From the excellent Twitter account Ninja Economics comes the incredible chart below showing that “for the first time ever there are now more people in the world older than 65 than younger than 5.”
At first blush, this might seem like a vaguely interesting fact and not much else. But in reality, this development will affect virtually every aspect of our future lives. First and foremost, it means that the global human population will start to fall, since aging populations have fewer kids (and as Reason‘s Ronald Bailey notes, global fertility rates have been falling for years). We’ll likely reach a peak population of under 10 billion people around 2070.
The impact on the world’s economy will be staggering, especially since there are effectively no known cases where long-term economic growth takes place against the backdrop of a shrinking population. Individual countries might prosper if they can lure more people to move within their borders, but the whole planet may start to resemble Japan, which is 30 years into its “lost decade” of weak economic growth and population decline. That means things will get weird:
To get a sense of what happens when a country ages dramatically and doesn’t replenish its population with younger residents, look to ultra-restrictionist Japan, which is the prime example of a First World “demographic disaster.” Japan, which has fewer people than it did in 2000, is suffering a slow-motion economic collapse characterized by weak-to-nonexistent economic growth and an erosion of quality of life. As The Weekly Standard‘s Jonathan V. Last wrote in What to Expect When No One’s Expecting: America’s Coming Demographic Disaster, Japan’s “continuously falling birthrates” has given rise to “a subculture that dresses dogs like babies and pushes them around in carriages, and a booming market in hyper-realistic-looking robot babies.”
The aging of the planet definitely calls even more attention to the problems with old-age, social-welfare entitlements such as Social Security and Medicare, which are funded by younger workers. Social Security, for instance, will be insolvent by the mid-2030s. As Eric Boehm writes,
Maintaining Social Security’s long-term solvency would require “the equivalent of immediately raising payroll taxes by 22 percent, reducing all benefits by about 17 percent, reducing new benefits by 20 percent, or some combination of the three,” according to a [Committee for a Responsible Federal Budget] analysis.
What will an older world look like, besides more wrinkly, liver-spotted, and, if current trends hold, STD-ridden? It’s not at all clear. One of the great things about capitalism and free markets is that they are constantly changing what gets produced and consumed. “Creative destruction,” Joseph Schumpeter famously wrote, is “the process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” For all the recent talk about “late capitalism,” the increasingly capitalistic global economy that has emerged over the past half-century or more has been pretty great for most people. In fact, for the first time ever, more than half of the world’s population “live in households with enough discretionary expenditure to be considered ‘middle class’ or ‘rich.'”
That is no small achievement and it should give us some faith that we’ll figure out a way to increase living standards even in a world whose population is shrinking. Then again, politics might rear its ugly head and put the kibosh on the global market order. Here’s Schumpeter again (writing in the early 1940s but sounding like he’s eavesdropping on the race for the 2020 Democratic presidential nomination): “The public mind has by now so thoroughly grown out of humor with [capitalism] as to make condemnation of capitalism and all its works almost a requirement of the etiquette of discussion.”
"For the first time ever there are now more people in the world older than 65 than younger than 5." pic.twitter.com/uug6WNDH4I
— Ninja Economics (@NinjaEconomics) May 1, 2019
from Latest – Reason.com http://bit.ly/2XYT5JS
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