The Population Crisis Is Going To Cause Economic Issues

about 3 years ago

There is an population crisis arising and it is about to blow up in our face.

No, it isn't the risk of overpopulation. That myth should be put to rest. The world is going to end up with an underpopulation crisis if things continue on the same path.

Unlike the mindset of a few decades ago, people are now starting to realize that birth rates are dropping in many parts of the world. This is causing counties to face a prospect similar to Japan. As populations age, a host of problems are created, both socially and economically.

For the past 25 years, Japan has wrestled with this problem yet came up with no solution. This is bad news since a number of other countries are already going down this path.

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Birth rates in many Western countries are down. In fact, they are so far down, they are below replacement level. This is generally considered to be 2.1 children for each mother.

Some countries like Russia were below this for more than a decade. The population of that country is starting to shrink. The same is true for Italy, Spain, and now Germany. All peaked or are close to it.

Even the United States is having a major issue. The pandemic and associated lockdowns were thought to spur a baby boom. After all, people locked up at home with nothing to do, well why not fill the time with sex? It appears the exact opposite happened. While there is a lack of numbers on the amount of sex people had, they do exist on the birth rates as a result of the pandemie.

And they are not pretty.

Nine months after the first lockdowns began in the US, the number of births in the country had declined by 7%, according to data provided to CBS News by health departments across more than 24 states. And fertility rates - the number of live births a woman is expected to have over her lifetime - are already lower in the first few months of 2021, said Christine Percheski, associate professor of sociology at Northwestern University.

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This is going to result in 300K-500K fewer births for the year.

It continues a pre-pandemic trend that saw the U.S. fertility rate come in at 1.73 births per mother. This is far below the 2.1 needed.

This situation will likely weaken the United States. Since it is a consumption driven economy, an aging population means that people consume less. Older people do not buy new homes, cars, or pay for college education. With less children, companies that cater to that segment of the market are going to have difficult. Toy R Us, one of the top chains for toys went out of business a couple years ago. The combination of online shopping along with fewer kids meant lower revenues.

From a geopolitical perspective, this should help China. However, for those who are bullish on that country, all is not rosy either. While it is the heavily populated, with 1.4 billion people, this is near the peak.

In fact, it is now estimated that they are done expanding in just 4 years.

China’s population is set to peak in just four years’ time and the milestone will be marked by a significant downturn in consumer demand, said Cai Fang, a member of the monetary policy committee of the People’s Bank of China, the central bank.

“When the total population enters negative growth (after 2025), there will be a shortage of demand," Cai was quoted as saying by Hong Kong-based South China Morning Post on Sunday

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Unlike the United States, China does not have an economy based upon consumption but, rather, exports. They are trying to become a consumption based economy. This is obviously going to be wrought with difficulty if the population is peaking.

Of course, there are still the exports. The problem for China is the largest market it caters to is the United States. If Americans are getting older, they will reduce the amount of stuff they buy.

Another challenge for that country: the second biggest market it caters to is Western Europe. On that continent, only Israel is above replacement rate.

As we progress through this century, India and Nigeria are expected to see their populations grow. However, this is not a guarantee.

We find that as the economic circumstances of a country improve, the birthrates tend to decline. There are a number of reason for this. As people get educated, they tend to put off having children, especially women who enter the workforce. Also, access to better healthcare and birth control certainly factors in. Finally, as an economy shifts away from agriculture, less hands are needed to support the family.

All of this tends to mean less children.

The result eventually is an economy that is upside down. Older people require more social services than younger people. For this to work, there needs to be production to support those extracting from the system. Unfortunately, with demographic shifts, countries lack the people to generate the revenues needed to pay for said services.

This is the situation that Japan is still mired in. And it is one that much of the rest of the world is about to experience too.

Automation is going to be a big factor going forward. While it will cause a lot of job loss, much of it will come from the fact that it is needed to make up for the shortfall of workers.

These might become more commonplace as we progress through the next few decades.

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