By Michael Baxter 5 Feb 2010 [1 Comment | 1,277 views]
Related articles
During the credit crunch we have become so pre-occupied with bankers that we have forgotten a far more serious challenge.
But it may be changing. Recently two books have been published looking at this deeper threat.
A fascinating article in “Foreign Affairs” magazine came up with a radical solution.
And in its latest quarterly report, The National Institute of Economic and Social Research touched on this all important issue.
It is not all bad. There is a positive twist you can make can make. Actually, it is a very positive twist. There’s another book that has been published recently that makes that point, and that’s called Bubbles and Wisdom, by yours truly.
Right now the world is going through two contradictory changes. In half the world the population is rising at an extraordinary and quite frightening pace. And in the other half of the world, the population is declining at a pace which is just as terrifying.
How can one possibly find good news in that?
The surge in population will bring with it pressure on raw materials. Food will be pushed up in price, so too will oil, but most serious of all, water will become an ever more vital commodity.
The balance of power will shift. According to Jack A Goldstone in his piece for Foreign Affairs – The New Population Bomb - “At the beginning of the eighteenth century, approximately 20 per cent of the world’s inhabitants lived in Europe (including Russia)…In 1913, Europe had more people than China, and the proportion of the world’s population living in Europe and the former European colonies of North America had risen to over 33 per cent.” And yet, “by 2003, the combined populations of Europe, the United States, and Canada accounted for just 17 per cent of the global population. In 2050, this figure is expected to be just 12 per cent – far less than it was in 1700.”
As you know, the developing world is seeing GDP per capita rise at a breathless pace. So not only is the population of the developing world growing while the developed world’s population stagnates, but GDP per head is rising in the developing world too while in the developed world it seems pretty static.
The Foreign Affairs piece suggested that we may want to ditch the old way of breaking the world into First, Second and Third World, into three new groups. Mr Goldstone says we will have a “new First World of the aging industrialized nations of North America, Europe, and Asia’s Pacific Rim (including Japan, Singapore, South Korea, and Taiwan, as well as China after 2030, by which point the one-child policy will have produced significant aging); a Second World comprising fast-growing and economically dynamic countries with a healthy mix of young and old inhabitants (such as Brazil, Iran, Mexico, Thailand, Turkey, and Vietnam, as well as China until 2030); and a Third World of fast-growing, very young, and increasingly urbanized countries with poorer economies and often weak governments. “
Much of the increase in the world’s population will be in countries with a large Muslim population. Take Afghanistan, as an example. Its population is projected to rise from 28 million today, to 45 million by 2025 and 75 million by 2050. Now see that particular demographic shift in light of the current war.
If the current divisions between the West and Islam grow, then see how this could become more serious as the Islam world sees its population explode while the western world sees stagnation.
But the conflict points won’t just be between new and old powers. Conflict between burgeoning powers will be a danger too. Take as an example China’s policy in Tibet. In all the criticism laid at China an important point is forgotten. Arguably, Tibet possesses the most valuable natural resource of all: fresh water. The rivers that flow from this region irrigate much of China and India. These are the world’s two most populous countries. At some point during this century they will probably be the world’s two biggest economies. How the dynamics of water will pan out, when these two powerful nations find they have a common source of water is a tad scary.
But, at the same time, in Europe, And much of Asia, including Japan, South Korea and eventually China, the problem is a declining population.
According to the Foreign Affairs piece, by 2050 the entire working population of South Korea will barely exceed the number of people over 65.
There’s a new book by Tory MP David Willets: “the Pinch: How the Baby Boomers stole their Children’s future and how they will give it back.” To be honest you know what the book is about form its title. The Baby Boomers have run up huge debt. They have pushed up house prices making them unaffordable for the youngsters. They went to University and came out without debts. Now to fund the baby boomers’ lifestyle, kids need student loans. The baby boomers will retire with inadequate savings leaving the diminished population of the young, who after repaying their student debt, have to find a way of caring for the elderly. And to cap it all, the baby boomers have left this legacy we know as Climate Change.
The truth is the retirement of the baby boomers is a massive problem in the making. And the aging of the Japanese populace is surely a forgotten cause of Japan’s lost decade – which still hasn’t ended.
In another book the problem is also described in the title:
Fred Pearce has penned “Peoplequake: Mass Migration, Ageing Nations, and the coming of the Population Crash.
Mind you, the problem will be worse in some countries. As NIESR pointed out recently at least in the UK the government has woken up to reality and is extending the retirement age.
NIESR has divided the developed Western World into three groups. “The first group includes countries where both the total and working-age populations are projected to decline. These countries include Japan, Germany, the Baltic economies, Poland, Hungary, Bulgaria and Romania. Economic growth in these countries over the medium term relies on strong productivity growth, or on a rise in the labour force participation rate.
