Is population decline a bad thing?
All this handwringing about declining and ageing populations in Asia and Europe. Is it really such a bad thing? Yes productivity will decline, and there will be pension problems. But declining and ageing populations is not a surprise to any government or anyone with even a smattering interest in demographics.
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The two things you identified are both massive deals. The Economist bangs its spoon on its high chair nearly every week about this topic (this week it was Bagehot). Why does something being obvious cause you to question whether it's bad?
The synthesis here is: it's obviously bad. The only people arguing the contrary are neo-Malthusian de-growther environmentalists like Paul Ehrlich that nobody should take seriously.
With respect I disagree. Climate change is the most serious existential threat - and likely a severe economic threat. Reduction in populations - especially in the more carbon intensive nations - seems like a natural and necessary thing.
Pension liabilities are a problem - but they were always going to be a problem. Keeping up a high population rate seems like brunt force solution rather than utilising good management policy.
Listen, I agree that climate change is a serious threat, but population decline in rich economies doesn't move the needle on climate change that much compared to structural changes in production and consumption that are reducing emissions. Per capita carbon emissions is trending down in the OECD and is about to pass China on the way down or already has during the pandemic.
The 800 lb gorilla in the room is the group of emerging economies like India, China, and Sub-Saharan Africa. If they follow the same path as the West, namely a dirty one -- India has 4x its current coal power coming online by 2030 -- along their way to hopefully getting rich, then the efforts of the West will be mostly drowned out
Fundamentally, the scale of an economy matters less than its industrial structure in determining the emissions produced. The vanguard of the old industrial structure make sock puppet arguments similar to yours to flood the zone with disinformation, shirk responsibility, and alleviate pressure for system level changes. For example, the concept of the "personal carbon footprint" was a product of a BP marketing campaign (this is post-"90s climate hawk" evil Deepwater Horizon era BP).
"Good management policy" is not a given. Old people exercise lots of power over politics so transitioning away from a PAYGO system, a literal intergenerational Ponzi, is pretty much infeasible politically. The only alternative we have is managing the population pyramid (immigration, pro-natalism, labor-force participation) such that we have enough productive workers to continue to drive growth and support the olds.
If you want an example as to how bad it can get then just take a look at Japan’s economy over the last 4 decades. Japan was regarded as the second largest economy, a global superpower, and held in a similar light to how China is today prior to the 1980s, however, population decline and an ageing population has caused it significant problems. The country has experienced deflation and negative rates for 40 years. Even in this high global inflationary environment, its inflation is still relatively low (~ 2%).
All the way from the most expensive real estate pricing in the world in the 80's to now their central bank put in FX controls last year because of how far the JPY has fallen. Not to mention all of the ridiculous bond buying before that just to try and keep things afloat. Their birthrate is below sustainablity and isn't looking up either at the momenent unfortunately. A growing number of Japanese are giving up on marriage due to the economic constraints, accelerating the sustainabitily drop.
Japan sells more adult diapers than kid diapers.
If they were really that scared about it they could allow in more immigrants from other countries to replace the declining population but they won't
Japan is not even going to be the worst case scenario for East Asia IMO. China is quickly coming up on these same problems with a quarter to a third of Japanese per capita income.
It is if your country has a lot of debt and social programs funded by the government.
> Yes productivity will decline, and there will be pension problems.
Sir, that is also known as collapse
How is that a collapse? Sounds to me like it just means that older people are going to have worse qualities of life.
So will the younger people being hosed to support them, who will likely age into even worse benefits themselves and continue to see limited or less lucrative opportunities along the way.
When everyone loses and your social welfare system starts to fail collapse isn't all that inaccurate.
I'm not sure I envy young Japanese folks right now.
Population decline in the absence of other issues would actually be a positive thing for younger people. If there are fewer people by whom assets can be owned, then by necessity the average amount of assets belonging to each person would increase. This would translate to real increases in wealth for younger people.
Unfortunately, the reality of the Eurozone and East Asia is nowhere near as rosy. A lot of countries have downright scary population pyramids and bloated social welfare systems. The bloat of social welfare and pensions is well discussed by other responses, so I won’t belabor it. What I will say is that there is also a perverse feedback loop embedded here, namely, that as the percentage of resources demanded from the young to feed, clothe, medicate, and bathe the elderly increases, younger people are less likely to have the economic wherewithal to have children, creating a collapsing feedback loop to the bottom. Unless you can increase productivity faster than the population drop, this leads to perma-recession and mass poverty. Japan is staving this off with enormous amounts of debt manipulation.
