About 18 months ago, news broke that China’s population was starting to decline. Business commentators were frantically puzzling over what this would mean for China’s economic forecasts and its place in the world. The implication was that a smaller population would mean less consumption, which would ultimately slow growth and alter China’s growth trajectory.
To quote a Brookings Institution report, “Western feelings of defeatism based on fears about the economic and strategic rise of the People's Republic of China (PRC) must be tempered with consideration of the many constraints affecting the country, particularly its demographics.” This sentiment not only betrays Western geopolitical fears, but also reveals a perverse and intellectually dishonest economic logic.
Fast forward to the present day and the news that India's population is starting to decline elicits similar responses. “Falling birthrates lead policymakers to waste time trying to avoid Japan-like burdens,” read a recent Nikkei Asia headline. Why should a country on the brink of overpopulation worry about a declining population?
Yet in the same publication you may find headlines about limiting climate change, resource constraints, mass pollution, and mass extinctions. These challenges are directly related to the number of people on the planet and our obsession with a perpetual growth model, as if the only way to manage the economy and ensure everyone can live a decent life is to participate in wasteful and destructive mass consumption.
Should population decline really be seen as a risk to the country's economic future, or should we celebrate it?
Stabilizing population is an opportunity to redefine the very purpose of economics on a planet facing an existential threat. Its function should no longer be narrowly tied to wealth creation, under the unproven misconception that everything would grind to a halt without unlimited growth. It is an opportunity to create new and much-needed economic theory and discipline that is consistent with what common sense tells us are the limits to growth.
In fact, economists should not be leading the debate on the trinity of population, growth and resources. The global thirst for endless growth, based on the archaic notion of “rational economic man”, has given rise to the existential threats that define our time, including environmental degradation and numerous social traumas. In this context, the discussion on population can be delicate. The question of “who is in charge” quickly becomes implicit.
Therefore, if we understand the nature of these threats and do not deny them, we should see depopulation as a good thing. After all, depopulation is not the result of war, pandemics or famine. It is primarily brought about by human progress: education, awareness, women's rights, changing social values and the economics of the cost of living.
It's also a natural biological phenomenon: the world's population has tripled in the past 70 years, but is expected to reach a new dynamic equilibrium and reach 10 billion by 2050. The first millennials were born about 40 years ago, when there were 4 billion people in the world; today there are 8 billion.
However, archaic economic theory that did not acknowledge limits or respect boundaries prevailed, and humanity experienced a period of unprecedented growth in just 40 years, a mere moment in human history. Modern classical economics either did not realize this, or willfully ignored it, and its proponents promoted a growth-at-all-costs model rooted in waste and consumption, with its ideological foundations rooted in European colonial expansion, where resources, including labor (slaves), were taken for free, stolen, or traded unfairly.
An almost unexpected opportunity
All scientific evidence to date suggests that man-made threats to the planet could have devastating effects and large-scale societal collapse even before population peaks.
The real challenge to prevent a sudden collapse is adapting our economic model to this new global reality.
As populations simultaneously decline and age, economies must shift from a quantity-driven growth paradigm to one that emphasizes quality of life and the right to basic needs as the most important indicators of economic success. This shift requires a fundamental rethinking of how goods and services are produced and consumed, and for what purpose, rather than further ruthless consumption abused and enjoyed by a minority. The political economy shifts to one where the priority is on building shared prosperity, meeting basic needs and rights that are still out of reach for the majority of the world. A declining global population presents an almost unexpected opportunity to be seized.
Businesses will naturally adapt as they are forced to innovate and compete based on new opportunities, such as producing superior quality products and services rather than mass-produced, even inferior, goods to meet growth targets. This is not a new expectation, but a society's demand for a more sustainable private sector with higher standards and better customer satisfaction.
Canned soda consumption will decrease. Junk food consumption will decrease. Car sales will decrease. Fossil fuel extraction will decrease. The world will not be weakened by these disruptions. As the post-fossil fuel era is being discussed, new jobs will be created. For anyone with common sense who does not believe in the illusion of the end of history, these are welcome changes to societies around the world.
Mainstream economics has prioritized a narrow view of growth, highlighting the intellectual and moral bankruptcy of traditional economic thinking. It is all too easy to ask people to consume more while politely acknowledging existential threats. The current paradigm is fundamentally incapable of devising new means to address building societal resilience.
It should be abundantly clear that consumption will not get us out of our current predicament. After all, it was our terrible obsession with a consumption-driven model of perpetual growth that got us into this mess. Now that we have reached the upper limit of our resource use, population decline should make that abundantly clear.
Look no further than the world's most densely populated places — megacities that few economists have ever set foot in or lived in — and you'll see that the quality of life is dire, and getting worse. By 2050, Mumbai will have 42 million people. Kinshasa, 35 million. Karachi, 31 million. Mexico City, 25 million. Most of their residents would welcome a decline in population.
With fewer people, these cities could become more governable and livable. A key element of governance would be to equalize socio-economic inequalities between cities and suburbs, again going against traditional economic thinking, where urbanization of economic centers is essential for growth, while the hinterland is viewed as unproductive except for resource extraction.
The public and private sectors must therefore rapidly develop products and services tailored to the needs of rural dwellers, ageing communities, and the urban poor, such as advanced health care, adequate housing, water and sanitation, and age-friendly infrastructure.
These are not charities, but new growth areas. Investors need to adapt to returns that reflect a new era of more responsible, purposeful capitalism. This will also allow us to develop clear and inclusive social contracts, where prices of goods and services are closer to their true costs, and investors can have more confidence that benefits are not derived from undervalued externalities.
In this context, free markets are not a panacea: governments need to apply long-term vision to public policies and incentives to guide more meaningful investments.
Rather than being feared, global population decline should be embraced as an opportunity to rethink and reshape our economic model to make it more fair and resilient. We have little choice otherwise. Sir David Attenborough once famously said, “Anyone who thinks you can achieve infinite growth in a finite environment is either a madman or an economist.”
Let us not allow fear-mongering about population decline to take hold, but rather celebrate this seismic shift towards an economic approach that is not at odds with the natural and social systems that sustain us.
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