Demographic Dynamics
The Population Pandora of Our Present Future
“The idea of the future being different from the present is so repugnant to our conventional modes of thought and behavior that most of us offer a great resistance to acting on it in practice.”
- John Maynard Keynes, Some Economic Consequences of a Declining Population
Arriving from Ifriqiya to the recently conquered lands of Egypt, the Fatimid Caliph Al Mu’izz disembarked in Cairo. It was a new city founded by General Jawhar Al Saqili (from Sicily), built on ancient foundations and next to the neighboring settlement of Fustat. Cairo was a pristine urbanscape to be (re)built from the ground up. Al-Mu’izz Street founded a thousand years ago, remains a major artery in historic Cairo.
The city developed into an economic and regional center, but it took nearly a millennium for its population to reach 250,000 in 1850. By 1950, the city had dramatically grown to 2.5 million inhabitants. Today, greater Cairo has a population exceeding 22 million with an ever-expanding footprint.
In less than two centuries, the city witnessed 100 unfold growth! Teeming with families, markets, and cars, its constant cacophony epitomizes the world’s contemporary city.
We have become desensitized to exponential population growth as the commonplace story of our time. Populations grow. Cities expand. People upon people.
This is the story we had been led to believe would never change…
All Roads (and belts) Lead to China
At the beginning of this year, the National Bureau of Statistics of China shook the world; it declared that the population had declined in the country by 850,000 people. The world’s most populous nation was losing people! The previous decline in China occurred half a century earlier and only due to a devastating famine. This was different. The reason was simple; the birth rate had fallen below the death rate.
As goes China, so goes the world these days. The poignancy of the superpower-in-waiting hollowing out from the inside seems to represent a premature climax that would take the wind out of the sails of most geopolitical fantasies of the last two decades. How could China go up if it was going down?
This update was jarring and brought to the fore long-standing analyses that showed China’s population was expected to fall to half its current levels, to just over 700 million by 2100. What in the world is going on? And if this is happening in China, where else is it happening?
We are just at the beginning of the implications of a new global phenomenon that will reshape our understanding of everything.
The Millennia Generations
Constant population growth has been an expected reality in our world. Today 8 billion souls walk the planet, with 140 million more arriving yearly (by stork, apparently). Such is the nature of population growth that we have not only taken it for granted but also have viewed it as a threat.
The ‘J-curve’ of demography had humanity growing relatively steadily for two millennia after some ancient dips. In fact, at the beginning of that growth spurt, the total number of people on our planet was somewhere around 150 million, approximately equal to the total number of newborns every year today.
For most of modern history, until the global population reached 1 billion around 1800, the growth rate was below 0.1%. The improvement in healthcare (significantly) led to population bombs, first in the West and then in the East. By 1920 the population had grown to 2 billion, and with industrialization in tow, the global population leaped from 2 billion, fourfold, to 8 billion just a century later. In the 1960s, the growth rate peaked at 2%.
The last two hundred years led to great cities during our contemporary era of hyper-urbanization. The megalopolis existed sparingly in centuries past and barely exceeded 1 million residents. There were no Londons or New Yorks. Today there are over 500 cities with over 1 million people. These great cities are at the core of everything for our economies and societies.
Significant dividends have come from this growth, especially over the last hundred years. A growing population meant greater pools of labor, greater consumption markets, greater ability to inputs of production, greater economies of scale, and greater pools of capital. Combined with technological and productivity improvements, it’s been a time of expanding absolute prosperity. Nevertheless, there has also been tremendous inequality.
With ever-larger numbers on the planet in bigger and bigger settlements, everything also had more significant consequences: fires, diseases, and wars. Tragedies and triumphs abounded as a result. Destroying and saving tens of millions of lives simultaneously became a norm throughout the 20th century.
The feeling of omnipresent tragedy has become the common refrain when discussing demographics.
An Aside of Malthus
Most scholars and global policymakers have been worried about unsustainable population growth for the last several decades. Neo-Malthusian thinking builds on the prior principles laid down several centuries earlier by Thomas Malthus that warned that greater prosperity led to greater population but also greater poverty.
Paul Ehrlich led the way in the 1960s and 1970s with The Population Bomb to raise alarm bells. Food will run out. Water will run out. The planet itself will be destroyed! Population for the sake of humanity needed to be contained! It was understandable given the peak of growth rates around that time that radically doubled the population in decades cycles (that previously was based on numbers of centuries).
Malthusian thinking is embedded in the collective psyche. Over the last century, population growth has objectively degraded the planet. The contention, however, that this degradation would prevent humanity from living – feeding itself and having enough resources - did not happen. In that way, the Cassandras were wrong.
Yet, within societies and communities with lower economic conditions, massive population bursts have often increased the circle of poverty. Larger families with little means and even less state support led to more despair. Family planning thus has been the imperative of many public health organizations. Just several decades ago, the trend was to forcibly sterilize the ‘lower classes,’ whether indigenous communities, minority neighborhoods, or just generally the poor.