“De-growth” is not this warm, euphemistic neologism that the news would like you to think. It is a cruel road to worldwide poverty, both in Europe and in spillovers to less fortunate countries. If productivity goes down and Europe produces say, 5% less fertilizer, do you think Europe bears most of the brunt? No! Africa and Asia do, because those are the poorer countries at the bottom of the stack who get hit by the 5% first. This 5% is a much larger percentage of those local economies than it is for Europe, leading to disastrous reductions in food production. When Europe catches the cold, other continents cough their lungs up in a bleeding pile.
“De-growth” is a genocidal idea. Genocidal to Europe. Genocidal to the US (albeit more removed). Genocidal to Asia. Genocidal to the impoverished world by proxy.
Agreed, a lower overall world population isn't necessarily a bad thing, though we have plenty of space on Earth for more people (just drive around the continental US and tell me otherwise). It's the demographic mix when the overall population is declining that is devastating as the person above outlined. You have a population pyramid that inverts and all of a sudden a massive societal burden to take care of the elderly. Society becomes less willing to innovate and sclerotic.
you won't end up having enough younger people to support the older population
Younger people can only support older people if the young people make enough money to support themselves and also have excess left over. i.e. high-skill work. If you keep adding more young people, you may run out of that high-skill work and get to a point where adding young people is a cost, not a benefit. At a minimum, there is not an unlimited solution where we can just always support old people if we have more young people. Clueless elitists like Matt Yglesias (who argues for a US population of 1 billion and just this morning got caught not knowing what a basis point is) are mis-educating a lot of people on this.
It's not a bad thing.
Idea that you need to keep growing the population to support retiree shortfalls is ponzi thinking. It can solve a problem in the short run, because you add more healthy and productive people to support the older, unproductive people. But you just run into an even bigger problem later, obviously. So that's one problem with the case for intentional population growth.
The second problem is that you can add people without adding jobs for them to do. That just makes it worse.
What would really help is if we could add to people's health-span, relative to life span, so that they're able to work to a later age. Instead of a human life being 50 productive years and 30 unproductive years, make it 55/25. That would solve a lot of problems. But we need a healthier country for that.
Why do people always ignore Africa when talking about population? The amount of people in Sub-Saharan Africa is going to explode over the next few decades and practically all of them will be born into poverty and will live in corrupt, unstable, underdeveloped countries. This is going to be a disaster for the environment, for food security, for migration, for political stability. On a global level all of the progress that Western liberal democracies have made in reducing poverty, improving living standards and promoting human rights is going to be rolled back, for the sole reason that the people living in those countries will die and be demographically replaced by the global poor.
It’s a big assumption to make that countries like Nigeria will not continue to industrialize and liberalize in some respect. As countries get larger and more economically important, the US and OECD have ways of putting their hands on the scales to ensure that they stay in line, up to and including using the military and intelligence communities to overthrow leaders if they are holding the country back and making it a less worthy trading partner.
Think about it like this, a despot can make a lot of money for himself by keeping everyone as serfs and just pocketing their money, but the US and Europe can make a lot more money off of a larger country that is more liberal, and over time the despots make more money that way as well. From a pure realpolitik cynical perspective, the conditions you describe will not be allowed to persist because ultimately the West will successfully convince these countries that a burgeoning consumer class makes them more money, and if they don’t agree, then we have the best tools in the world to yank the tablecloth and set up a new dinner.
It’s important not to have an outdated view of Africa, particularly as Nigeria increasingly becomes a regional powerhouse and an increasingly consumerized nation with more creature comforts than some Americans might expect.
It's a big assumption to make that 3bn people in Sub-Saharan Africa can lead American-style consumerist lifestyles when ~50% of the continent is impacted by desertification and the number of wars in the region is close to an all-time high. As we all know Iraq and Afghanistan are beacons of liberal democracy and Western-style capitalism and the US will surely have success bringing its model to Nigeria (as it did for Iraq/Afghanistan) where conservative Muslim cattle herders in Boko Haram-controlled territory in the North of the country are pumping out 15 children per family and threaten girls who try to go to school with AK-47s.
