A common belief about
the aging of the baby boomer generation is that, similarly to a
depopulating world, it would result in a proportionally smaller
workforce having to support a larger-than-usual retiree population.
While this appears to be true on the surface, it would only occur in
countries with very high labor force participation levels. There
are plenty of jobless people, in all countries—either unemployed
or on social assistance—who would be more than happy to join the
labor force and boost the ranks of those currently working.
Addressing the Age Crunch Problem
Increasing a country's
population size would spread the costs of supporting the aging baby
boomer generation but would also reduce incomes. As explained
earlier, monetary expansion is what increases economic growth. It
is not human bodies. As such, a country with a larger population
would still have the same total GDP. The question is, would the
gains made by spreading costs more thinly be greater than the income
loss incurred by sharing a country's GDP among more people? Let us
take a closer look at the issue and the financial implications of a
population growth strategy.
Suppose that the
costs of supporting retirees are currently 5% of a person's revenue
(paid to governments in the form of income tax) and that they go up
to 15% as a result of the aging of the baby boomer generation.
Average incomes after tax would then decrease by 10%. If a country
decides to boost its number of people by 10% in order to spread
those costs more thinly, the 10% loss in revenue would then be
shared by 110% of a country's population, resulting in a slightly
smaller decrease in income of 9.1% (10% of costs divided by 110% of
population) instead of 10%.
However, since the
total amount of money in the economy has not increased, 110% of
workers would now have to share 100% of a country's GDP, which would
mean an additional loss in income of 9.1% (1 minus, 100% of GDP
divided by 110% of population), for a net revenue of 81.8% and a
grand total income loss of 18.2%.
What would happen if a
country chose to depopulate by 10% instead. Firstly, many people
who are unemployed or on social assistance would be able to find
jobs, which in itself would benefit both society and individuals and
decrease the cost of social support programs for taxpayers.
Secondly, 100% of the
GDP would now be shared by 90% of the population, resulting in an
increase of per capita income of 11.1% (100% of GDP divided by 90%
of population, minus 1). However, the costs of addressing the aging
baby boomer problem would go up but only to 11.1% per person (10% of
costs divided by 90% of population), leaving workers to break even,
or with no change in income. Compare this with the 18.2% net loss
a stronger depopulation target of 20% would yield a rise in per
capita income of 25% against a cost of addressing the aging baby
boomer problem of 12.5% per person, for a net gain of 12.5% in
The economics of
population growth do not add up. In fact, they are shockingly
flawed. They amount to a recipe for disaster in terms of
consumption of non-renewable resources and will not yield the
intended result of making it easier to pay for the aging of the baby
boomer generation, quite the opposite.
Addressing Pension Problems in Developing
Using a logic similar
to that of the age crunch problem, many argue that one of the
reasons for the population explosion in the developing world is that
people in countries without universal pension plans for the elderly
have large families as a means of making it easier to be supported
by their children in their old age. The rationale is that the
financial burden of taking care of two parents as they get older is
lighter when distributed over a larger number of children. Could
this reasoning also be wrong?
On the one hand,
bigger families are also more costly to support, preventing people
from saving for retirement or the education of their children. On
the other hand, the economics discussed above also apply to this
situation. Suppose that the costs of supporting a parent are 25% of
one's income. Two children supporting two parents would leave the
former with each 75% of their income (200% of salaries less 50% of
costs, divided by 2).
If a family chooses
to double its number of offsprings to four in order to spread the
costs of supporting elderly parents more thinly, the children would
then be left with slightly more money, 87.5% of their income (400%
of salaries less 50% of costs, divided by 4).
However, a doubling
of a country's population would mean that GDP would now be shared by
twice as many people, yielding an additional 50% loss in income
(100% of GDP divided by 200% of population), for a grand total of
62.5% decrease compared to 25% under the scenario with two children.
What about a
one-child policy strategy? What would happen to China if it were
able to reduce its population in half over a given period of time?