“The second group consists of countries where total population is expected to rise, while the working age population is expected to decline. This group includes the Czech Republic, Finland, Italy, Greece, France, Portugal, Belgium, the Netherlands, Slovenia, Slovak Republic, Denmark and Sweden. Again potential growth in these economies depends on the prospects for productivity growth and on the potential to increase labour force participation, either by raising the retirement age or encouraging non-participants to join or rejoin the workforce. Fiscal pressures may be particularly high.
“The final group is projected to have positive growth in both total and working age population. These countries include Spain, Canada, Australia, US, UK and Ireland. These countries all tend to encourage inward migration, especially of highly skilled migrants. Potential growth is generally higher in these economies, although they may still come under fiscal pressure if the non-working-age population is growing significantly faster than the working-age population.”
Thomas Malthus is the man who painted the warning of woe.
He said that the world’s population will increase faster than our ability to produce goods and services. And ever since then, economists have talked about a Malthusian nightmare. There is a very real danger that the world will see the realisation of such a nightmare. Will there be enough natural resources to meet demand?
The solution lies in innovation. Not everyone is going to like this next statement. Genetically Modified crops are just going to have to be developed.
As for energy, there is plenty of energy beaming down on this planet from the Sun to provide all we need. But we are going to have invest a fortune in renewables. Regardless of whether you agree or disagree with the man made climate change hypothesis, it is clear that fossil fuels just don’t do it. We have got to learn how to harness the energy from the Sun, either indirectly via wind tide and wave power, or directly via solar power.
Apparently, 5.8 per cent of the people who have ever lived are alive today.
This is what the book Bubbles and Wisdom co written by the author of this article has to say on the subjects of our population challenge:
“If 5.8 per cent of all people who have ever lived are alive today, then presumably 5.8 per cent of all geniuses who have ever lived are alive today.
“Since the birth of Sir Isaac Newton, around 20 billion people have been born. Around one-third of that number are alive today. Think of all the geniuses who have lived since that time – scientists such as Einstein, musicians such as Mozart and Beethoven, artists, authors, great leaders. It seems reasonable to assume that no less than one-third of all geniuses who have been born since the birth of Newton are alive today.
“Take an even more recent date, 1850, and we find that less than half of all people who have been born since 1850 are alive today.”
In other words we can meet the needs of this growing populace and we can innovate by using all that new brain power that the population explosion has created.
And as for the dynamics between the population explosion and the population decline, Bubbles and Wisdom said:
“In the West and in other developed countries, we have discovered a new reality. Once economic wealth reaches a certain level, and once a society has learnt of the benefits of liberated women, we have discovered that the population no longer keeps rising. Instead, we opt for smaller families. It seems that, in part, this is down to women finding they no longer want to spend their lives as a form of baby factory, churning out newborns for as long as they are able.
“It is also down to another factor. In the past our children were our welfare. The bigger our families, the more likely we were to enjoy security when we grew old and were no longer able to provide for ourselves.
“These days in advanced economies, welfare is often provided by the state. We put our money into pensions and, depending on where we live, healthcare packages also, meaning we don’t need such large families. It seems these days that children provide negative economic benefit. We have kids because we want them, not because our kids provide our future pension.
“And as this reality bites, we discover the flaw in the theories of Thomas Malthus. Our ability to produce may increase arithmetically, but there can come a point when the population moves from geometrical increases to more gradual rises, and then turns negative.
“It is clear that there is a limit to how many humans this planet can sustain. It is uncertain what this limit is, but it seems we can have reasonable confidence we are not there yet. This means we enter a kind of race, a race where the finishing line is not clearly defined. We know that as the world gets richer, the population will rise until we reach a level where the secondary effects of the greater wealth we have already discovered in the West set in, and the change in population goes into reverse. It all boils down to hoping we can reach that point when economic development is sufficient to ensure the global population falls, before we reach that point when the population is too great for the earth to sustain it.
“It is clear that this race will not be smooth. In lane one is racing the threat of overpopulation; in lane two are the benefits of falling population that come with rising development. There will be occasions when the competitor in lane one goes into the lead, and other occasions when the competitor in lane two leads the race.”
So the demographic story goes like this:
It seems that once an economy reaches a certain level of development, population goes into decline. We need to try and ensure the developing world reaches this stage before it is too late.
But then, once the population declines a whole new set of problems emerge, namely how does this diminishing labour pool provide for the growing number of people retired?
To end, let’s leave you with the conclusion from the Foreign Affairs piece: “One somewhat daring approach to immigration would be to encourage a reverse flow of older immigrants from developed to developing countries. If older residents of developed countries took their retirements along the southern coast of the Mediterranean or in Latin America or Africa, it would greatly reduce the strain on their home countries’ public entitlement systems. The developing countries involved, meanwhile, would benefit because caring for the elderly and providing retirement and leisure services is highly labour intensive. Relocating a portion of these activities to developing countries would provide employment and valuable training to the young, growing populations of the Second and Third Worlds. “
[...] LINK [...]