems.  Japan is already feeling these effects.  However, in the slightly longer run there is much good in these numbers.  A smaller number of people, and even a slower-growing number, will lessen environmental stress on the planet.  Food production and sources of clean water won’t have to keep growing to keep up with demand.  More land can remain undeveloped, easing habitat and species loss.  Less waste will have to be disposed of, and so on.  The ultimate effect from a wealth standpoint is that it won’t have to be shared among so many people.  In the past two centuries the world has grown much richer than in any others as modern industrial economies have produced economic goods at an even faster pace than exponential population growth, but over the next two, slowing and even declining population growth will greatly magnify the wealth effect.  We’re already feeling the cutting edge of this trend as the “Baby Boomer” generation begins to transfer an unprecedented amount of wealth to succeeding generations.  A world in which wealth creation is far-outstripping population growth is one to look forward to.