Rather than fretting about an overcrowded planet, we should be more concerned about the possibility of not having enough young people to sustain economic growth at current levels.
In the 1973 movie “Soylent Green,” the cumulative impacts of rampant overpopulation, pollution, and climate change had, by 2022, ravaged Earth to the point where a company began manufacturing the only remaining food source, found to contain human remains.
Thankfully, the dystopian vision of our present, not an uncommon trope at that time, turned out to be mostly wrong. While climate change and pollution are certainly among the world’s most pressing Gordian knots, the fear of overpopulation may turn out to be overblown.
Today, one of the biggest demographic concerns has been very slow reproduction rates, considered insufficient to sustain global economic growth at present levels.
To maintain the global population, replacement level fertility, the average number of children born to each woman, needs to be about two. With almost all developed countries — also being the biggest consumers — recording birth rates below the replacement level, economic growth may begin to sputter as companies struggle to find workers and incremental consumers.
Immigration has historically been a key tool used by many countries to avoid stagnations similar to the one experienced by Japan. It will, therefore, seem feasible to use further incentives to compete for immigrants — in late 2018 Japan introduced legislation to encourage foreigners to move there to offset its 400,000 annual population decline.
However, a combination of the coronavirus pandemic and restrictive policies in recent years, have lowered global net immigration.
Changes in key demographics, such as a decrease in the under-18 population and working-age adults, and a rise in death rates, mean an economic time bomb is ticking.
Labor supply shortage will need to be alleviated by improvements in productivity, powered by mega technology themes such as mobile connectivity, the internet of things, cloud computing, enterprise software, artificial intelligence, and automation. Blue- and white-collar jobs will increasingly need to be automated or eliminated with robotics and software.
The upshot is that policymakers singing from the industrial age grow the pie as fast as possible hymnal of the past few hundred years, face a reckoning.
Policymakers generally follow Adam Smith (18th-century Scottish economist), whose two key drivers of growth were population and the productive reinvestment of profits. But if growth in labor supply, and by extension total consumers, falters, the onus falls on Smith’s second engine of capitalism to pick up the slack.
The problem is, information-dependent digital-era companies require far less capital than their asset-intensive industrial age equivalents, leaving the world awash in cash and with few options to put it to work productively.
To tackle these problems created by declining populations and to maintain growth in economic activities and profits on a per capita basis, governments need to stop relying on inflationary fiscal and monetary stimulus to grow the pie, and instead find ways to distribute the existing pie more evenly by incentivizing productivity gains via deflationary technology.
While overpopulation contributed heavily to the creation of the hellscape depicted in “Soylent Green,” the ramifications of a declining global fertility rate may be just as significant, upending centuries of capitalistic theory and practice, and demanding a new paradigm to manage the transition to lower growth for longer.
It is a prospect that those married to outdated industrial age systems, models, and government policies could well find tough to accept and adjust to.
• Brad Slingerlend is co-founder and an investor at Denver-based NZS.