Today, unlike in the past, it is about choice. And providing families and women with an empowered choice is an intrinsic imperative. We should ensure that no woman feels deprived of an ethical choice about how and when to have a child.
The question then needs to be asked: should the world of public health still be encouraging smaller families?
The Great Reversal
We are now headed into incontrovertible population decline across the world. Estimates from the Club of Rome to those published in the Lancet that the world population could peak as soon as 2040 at 8.5 billion or reach 9.7 billion by 2064 and then decline. The consensus of population growth has reversed itself. Overall the rate of natural increase declined as societies became more educated, prosperous, and globalized.
In the West, this trend is evident. It also includes the ‘expanded West,’ like South Korea, where the rate of natural increase has fallen to 0.8, far below the replacement level of 2.1. Meanwhile, new dynamics have entered the fray: societal loneliness, declining fertility, and climate change Cassandras, all pressures to not reproduce.
More worryingly, what happened in the West is now happening in the Global South. Every country is undergoing the same downward shift in the rate of natural increase. China was the latest to experience a population decline. Even India is due to see its population peak in the next decade. By mid-century, only some countries in Africa and a little further afield will have growing populations.
It is not just that populations are aging and thus the birth rate is declining. This trend clearly shows that those who can have fewer children are at a declining rate, as seen from the fertility charts in the United States.
There is research emerging that with higher incomes, family sizes are larger. A lot has been written about sperm counts declining and infertility rates rising for both men and women. This may be true, but how much is an open question. More research is needed across all these nuances contributing to the overall phenomenon.
The prior solution in the West for population decline was migration. Yet today, the population decline is everywhere. This is a global problem, not a distribution problem. There is no solution on the horizon; in the next couple of decades, we will have to address population decline everywhere.
A Universe of Unintended Consequences
The question may come to your mind: why is this even a problem? Fewer people mean more resources! Right? In any country today, small families represent societal destruction. No leader or political force should or can advocate for this, which is why none truly do.
Why? The entire way society has been organized for 2000 years has been informed by population growth, and for 200 years, around exponential growth. The real estate market. Stock growth. Agriculture. Colleges. Automobiles. Energy. So what happens next? Population de-growth is inevitable and already happening. A declining species could also lead to other forms of decay. We do not even know what this unknown unknown could be.
It may also lead to severe conflict as acquiring resources and territories becomes the only way to grow.
Declineconomics
Every aspect of the economy (and social services) is predicated on population growth to some degree. John Maynard Keynes wrote most presciently around this (but ultimately prematurely):
“Demand tends to be below what was expected, and a state of over-supply is less easily corrected...Demand for capital depends on the number of consumers, the average level of consumption, and the average period of production.”
The cratering of demand, without remedy, will be severe. Some have estimated that half of GDP growth is attributed to demography (the other half being productivity). Recent analysis estimates that South Korea’s economy, where the society is rapidly aging, could fall 30% by 2050. [Bulgaria is an outlier pairing economic growth with population decline but this would not be possible to replicate in the current era].
Declineconomics makes more sense on a micro level as you start moving industry by industry. Overall, almost every marketplace will become highly competitive (to find consumers), which could lead to price deflation for certain goods in the short term. However, this will lead to under-investment of capital that would limit returns on basic consumer goods and likely inflation for staples for most people.
The tax base will decrease precipitously with more dependents and fewer workers in wealthier countries with high productivity levels and high labor participation rates. This will put further pressure on capital, as surplus capital will be under stress to provide returns to investors, society, and the government.
There are innumerable examples to draw open that are already starting to occur. The entire university structure of the United States will be affected, for example, as student enrollment drops over the next decade. Fees may finally start to decline, but universities will also begin to close. There will be less spending in countless towns and cities across the United States, eroding municipal viability around the country (more on that later).
Reality of Real Estate
Real estate worldwide has been predicated on scarcity in urban areas and increasing population pressures. Investment in real estate will become a curious concept in the next decade. There is truly no scarcity of land on this planet. Land is scarce near other people, infrastructure, national jurisdictions, security and safety, and so on. That scarcity will remain, and the metrics of real estate that meet that criteria will likely be in demand. Luxury accommodations would be a notable example.
Yet, note housing prices across Europe, particularly in peri-urban or rural areas. They are always ‘cheap.’ The increasing urban density and global capital flows have masked the underlying weakness of most European real estate. Over a multi-decade trajectory, the notion of unlimited urban density and sprawl no longer makes sense.
Japan is currently sitting on 10 million empty homes. What happens in South Korea? Europe? And then what about China? It is difficult to attribute the same trajectory to the United States as it is still the world’s migration and capital destination of choice. However, iteratively, real estate will need to be re-examined across the world. The challenge for investors will be timing; a reversal in Indonesia, for example, may take 30-50 years. Thus, understanding the demographic dynamics by geography will be critical. Yet, overall, real estate will shift globally because the nature of the demographic shift is global.
Ghost Cities
As the world truly ‘peaks’ in population, perhaps as early as 2040, we will see urban choice at a global and domestic level.
