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The populations of key countries are shrinking

Released by US film producer Mike Moore, the documentary Planet of the Humans tells how renewable sources of energy are flawed solutions to mitigate the dangers of climate change.

About halfway through the documentary, a scientist laments that the environment’s biggest problem is that “there are too many human beings using too much, too fast”. The warning here and elsewhere in the documentary is that only a reduction in the world’s population can save the planet.

Declining birth rates

Well, in that case, the battle against climate change is winnable because the populations of many countries are shrinking. The OECD says that only three (Israel, Mexico and Turkey) of its 37 members have fertility rates above the replacement rate of 2.1 children per woman.

Babies per woman (Total Fertility Rate)

Source: Free teaching material from www.gapminder.org. Period from 1950 to 2100. Data from UN’s Population Division’s publication World Population Prospects 2017.

The UN reports the reproduction rates of all European countries are below replenishment levels. The EU forecasts that the populations of 12 of its 27 member countries will shrink in coming decades as only immigration props up numbers in the others. The World Bank predicts China’s population will decline by 100 million people by 2050, that East Asia’s will shrink from the 2030s and Brazil’s will contract from the late 2040s by when India’s population growth will be static.

Already dwindling are the populations of Russia (since 1992), Japan (first in 2008 and uninterrupted since 2010, see below) and Italy (since 2014). But for immigration, many Anglo countries with declining birth rates including Australia and the US would be shrinking population-wise too.

Many demographers say, if anything, the global bodies are underestimating the declines in population numbers. Social and economic forces that lowered birth rates in advanced countries are now universal across the emerging world. These factors include expectations of low infant mortality, rising female education, better career prospects for women, and urbanisation.

Fewer births in the emerging world, these demographers say, will see the world’s population diminish from a peak of between eight and nine billion people from around the middle of this century, whereas the UN forecasts the world’s population to increase another three billion to 10.9 billion by 2100.

The economic impact

The consequences of declining populations could be significant and mostly grim, any environmental benefits aside. Fewer births reduce what is probably the biggest motivational force in society; young parents seeking a better life for their children. In economic terms, declining populations are a bigger challenge than ageing populations because the former herald a lasting shortfall in private demand that points to lower output, even if GDP per capita might rise. Businesses will invest less if fewer people are consuming less. Such outcomes hint at the ‘Japanification’ of economies; deflation and almost permanent recessions for economies that prove impervious to stimulus.

Government finances face difficulties as the shrinking and ageing of populations accelerates because a smaller working-age cohort must support more elderly people who cost more health-wise. A stretched bunch of fewer workers could lead to reduced innovation and productivity gains. Government policy, especially with regards to taxation and social-security spending, could become skewed towards the elderly rather than productivity should older voters form a voting bloc.

For the countries affected, a drop in population numbers might undermine their global power, and any rejigging of the world order rarely happens without friction. To sustain population numbers, rich countries might rely more on immigration but that risks social and political strains (including in source countries), especially if long-dominant ethnic groups become minorities.

These outcomes indicate the biggest threat raised by shrinking populations; that the unprecedented change is a shock. Capitalist societies are geared for growing populations, as happened over the 19th and 20th centuries when the world’s population increased eightfold from one billion around 1800. Over that time, all aspects of societies were designed to accommodate more people, a trend that engenders much optimism and dynamism.

Much might need to be adjusted as fewer people mean less of everything. Policymakers could no longer assume positive economic growth as a given. Companies could no longer reflexively plan to expand. Investors could no longer presume higher revenue by default. Town planning might be about shrinking social infrastructure. And so on.

Time to stop ignoring this change

In 1937, UK economist John Maynard Keynes foresaw the problem and cautioned that “a change-over from an increasing to a declining population may be very disastrous”. At the very least, as many urge, it’s time that society stops ignoring what might be an unrelenting challenge of the upcoming age.

To be clear, demographic projections largely extend trends, and birth rates could rebound at any time to make mockeries of such forecasting techniques. It barely needs to be said that a rising population is no guarantee of economic success and that younger populations come with bespoke challenges too. Declining populations could come with benefits. These could include reduced environmental damage, fewer clashes over the world’s resources and reduced inequality if labour shortages boost wages. Perhaps changes might be less disruptive than expected because populations only shrink slowly.

Such musings reinforce how much is speculation when it comes to analysing a sustained decline in populations because the world has never undergone a voluntary mass depopulation. There’s no guarantee either of the supposed benefits such as the better environment that Planet of the Humans assumes.

 

Michael Collins is an Investment Specialist at Magellan Asset Management, a sponsor of Firstlinks. This article is for general information purposes only, not investment advice. For the full version of this article and to view sources, go to: https://www.magellangroup.com.au/insights/.

For more articles and papers from Magellan, please click here.

