Population Decline and Economics

George Friedman is a geostrategist, and he writes entertaining books: such as The Next Decade, and  the Next Hundred Years. Geostrategy looks at the  world from the perspective of how oceans and landmasses  interact with populations and states to shape how the world is controlled. You can pick his books up at airport booksellers, and they stimulate thought without commanding agreement, which for me is a compliment.

Friedman is, not incidentally, Hungarian by birth, which country has given us Edward Teller, John von Neumann, George Jonas, and a host of other geniuses and near-geniuses.

Culture, race, and religion are not the primary drivers in Friedman’s world view. His is a narrow but productive focus, comparable to that of an economist’s.

Consequently his latest piece is of interest, because he deals with the large implications of the ongoing world population crash – you hear me – crash. You may not have heard that the world population is in the process of crashing. It is. It is dealt with in many places, and I recommend David P. Goldman’s “How Civilizations Die (and why Islam is dying too)” for the facts, if not for Goldman’s gloomy interpretation of everything. (Goldman writes as “Spengler”, another notorious cultural pessimist).

Back to George Friedman, who is ever optimistic.

One of the key variables mitigating the problem of decreasing population would be continuing advances in technology to increase productivity. We can call this automation or robotics, but growths in individual working productivity have been occurring in all productive environments from the beginning of industrialization, and the rate of growth has been intensifying. Given the smooth and predictable decline in population, there is no reason to believe, at the very least, that GDP would not fall less than population. In other words, with a declining population in advanced industrial societies, even leaving immigration out as a factor, per capita GDP would be expected to grow.

Friedman’s second reason for optimism is that we would be moving into a world where capital was becoming more abundant relative to labour. Since the 1600s, or perhaps since the beginning of time, humans have been plentiful, capital scarce. He envisages a world where, as humans become ever scarcer, their relative value will rise.

The economist in me says that as humans become more valuable, they will tend to have more children, but this effect might be constrained by a comparable expense of raising them.

Friedman’s second prediction is that the distribution of wealth would change under conditions he envisages.

That would mean that in addition to rising per capita GDP, the actual distribution of wealth would shift. We are currently in a period where the accumulation of wealth has shifted dramatically into fewer hands, and the gap between the upper-middle class and the middle class has also widened. If the cost of money declined and the price of labor increased, the wide disparities would shift, and the historical logic of industrial capitalism would be, if not turned on its head, certainly reformulated.

Friedman says we might head into a period where wealth became more evenly distributed, as humans became relatively scarcer to capital.

 

The argument I am making here is that population decline will significantly transform the functioning of economies, but in the advanced industrial world it will not represent a catastrophe — quite the contrary. Perhaps the most important change will be that where for the past 500 years bankers and financiers have held the upper hand, in a labor-scarce society having pools of labor to broker will be the key. I have no idea what that business model will look like, but I have no doubt that others will figure that out.

Friedman reminds us that we have to look beyond today’s crisis in Islam to the underlying changes driving the world. Another thinker in Friedman’s stable, Ian Morris,  put it this way:

New energy sources, technologies that erode the boundaries between mind and machine, and shifts toward living in virtual rather than physical spaces may all threaten — or promise — to make the 21st century the biggest rupture in human history, dwarfing the agricultural and industrial revolutions. A century from now, trying to find the right level of inequality for a fossil fuel society might seem as irrelevant as determining the right level of inequality for Neanderthals does today.

Ian Morris is the author of “Why the West Rules, for Now”. I recommend it highly.

IanMorris book

oldwhiteguy

it has been observed that as western societies became more prosperous families became small. people had fewer children. outside of muslim families this trend seems to be continuing. I do not think that an increased economic value of a human being would reverse that trend.

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