One child would have to support two parents, each at 25% of a single
salary, leaving the former with only 50% of a full income.
However, 100% of GDP
would now be shared by half as many people, yielding double the
income per capita, or 200% (100% of GDP divided by 50% of
population). Of course, this assumes that productivity has also
doubled, which could occur given enough time. Remove from this the
50% cost of supporting two parents, and a child is left much richer,
benefiting from an actual 50% increase in income. Compare this with
the 25% and 62.5% losses under the scenarios involving two and four
Note that these
examples are simplifications and assume that there are enough people
unemployed and on social assistance in a country to make up for the
loss of workers resulting from depopulation policies.
As well, they also
assume no economic growth from monetary expansion. In any case,
this would favor depopulation strategies. Under the scenario with
four children, a doubled GDP of 200% would be divided by twice the
people, yielding 100% or no loss of income instead of 50%. However,
the one-child policy would mean that 200% of GDP would be shared by
50% of the population, yielding a 400% share per person, or a
quadrupling of income, and representing an improvement of 250
percentage points, instead of 50 as in the scenario involving a
doubling of the population.
The economics of
population growth really are the economics of poverty.
Sharing the Costs of Infrastructure
The building and
maintenance of infrastructure such as roads, electrical networks,
transit systems, aqueducts, etc. will have to be supported by fewer
people in a depopulating world. The common perception is that this
would mean lower disposable incomes for individuals. While it
appears that economies of scale would spread the costs of
infrastructure more thinly—a logic that strongly drives government
policy in many countries—a closer examination reveals a much less
In fact, each system
has its own economy of scale, and in the aggregate not much is
gained from population growth in terms of reducing costs. Suppose
that a car with a maximum carrying capacity of four is a piece of
infrastructure, a form of public transit. If used to go to work by
one person only, the full cost of the vehicle (100%) would be born
by a single individual. If used by two, respective shares of
expenses would be 50%. At four people, the car would reach its
maximum efficiency, dropping costs for everyone to 25%.
If a new person is
added to the equation, a second car would have to be purchased. In
this new case, 200% of car expenses would be split between five
individuals, resulting in a 40% share of costs each. As such,
having five people—or a larger population—to share expenses is
not better than four for the car
Furthermore, the cost
of adding more cars will never be lower than at the maximum
efficiency level reached at four people. At 8, 12, 16, and other
multiples of 4, expenses for individuals would reach 25% but never
lower. Four is the smallest optimal population level
for the car infrastructure. Increasing the number of people after
that will mean higher costs, except at full multiples where they
will be equal.
same applies, for instance, to a bridge. The highest efficiency
level is reached when traffic is maximized. The minute that a city
has to build a second one to ease congestion, costs per capita
increase and progressively drop until the circulation on this new
bridge is again at the maximum. The same would be true of a public
transit system when new routes are opened, buses are added, or when
a city builds a subway in response to increased demand for public
transit. Of course, there can also be convenience or quality issues
involved in the decision-making process.
consider that cities and countries comprise many types of
infrastructural systems, each with its own smallest optimal
population level. Many of these would reach maximum efficiency at
low levels and never fare better after that, with costs increasing
between multiples as shown above. Doubling the number of people in
a city or country would only result in lower efficiencies or
multiples rather than an actual decrease of costs.
scale effects would only be achievable for systems that have optimal
levels larger than a city's or a country's total population.
Increasing the number of people in this case would lower costs but
only up until their smallest optimal level is achieved. As with
other systems, costs would rise after that and progressively drop
until a new multiple is reached.
population levels are far from yielding the efficiencies of scale
that most people think they do. Cost savings occur only for larger
systems, and those have to be balanced against the many negative
efficiencies of smaller ones between multiples, yielding at times
overall net positive scale effects and at times, net negative ones.
more than that, there is yet another variable to the equation. The
economics of poverty also applies to this situation.