 

11 Comments
Andrew Smith
March 25, 2021

Late to the commenting but recently SCMP South China Morning Post posited that China may have already reached peak population, due to plunging births, according to local 'hukou' data.

'China population: concerns grow as number of registered births in 2020 plummet

China saw 10.035 million new registered births last year, according to the Ministry of Public Security, down from 11.79 million births in 2019

The new figure does not include the entire population, with total data expected to be released in April by the National Bureau of Statistics

Amanda Lee in Beijing - Published: 5:00pm, 9 Feb, 2021'

Adam
June 25, 2020

I suppose its hard to put a number on a sustainable population for Mother Earth but its a given that even seven billion today is a tad too much. Perhaps the magic number is four billion souls enjoying whats left of our beautiful planet. If so , perhaps don't panic yet. Today a large number of toiling human beings are not really toiling a lot. What I mean to point out is if we had four billion people with better education , sanitation, health, socially stable mentally. People educated with better morals and, well throw in a good measure of integrity as well. Then I feel we would have a stronger global economy than we had in 2019 . Of course Green orientated industries would have to be the norm too. Things may work out ok!

AlanB
June 22, 2020

The populations of most countries are increasing. The correct statistic to use is the Rate of Natural Increase (RNI) which is the Crude Birth Rate minus the Crude Death Rate.
If the RNI for countries with small populations was high this would not matter as much for total global population, but many high population countries also have a high RNI, for example Egypt, Nigeria, India, Indonesia.... This is what is pushing up global population.
Countries with negative RNI tend to be smaller population countries eg Bulgaria, Hungary, Greece.
With global population now estimated at 7.8 billion and still rising for the world and for most countries, population growth remains the bigger problem than population decline. The world economy is safe but world population growth has many negative impacts on the world environment. Plastic pollution of the ocean from developing high growth population countries is a major problem.
RNI by country is shown on the link here:
https://en.wikipedia.org/wiki/List_of_countries_by_natural_increase

Michael
June 21, 2020

You almost never hear this discussion in the mainstream media. On the rare occasion it pops up anywhere its snuffed out with the media never taking up the challenge and debating the matter over an extended period of time. This is an eye into the business interests who own the media which collectively lie in ever increasing population. That's how business become mega wealthy. The concept is both self interest and vandalism on a planetary scale because mankind is close to destroying the ecosystem of the planet now let alone the damage a further 3 billion people will wreak.
The business model will need to change if populations decrease and perhaps then some of the CEOs who run the planet may be forced to accept a fair pay rather than the obscene packages they now negotiate for themselves, those which corporate shareholders rubber stamp so that the corruption at the top end of town can be had by all....at the top end of town..
Its an interesting world and the planet and what sustains life will benefit by (much) less of us. Bring it on, but I fear it'll be too late when humanity realises that no amount of money can fix the damage which is being inflicted on the place we all call home.

Kathryn
June 19, 2020

Been saying this for years. If the worldometer has the projections for decades to come which I think is under estimated, then it's going to be an interesting ride.

Patrick
June 18, 2020

Great article Michael. There's no doubt the world is over populated and needs this decline as bad as it sounds for economists. There's no doubt that over population is the main cause of environmental problems as mentioned in Mike Moore's documentary, although it doesn't take a scientist to realise that.

The capitalist system and businesses will need to change the measure of their success from eternal growth to sustainable existence. Not a bad thing.

Marianne
June 19, 2020

Reducing population growth is less relevant than the way resources are used. Most of those countries with low population growth have a heavier carbon footprint. If lower population growth in other countries results in higher disposable income levels (which is likely in the short to medium term) this will not have a positive impact on the environment at all. Unless we radically change our consumption patterns.

Justmom
August 05, 2021

Exactly!

Greig Meyer
June 18, 2020

Hi Michael. The world population is still increasing by 85 million a year. Most of them are stone broke and therefore not of interest from an investment point of view, but population decline is far from what is happening. If countries massively overpopulate such as Japan (from Tokyo to Osaka is basically one mega city of 50 million people with no natural environment left at all) then a decline back to a sensible population is needed but comes at a cost of negative gross economic numbers (but not necessarily at the individual level). The far better solution is to stabilise populations at sensible sustainable levels that the planet can actually support for more than one or two excessively greedy generations. Fund managers and economists have powerful impacts in this regard because they influence politicians who at their encouragement become obsessed with gross economic growth as the solution to everything. As you would be aware per capita Australia's economic performance is terrible compared to most of the lower population growth countries, presumably because all our money goes building new houses and roads, while theirs goes to improving infrastructure for the existing population - experienced as a real wealth increase rather than just more houses. Regards. Greig

Ian
June 18, 2020

Great comment Greig

Selwyn
June 18, 2020

Agree Ian. Let's hope this gets some serious political discussion going

 

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