It is always unclear to me if this is a bad thing.
In a shrinking population, are individual people worse off, or does it just look like a decline when you look at the country in aggregate? There is no shortage of squandered talent in the world. So many people work below their capability because there are just more people than opportunities. It seems like it’s not a problem to keep running the modern world, even with a fraction of the current world population.
And besides, many smart folks think we are deep into overshoot, not just on carbon emissions, but on almost every resource we use to run the global economy. If we are beyond the carrying capacity of the planet, then we either need to become massively more efficient or just have massively fewer people on the planet. And given that there is no current hope of sustainable living on any other planet, seems like lowering birth rates can only be a good thing that will give us some chance of surviving our ecological bottleneck.
Everything is fine if reality and expectations are in line. But many societies are projecting economic growth at levels that have historically been underpinned by the increase in demand from sheer population growth, as well as the increase in supply of labor.
Edit: The other issue is tribal. The global tribe has lots of sufficient labor and young people to offset decreasing numbers of young South Koreans, but humans are not fungible. There will be many types of conflict due to cultural differences, as well as shifting power dynamics and the resulting lack of acceptance of newcomers on the same level as native tribe members, etc.
Historically population drops were bad. When you lose population, you lose the labor required to support as many specializations, and civilization regresses. Now, though, fertilizers and modern medicine support excess human population, fossil fuels are an energy wellspring that helps reduce the need for physical labor, and AI can free people from repetitive mental work.
Combine this with the fact that yes, our overshoot is horrific, I really do not see why declining birth rates in this era are a bad thing.
You're missing the demand side and the dependents problem. AI, Automation, etc. may replace factory workers but those workers also consumed products. With less consumers you have less demand thus your revenues are doomed to shrink year on year.
Just about every society has dependents who can no longer work and younger workers who support them through tax revenue. With fewer and fewer young workers and more and more dependents you have no good options. Cutting services would be bad for the elderly and likely impossible to pass in a democratic society as they would make up the majority of the voting population. Not cutting services would accelerate flight of workers and worse birth rates as overwork youth don't have time to start their own families.
We might have lower demand for consumption but have higher demand on "global works" - fight global warming, upgrading with AI the economy, space development. You can think of them as technical debt we have to pay.
It would seem common sense that growth cannot continue on a finite planet forever without catastrophe, hence our current situation. The overarching problem is that no system has been able to replace the one we have currently in order to prevent or mitigate the consequences of loss of population or growth on society, but that was never an easy problem to solve.
Most of the past century's gains in quality of life were tightly correlated with rising labor. If the population crashes, then who will do all the specialized work? Another thing to think about is excess capital and investment. With a large population, excess savings become investments into new companies, technologies, etc. Without excess savings there will be no tech industry, improvements in science, infrastructure investments or much of anything interesting.
Environmentalists say that fewer people will be good for the environment. But what about investments and research into green energy and carbon removal? Those will simply not happen unless the economy is still growing.
It’s complicated, my understanding is that the current idea of the western state and middle class traces itself back to the period right after the Black Death created one of the largest population shocks in history, which effectively ended serfdom and loosened the grip of the Catholic Church. Basically the effects of population dips are not cut and dry.
It’s not clear to me it would necessarily play out as people stopping all non critical work to take care of old people. Maybe it would, on a family level - People would spend more time taking care of their parents, and then maybe conclude they should have more kids to take care of them when they are older like they do in the developing world. But the modern pyramid-shaped pension program is a recent invention and not necessarily one I think would be so durable as to destroy other industries?
This is a joke. Excess savings are economically pointless, they serve no purpose, excess savings mean people are saving more than they invest, leading to economic decline.
>Without excess savings there will be no tech industry, improvements in science, infrastructure investments or much of anything interesting.
I honestly have no idea what you are talking about. Governments borrow more and more money to artificially turn excess savings into regular savings by increasing the investment rate, any benefits you think come from excess savings actually come from turning excess savings into regular savings aka savings = investment.
If savings are above investment it means aggregate demand is below aggregate supply and we are failing millions of people.
TL;DR: it's more about demand than labor supply. Same result.
I don't think it is as binary as you suggest. There will be lower total saving after a delay. There will certainly be less investment more immediately.
What will happen is this.
If you borrow money to make and sell (say) shoes, and the population is doubling every 35 years (2% growth), then your market doubles in 35 years also. (You need money because your buildings and equipment wear out, if not for materials.)
Your lenders have it relatively easy in this situation, because fewer of their borrowers go bust, so interest rates (which are partly compensation for risk) are lower.
With negative population growth, your market is shrinking, so your lenders' risk of loss increases.
Anyone who still has excess savings demands higher return on investment. Fewer potential investments can jump the higher hurdle. Total investment decreases, total income decreases and everything spirals down.
