In the 1973 movie Soylent Green, the cumulative impacts of rampant overpopulation, pollution and climate change have so ravaged the Earth by the year 2022 that the Soylent Corporation manufactures the only remaining food source, which Charlton Heston, who plays a detective, discovers contains human remains.
Thankfully, this dystopian vision of our present, which wasn’t an uncommon trope at the time, got much wrong (as do most predictions). While climate change and pollution are certainly among our most pressing gordian knots, the fear of over-population may turn out to be overblown.
Today, the biggest demographic concern is that we are reproducing at too slow a rate to sustain global economic growth at levels we’ve become accustomed to.
To maintain the global population, “replacement level fertility,” or the average number of children born to each woman, needs to be about two. Globally, the figure was 2.4 in 2019, according to the World Bank, with only Sub-Saharan Africa (4.6), the Arab World (3.2), the Middle East & North Africa (2.8) and South Asia (2.4) exceeding the replacement rate on a regional basis.
With a global population of about 7.8 billion at the start of 20221, a fertility rate of 2.4 equates to almost 100 more people every 40 seconds. That’s 100 times the current US annual population growth rate, which dropped to a record 0.1 percent in 2020.
The US is not an outlier. Among the world’s 10 biggest economies, only India (2.2) has a replacement rate above 2.1, according to the World Bank.
With almost all developed countries (read: biggest consumers) recording birth rates below the replacement level, economic growth may begin to sputter as companies struggle to find workers and incremental consumers.
At 69% of gross domestic product (GDP)2, US growth depends heavily on personal consumption, which jumps from about $48,000 a year when people are 25-35 to a high of around $60,000 annually between the ages of 45 and 54, before declining to about $35,000 at age 75 and older.3
In other words, consumption peaks during child-rearing years.
The concern is further supported by data showing that US household formation dropped to a record low 9% from 2010 to 2020 after an anemic 11% advance in the first decade of the millennium. A consequence of slower household formation is that people are delaying parenthood. The proportion of Americans in their late-20s who were single without children surged to 54% in 2013 from 36% in 1986.
Immigration has historically been a key tool used by the US and other countries to avoid the stagnation experienced by Japan. However, a combination of COVID and restrictive policies in recent years mean US net immigration was just 247,000 in 2020-21, 76% below the 2015-16 level of 1,049,000, according to the US Census Bureau.
In coming decades, it therefore seems feasible that countries will use incentives to compete for immigrants – in late 2018 Japan introduced legislation to encourage foreigners to move there to offset its 400,000 annual population decline.4
Declines in key demographics mean an economic time bomb is ticking. According to the US Census Bureau, the under-18 population fell 1.4% from 2010-20 and, critically, for at least four years starting in 2022 growth in the number of working-age adults (20-64) is forecast to turn negative for the first time. Remember, consumers account for almost 70% of US GDP.
Similarly, the UK’s Office of National Statistics said that it expects deaths to be 1.4 million higher than births from 2020-45.5
Declines in labor supply will need to be alleviated by improvements in productivity, powered by mega technology themes such as mobile connectivity, the Internet of Things, cloud computing, enterprise software, artificial intelligence and automation. Both blue-and white-collar jobs will increasingly need to be automated or eliminated with robotics and software.
The upshot is that policymakers singing from the Industrial Age “grow the pie as fast as possible” hymnal of the past few hundred years face a reckoning.
Policymakers generally follow Adam Smith, whose two key drivers of growth in Wealth of Nations were population growth and the productive reinvestment of profits. But if growth in labor supply, and by extension total consumers, falters, the onus falls on Smith’s second engine of capitalism to pick up the slack. Trouble is, information-dependent digital era companies require much less capital than their asset-intensive Industrial Age equivalents, leaving the world awash in cash and with few options to put it to work productively.
To tackle the problems created by declining populations and to keep the economy and profits growing on a per capita basis, governments need to stop relying on inflationary fiscal and monetary stimulus to grow the pie and instead find ways to distribute the existing pie more evenly by incentivizing productivity gains via deflationary technology.
While over-population contributed heavily to the creation of the hellscape depicted in Solyent Green, the ramifications of a declining global fertility rate may be just as significant, upending centuries of capitalistic theory and practice, and demanding a new paradigm to manage the transition to lower growth for longer.
It’s a prospect that those married to outdated Industrial Age systems, models and government policies could well find tough to accept and adjust to.
Brad Slingerlend is co-founder and an investor at Denver-based NZS Capital, which manages more than $1 billion in assets and focuses on innovative companies that create more value for all their constituents — including investors, employees, vendors, the communities they operate in and the planet as a whole — than they take for themselves.
FERTILITY RATES IN WORLD’S 10 BIGGEST ECONOMIES 2019
FERTILITY RATES BY REGION 2019
Central Europe & Baltics
East Asia & Pacific
Europe & Central Asia
Latin America & Caribbean
Middle East and North Africa
FERTILITY RATES BY INCOME 2019
Upper Middle Income
Lower Middle Income
Middle & Low Income
1 Source: Population Clock: World (census.gov), on 21.01.2022
2Source: Shares of gross domestic product: Personal consumption expenditures (DPCERE1Q156NBEA) | FRED | St. Louis Fed (stlouisfed.org)
3Source: Consumer expenditures vary by age : Beyond the Numbers: U.S. Bureau of Labor Statistics (bls.gov)
4Source: Net International Migration at Lowest Levels in Decades (census.gov)
5Source: National population projections – Office for National Statistics
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