Friday, June 2, 2023

The $50 Trillion Problem: "Global fertility has collapsed, with profound economic consequences"

First up, The Economist with the headliner, June 1:

What might change the world’s dire demographic trajectory?

In the roughly 250 years since the Industrial Revolution the world’s population, like its wealth, has exploded. Before the end of this century, however, the number of people on the planet could shrink for the first time since the Black Death. The root cause is not a surge in deaths, but a slump in births. Across much of the world the fertility rate, the average number of births per woman, is collapsing. Although the trend may be familiar, its extent and its consequences are not. Even as artificial intelligence (ai) leads to surging optimism in some quarters, the baby bust hangs over the future of the world economy.

In 2000 the world’s fertility rate was 2.7 births per woman, comfortably above the “replacement rate” of 2.1, at which a population is stable. Today it is 2.3 and falling. The largest 15 countries by GDP all have a fertility rate below the replacement rate. That includes America and much of the rich world, but also China and India, neither of which is rich but which together account for more than a third of the global population.

The result is that in much of the world the patter of tiny feet is being drowned out by the clatter of walking sticks. The prime examples of ageing countries are no longer just Japan and Italy but also include Brazil, Mexico and Thailand. By 2030 more than half the inhabitants of East and South-East Asia will be over 40. As the old die and are not fully replaced, populations are likely to shrink. Outside Africa, the world’s population is forecast to peak in the 2050s and end the century smaller than it is today. Even in Africa, the fertility rate is falling fast.

Whatever some environmentalists say, a shrinking population creates problems. The world is not close to full and the economic difficulties resulting from fewer young people are many. The obvious one is that it is getting harder to support the world’s pensioners. Retired folk draw on the output of the working-aged, either through the state, which levies taxes on workers to pay public pensions, or by cashing in savings to buy goods and services or because relatives provide care unpaid. But whereas the rich world currently has around three people between 20 and 64 years old for everyone over 65, by 2050 it will have less than two. The implications are higher taxes, later retirements, lower real returns for savers and, possibly, government budget crises.

Low ratios of workers to pensioners are only one problem stemming from collapsing fertility. As we explain this week, younger people have more of what psychologists call “fluid intelligence”, the ability to think creatively so as to solve problems in entirely new ways .

This youthful dynamism complements the accumulated knowledge of older workers. It also brings change. Patents filed by the youngest inventors are much more likely to cover breakthrough innovations. Older countries—and, it turns out, their young people—are less enterprising and less comfortable taking risks. Elderly electorates ossify politics, too. Because the old benefit less than the young when economies grow, they have proved less keen on pro-growth policies, especially housebuilding. Creative destruction is likely to be rarer in ageing societies, suppressing productivity growth in ways that compound into an enormous missed opportunity....


And from NextBigFuture, May 30:

Low Population in 2050 for $50 Trillion Economic Loss – Over Ten Times More Than Climate Change

We do NOT know if the climate models are correct. There are predictions that worsening storms and drought will have economic losses that are 20-50 times worse than today by 2050. The older predictions of flooding or winters without snow have not happened. However, we know for certain that lowering birth rates will result in 20-30% lower working age populations by 2050 in Japan, China, Korea and Europe. Only massive immigration is temporarily avoiding this lower number of working age population outcome in the US, Canada and Australia. The total fertility rates have gotten worse from just under 2.1 replacement to 1.5 to 1.8 for many developed countries and is now dropping to the 0.78 to 1.1 range from many countries. The worst case economic loss from bad storms from climate change is 2-3% global GDP loss but the economic damage from lost population will be 20-30% GDP loss. $5.6 trillion would only be about 2% loss of a 2050 economy that is $250 trillion. If the climate models have massively overestimated the loss and climate damage is two to five times worse than today then it would be 0.1% loss of GDP. 20-30% loss of a 2050 economy that is $250 trillion would be $50-75 trillion.

In 2021, the World Economic forum called Climate change ‘most impactful risk facing the planet. The largest predicted economic losses of climate change are from models that predict a lot more storm damage. This is mainly worsening droughts, storms and torrential rain in some of the world’s largest economies could cause $5.6 trillion in losses to the global economy by 2050. This has not happened yet as the world has been experiencing $100-250 billion per year in such storm damage. The agricultural losses from climate change might be $330 billion in 2050 and this does not calculate the improved agricultural yields from warming conditions for Canada and other northern farmland.
Population loss does directly cause economic losses. Population loss from now to 2050 will cause about 20-30% in economic damage or about a $60 trillion in economic loss. The GDP of a country is the amount of working people times the average economic contribution from each person. If your economy has 30% fewer people and all the people had on average the same productivity then you would lose 30% of your economy....