There is no advantage to excess savings with fractional-reserve banking; and there is even less need for any savings with MMT. We are in an MMT world now, your savings have no bearings on the economy.
I think it's a problem because most societies rely on working age folks to support retirees. As birth rates fall off, the ratio of young to old reduces and too few people in the society are working for it to function well.
And the other issue is that the productivity in care work is still rather low. So we have to put quite large part of work force to something that is for general economy unproductive.
Let's name the elephant in the room: No government is going to make a significant part of the workforce work in (unproductive) elderly care. Societies will eventually start to just get rid of their old, first encouraging life-ending treatment, and eventually enforcing it if there are not enough takers.
The counter to this argument is that time begets wealth - thus the oldest folks are the most likely to have capital. Those with capital impact economic decision making: thus the real trap is that we will all eventually spend all of our time taking care of the elderly - it will be the last job in town - as the elderly will have the last wealth at the last moment. Government policy of today certainly favors the old and wealthy - why should that not continue?
Depends on capital they hold. Capital only has value because there is either demand or it produces something. If everyone in town is working to take care elderly, the capital in factories is worth nothing as there is no labour to produce things. Or the houses are worthless as there is no demand for them. Later can already be seen in certain locations. So they are out of luck unless they own the nursing home or production for necessary goods in taking care of them.
It will not continue because it is ultimately unworkable. We are seeing that already today, with increasingly larger parts of the population becoming aware of the "boomer problem". Eventually this will become evident enough so that governments can no longer ignore it.
That being said: Capital of a few old people becomes pretty meaningless when your economy is collapsing. See any country that went through capital collapse in the last 100 years or so.
I think there are many strong arguments against this, but most are debatable. So I'm going to focus on one of the arguments that I do not feel especially strongly about, but one that I think is simply undeniable.
A smaller world population in the longrun is a defacto nonstarter. Many places in the world continue to have extremely high birth rates. And the wealth/education correlation that claims to predict the change of this seems, at best, extremely weak when put under scrutiny. Billionaires have high wealth, high education, and high fertility. Places like Thailand have extremely low education/wealth levels, yet their fertility rate is lower than even the US. Israel is the third most educated country in the world, has an advanced economy, and a fertility rate that is even competitive against some African nations at 3.0.
The issue is one of prioritizing wealth more than family, which also explains why the trend collapses at billionaires (for whom family has effectively 0 impact on their wealth), even though the correlation would expect them to be having effectively 0 children. And this pursuit of wealth over family holds true in the West, but there's no reason to expect such ideology to spread. So the question is not one of a smaller world population, but of a smaller population of the groups that are not reproducing vs those that are. In other words should the West simply accept its own extinction, likely alongside those of its values? And to me, the answer to that question is no.
There are 102 countries having fertility rate above 2.1, a lot of these countries are in Africa or Near East. Still in a lot of these countries, fertility rate is dropping year by year
> It is always unclear to me if this is a bad thing.
In a shrinking population, are individual people worse off, or does it just look like a decline when you look at the country in aggregate? There is no shortage of squandered talent in the world. So many people work below their capability because there are just more people than opportunities. It seems like it’s not a problem to keep running the modern world, even with a fraction of the current world population.
It's debatable. Population declines are good for the environment. But rapid drops has cultural, political, economic and geopolitical consequences. e.g. South Korea doesn't really trust NK or China or that they can't really be a manufacturing economy without young workers.
There is nothing wrong with it as long as people are prepared for the effects: higher taxes combined with reduced social benefits (as fewer workers support more retired). A stagnant or declining standard of living. A house that goes down in value not up over time. More challenging education for children as schools are closed and consolidated.
> In a shrinking population, are individual people worse off
Yes.
A shrinking population means an ever-smaller number of workers need to support increasing numbers of retirees.
If you can work that out, then you've still got a small pool of workers producing goods for a large, mostly economically-inactive population, which means inflation and plenty of it.
The supply and demand for a good may go up or down as population decreases, depending on if a good was artificially constrained, etc...
I feel like for people living in big cities, where things are expensive simply because too many people want to live there, things might start to get easier.
It's simple, in commerce terms it directly implies lower future consumption, lower future labour supply and consequently lower value to investors. Losing economic strength will be a very large concern for any country.
In a shrinking population, are individual people worse off, or does it just look like a decline when you look at the country in aggregate? There is no shortage of squandered talent in the world. So many people work below their capability because there are just more people than opportunities. It seems like it’s not a problem to keep running the modern world, even with a fraction of the current world population.
And besides, many smart folks think we are deep into overshoot, not just on carbon emissions, but on almost every resource we use to run the global economy. If we are beyond the carrying capacity of the planet, then we either need to become massively more efficient or just have massively fewer people on the planet. And given that there is no current hope of sustainable living on any other planet, seems like lowering birth rates can only be a good thing that will give us some chance of surviving our ecological bottleneck.