The below chart shows DR Congo's GDP per Capita since 1950 - as we can all see there is a clear upward trend over time as the country has steadily industrialised and become more stable and liberal. There are ~100mm people living in this country today and this number will grow to ~400mm by 2100. The amount of time between 1950 and today is similar to the amount between today and 2100 so this is clearly nothing to worry about and will surely not bother us during our lifetimes.
This is the real problem, yes. Not just the decline in the wealthy parts of the OECD, but the continued rapid growth in populations that haven't shown any promise in escaping a perpetual cycle of violence and corruption.
If I had to make a prediction around all of this it would be that geriatric, shrinking Japan will be a much more pleasant place to live than most of Western Europe or America in 50 years, 100 years etc.
I saw the above comments comparing China and Japan, and in fact, that's why I first posited this question.
I was sitting in the UBS China conference at the time and there were speakers from China and Japan on a panel debating this, which made me query the WSO hive-mind.
I live in Hong Kong and spent much of my career in China, and am living right in the midst of aging / shrinking Asia (Korea, China, Japan, Hong Kong).
1) I don't think China will be Japan's twin - but their problems will certainly rhyme. In the case of China, the population is far far larger, and there is a vast split between the wealth of Tier 1 cities, where the income level and costs are similar to other global cities, and the Tier 2, 3 and rural parts of China, which are more akin to developing nations in terms of COL and incomes. Beijing has long been aware of the problems of a 1 child policy, but from a resource standpoint they had no choice. That policy was a must or the nation would have starved. The pension problems and productivity challenges are also well known. I don't think Beijing or Tokyo care too much about "we're #1 by GDP" or not. That's a silly number, and those are meaningless bragging rights. Employment, productivity and aged-people's burden on society are what they care about. China will shrink to 600M people - even their own national bureau of statistics has predicted this. What matters is what the implications of that are. Right now China has 25% youth unemployment. That's a shocking number. There's not enough jobs to go around, and now manufacturing jobs are being automated away, and shipped to Vietnam and India. Neither Japan nor China have pro-immigration policies.
2) I'm just not sure what the broader knock-on effects are. Falling Chinese real estate prices? Maybe. Maybe it is a property bubble, maybe not. One can't lump Tier 1 cities and the rest of China. With 1.3 bn (it's not 1.4bn, that was a mis-count) there's still plenty of willing and able tenants to rent apartments at high prices in Beijing, Shanghai and Shenzhen. Is China's economy going to slow? Of course. Inevitably. How could anyone expect it to grow at double-digits in perpetuity.
Falling standard of living? I'm not so sure. I think there will still be poor migrant workers for many years to come moving from Tier 3 cities and rural villages into Tier 1 cities and doing crap jobs, such as waiting on tables, picking up garbage and increasingly - caretaking for the elderly.
For the “yes, it’s bad” side, their best argument has essentially boiled down to “how ever shall we keep the Ponzi scheme going if we don’t grow?
Exactly. Agree. I want more substantiation of the argument that population growth is good other than "we need some more warm productive bodies to hold up the pension system" or "we gotta keep to the #1 GDP spot". I remain unconvinced. The other side of this coin is the looming pension disaster, but that has to be dealt with in better ways than just chucking more working bodies into the machine. I don't know what that solution is to the pension problem (maybe it really is immigration, or maybe it's socialized medicine, or maybe something else) but it just doesn't seem logical that we can just rely blindly on endless labor pool expansion.
Can we agree that population declines are inherently deflationary, holding other things constant? It makes intuitive sense that fewer people and less demand would cause the prices of items to go down.
Deflationary environments are dangerous because smart firms who do not absolutely need to purchase something will wait until time T+X to buy something at the lower value instead of buying it at time T. This reduction in demand causes even more deflation, which makes the economic suction to behave in this way even more powerful. This delay of purchasing behavior seizes up the economy and plunges people into poverty.
The typical proposed solution to this is obvious. More government spending and debt. This can stimulate the economy and produce inflation for a long time, but eventually one must pay the piper, and the debt ratios will eventually go out of whack as the inherent deflationary effect from the population decline becomes more and more expensive to paper over with debt. This also makes the government an ever-increasing percentage of the economy and navigates closer to a command and control economy.
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