Walking the winding streets of Canggu in Bali, you are constantly surrounded. Amidst the temples of contemplation, you will find cool cafes and iced cortados. Interspersed in the brownness of Bali is a vastness of whiteness. Gentrification has already gone global. Yesterday’s McDonald’s, movies, and Marlboros have given way to brunch, beach clubs, and the new tobacco vaping. Tom Friedman may want to rewrite that the world is no longer just flat; it’s flat white.
From Lisbon to Bali, Dubai to Singapore, the notion of the expat has shifted from pseudo-colonial explorer to mindful cultural usurper. The sexiness of these locations may give them staying power and growth despite global demographics as long as they balance local concerns. The young will find the young.
Conversely, the old will be left behind in villages, towns, and abandoned urbanscapes.
Detroit will be but an appetizer as urban blight will be rampant. Many countries will become bleak, desolate urbanscapes. This is a reality, not an apocalyptic vision. In fact, it may be worse. And it may come sooner than we think.
What will happen to the municipal tax base as entire industries, institutions, and individuals depart? How much of the world will resemble the coal towns of West Virginia?
Growth by Geopolitical Acquisition
What comes next for countries that have peaked in growth to be achieved by population and productivity, at least in terms of large leaps? How else do you grow? The idea of a global capitalist structure, with a rising tide raising all boats, has done well for the American economic order, but it was based on a world where the population tripled in 75 years. We have reverted to a trend that will hold for several decades, similar to the world before 1800, whereby population growth is rather steady, and economic gains are more so.
To grow in such an environment, the easiest and fastest method is, in fact, by acquisition – through force. While that is not the basis for Russia’s invasion of Ukraine, it is an interesting curiosity. Once incentives become more apparent, there will be more variability in geopolitical aspirations, especially where sovereignty is murky and resource bases are high.
Invisibility of Imagination
Exponential growth is not the goal, but staying above the rate of natural increase is objectively essential. A society that falls below this rate decays politically, economically, and socially. Devoid of youth, it also lacks vitality and imagination of the future. Young people are burdened with the responsibility of the old, a reality only to be exacerbated with increased longevity.
Once you wander certain areas of Japan and South Korea, but also Southern Europe, outside urban centers and ‘cool’ neighborhoods, you see a world of increasing desolation. Overall, the culture starts to become moribund. What is a society where you have fewer children? Does it lead to a cascading dynamic? If fewer children are in your peer groups, do you become the exception?
How do you imagine the future if there’s no one to imagine it through? What is the future without being a future for whom? Such questions appear grandiose, but there will likely be vast spiritual and societal malaise setting in, in broad swaths of the world. What type of society is created where the future is seen as in decline, bleak, and without newness? What are the morals of such a society? What is its focus?
Is Skynet the Answer?
On the horizon, however, is an alternative to grow: AI and robots. Who will take care of the elderly? How can you have additional ‘workers? AI and robotics. How can you fight wars with limited personnel? AI and robots. Where will you find people to harvest food? AI and robots. In this way, GDP may be protected. It will also create a largely unproductive class that will have basic care.
There is assuredly a productivity leap around the corner and on the horizon. And in the short term, there is likely to be a boost to economic growth patterns as we will see the greatest technological change in 100 years in terms of how we work and produce. Yet, that will likely further imbalance the labor-capital dynamic, especially as labor is seen as a declining pool.
Thus, capital will likely be gated and guarded, and labor increasingly devalued, even though it is scarcer. Regardless, investments in AI and robotics are critical to the future growth of economies but will need to go hand-in-hand with responsible public policy approaches.
Moving Beyond Misanthropy as an Imperative
Any number of Reddit polls show that a majority of people said the universe would be better off without humanity. Ultimately, this results from tremendous societal alienation and fearmongering, where there are people who now believe we should not reproduce.
If we collectively hate ourselves, why even procreate?
A multi-decade push has seemingly ensued to depict humanity as this destructive force, like a virus, as expressed in the iconic dialogue in The Matrix between the agent and Neo. Think of the contrast with a David Attenborough narrative of the beauty of a building by a beaver or a hunt by a lion and then the description in any series describing human activity.
In the long term, even climate change is a migration and settlement issue. Most of the world will still be habitable. From 1935 to 1955, humanity saw great progress across the board. Amid that, we witnessed the greatest single loss of life in our collective civilization. World War 2. And it was self-inflicted. Up to 100 million perished. But we survived and thrived. People adapted.
The lessons are of course that tragedies, including climate change, should be prevented, but to be anti-human is its own defeat. The goal is for humanity to thrive and be responsible stewards, not to disappear.
Demographic decline is where we are headed. It is not a theory to be postulated but a demographic reality already telegraphed by the current moment. We will then have to tackle other questions. What motivates the spirit of humanity? Who will win this new world? And what does a humanity reliant on AI for ‘growth’ look like?
More practically speaking, investment and industry will need to adapt models from broad ‘growth’ to deepening growth, finding niche segments to move into, and creating suitable cost-productivity models that can accommodate changing demographics. Likely most industries are currently unprepared.
At a policy level, no one has any solutions. Although everyone is trying.
Here’s to more crying babies around the world.