Growth is good. That’s been the mantra of just about every society at every point in human history, at least until recently. More people means more to work the land and higher productivity. If it gets a bit out of hand, high growth can create a larger army to go knock off the neighbors and open things up even more.
The pattern held through the industrial era and right up to the point where large undeveloped nations started to have trouble feeding themselves. There were incidents of mass starvation in some empires, likely even the Mayan, but until the 20th Century growth has always been something that everyone relies on. Peaceful societies have put growth to work taking care of the vulnerable and generally enjoying the few years we all have on this Earth a bit more.
But what if growth slows down, or even stops? One of the defining features of the next generation is likely to be dealing with declining growth across the planet. It’s also one of those issues that no one is ready to talk about.
To understand the issue, we should start with this piece in Barataria from three years ago. As the undeveloped and developing world become richer, their birthrates are declining – and the planet as a whole will be below replacement birthrate about 2050. That means that the population will peak just over 9 Billion and then start to fall. It’s an article worth reading again and following the links within to understand how big this change is.
This may seem like nothing but good news all around, given that there are so many starving in poverty across the planet. There may be hope for them yet. But as life expectancy increases and medicine is capable of saving more people, there is likely to be an ever increasing load of people to care for.
The issue is much like deflation, or a situation where people start to depend on constantly falling prices. Predictions for the future, including financing, depend on everything constantly increasing. Stability is actually a bad thing in the system that we have set up today.
The chart below is taken from a paper by Daniel Stelter of the Boston Consulting Group, as released by John Mauldin. It’s long, involved, and is worth the read. But this particular chart is important:
It shows when each nation hits the point where the working age population is scheduled to peak out, by year, and the size of that population is given by the size of the dot. Note that Europe is already hitting its peak, as has Japan. China is there today as well, probably due to their “one child” policies. All of Asia generally maxes out in the 2040s.
That’s not to say that there will not be economic growth through this period. Growth also comes from productivity increases, especially through improvements in technology. Improved information, in particular, can improve information about needs and reduce waste.
But there is a big difference between economic growth through more labor versus higher productivity. It comes down to how the benefits of this growth are distributed. Labor can negotiate its share, depending on political circumstances, but gains in productivity have typically gone to those who put up the capital to fund the operation. The definition of “money” starts to become an issue if you think about this long enough (unless your brain starts to hurt first).
As we contemplate the world that our children will inherit, this important trend is going to be one of the most important ways that their lives will be defined. Today we see the whole world evening out as developing nations catch up to the developed world rapidly (see: “Gangnam Style”). In a short while we’ll all be in the same boat, contemplating a world where growth comes primarily from the human mind, not the arm.
How that serves our hearts will define who we are as a species, gradually pulling back from a population level that threatens to ravage the entire planet.
There is little doubt that economic growth, as we have come to understand it, is ending. Greater cooperation already defines our economy as it has become global. The next phase, normalizing and accepting the lack of growth, is probably the most important force that will define whatever economy rises after this Depression ends.
And we haven’t even started to contemplate it in the popular press.
There are a lot of links to important piece throughout this piece – if you want to know more, follow them. Thanks!