It is now obvious that the population of most countries will decline in the next generation and this is authoritative. In fact, the entire global population explosion is ending. In virtually all countries, from the poorest to the wealthiest, the birthrate among women has been declining.
In order to maintain population stability, the birthrate must remain at 2.1 births per woman. Above that, the population rises; below that, it falls. In the advanced industrial world, the birthrate is already substantially below 2.1. In middle-tier countries such as Mexico or Turkey, the birthrate is falling but will not reach 2.1 until 2040 and 2050. In the poorest countries, such as Bangladesh, Equatorial Guinea, Chad or Bolivia, the birthrate is also falling, but it will take most of this century to reach 2.1.
But the real question is whether a declining population matters. Assume that there is a smooth downward curve of population, with it decreasing by 20 percent. If the downward curve in gross domestic product matched the downward curve in population, per capita GDP would be unchanged. By this simplest measure, the only way there would be a problem is if GDP fell more than population, or fell completely out of sync with the population, creating negative and positive bubbles. That would be destabilising.
But there is no reason to think that GDP would fall along with population. The capital base of society, its productive plant as broadly understood, will not dissolve as population declines. Moreover, assume that population fell but GDP fell less— or even grew, per capita GDP would rise and, by that measure, the population would be more prosperous than before.
World population was steady until the middle of the 16th century. The rate of growth increased in about 1750 and moved up steadily until the beginning of the 20th century, when it surged. Put in another way, beginning with European imperialism and culminating in the 20th century, the population has always been growing. For the past 500 years or so, the population has grown at an increasing rate.
For the first time in 500 years, this situation is reversing itself. First, fewer humans are being born, which means the labour force will contract and the price of all sorts of labour will increase. This has never happened before in the history of industrial man. In the past, the scarce essential element has been capital. But capital, understood in its precise meaning as the means of production, will be in surplus, while labour will be at a premium. Put in terms of the analogue, money, it means that we will be entering a period where money will be cheap and labour increasingly expensive.
The only circumstance in which this would not be the case would be a growth in productivity so vast that it would leave labour in surplus. Of course if that happens, then we would be entering a revolutionary situation in which the relationship between labour and income would have to shift. Assuming a more incremental, if intensifying, improvement in productivity, it would still leave surplus on the capital side and a shortage in labour, sufficient to force the price of money down and the price of labour up.
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 labour increased, the wide disparities would shift, and the historical logic of industrial capitalism would be, if not turned on its head, certainly reformulated. In short, the path to rough equilibrium will be rocky and fraught with financial crisis. To mitigate these obvious consequences, we call on governments at all levels to immediately put in place measures to hedge against the unexpected.