Infrastructure, like having to support an elderly population, is
just another expense for society: adding people spreads costs more
thinly but also forces a city or a country to share its total GDP
among more individuals. Spreading a 10% increase in infrastructural
expenses—for instance, from building a new bridge—would still
yield an 18.2% loss in income in a 10% population growth scenario.
A 10% depopulation strategy would result in no change, and an
aggressive 20% reduction in population would yield a net gain in
income of %12.5.
reasons for the above results are also the same as those for the age
crunch and pension problems. In fact, what cities and countries are
really adding to the picture in a population growth scenario is
unemployed people: an unchanged GDP means the same total number
of jobs. How does 10 people without income make it easier to pay
for a new bridge? It does not.
In reality, there are
only two major ways to increase wealth per person, lower the per
capita cost of infrastructure on individuals, and make it easier to
support a larger number of retirees: economic growth—which is a
road to disaster—and depopulation.
Unemployment and Productivity
The problems of the
aging of the baby boomer generation, the larger-than-usual number of
retirees resulting from depopulation initiatives, and the high
population growth rates in developing countries have two things in
common: the impossibility of resolving these issues by increasing
the number of people to spread costs and the need to improve
countries' financial ability to support retirees.
Based on all that has
been discussed so far, depopulation strategies seem to be the clear
way to go for the future. The success of such would depend on a
country's ability to maintain the size of its labor force and
increase its productivity while it depopulates. This can be partly
achieved by using unemployed people and welfare recipients able to
work—i.e. the inactive labor pool—to
bring additional workers into the production system and
offset losses due to depopulation.
productivity would enable a progressively smaller workforce to
support a larger-than-usual number of retirees without the negative
impact that population growth would have on the environment. Here
is a closer look at these two options.
If the number of
active workers in a country needs to be increased in response to a
larger-than-usual retiree population, the best way to do it is to
get as many people as possible to join the labor force.
unemployment figures in many countries actually hide a lot of
joblessness. Usually, the rates do not include people who are not
actively looking for work or on social assistance; most of them are
perfectly able to work and in dire need of a job.
In 2010, the US had a
total civilian noninstitutional population 16 years and older of
237,830,000 people. Out of this, 153,889,000, or 64.7%, were
employed and 83,941,000, or 35.3%, were not part of the labor force
although the number of officially unemployed was 14,825,000, for a
9.6% unemployment rate (calculated from US Census Bureau, Labor
Force Statistics from the Current Population Survey, 2010).
For the age range of 18 to 64, the percentage of people not in the
labor force was 28.3% (calculated from US Census Bureau,
In Canada, there were
17,145,300 people working in December 2010, and the total number of
persons between the ages of 20 and 65 was 21,445,700. While the
official unemployment rate stood at 7.6%, about 20% of Canada's
working age population (20 to 64) was not part of the labor force
(calculated from Statistics Canada, 2011, February 04, and
Statistics Canada, 2010, September 29).
In addition, there
are a number of teenagers who would also be happy to take up jobs if
they were easier to get. Many retirees might want to keep working a
day or two a week for supplemental income, to keep busy and active,
or just for the social opportunities that many jobs offer. The same
would be true of some stay-at-home parents. As well, in a
depopulating world, families would be smaller, reducing the need for
homemaking and freeing up more people for the workforce.
With proper training
and more opportunities, many in the pool of people not participating
in the labor force could enter the job market and compensate for the
age crunch problem or enable a country to depopulate at a faster
speed and reduce more quickly the consumption of non-renewable
resources at this critical point in time.
opportunities to everyone who wants to work would benefit society in
many ways: address the longstanding issue of unemployment, reduce
criminality from more people earning a living, decrease the
incidence of mental health problems related to joblessness, and
eliminate the need for population growth. In addition, it would
reduce the cost of unemployment insurance for both employees and
employers as well as that of health and social assistance programs
In most countries,
there is currently a lot of leeway in terms of being able to add
people to the labor force without population growth, and more than
enough to address the aging baby boomer generation problem. In
contrast, increasing the number of people in a country would not
only put more pressure on non-renewable resources and increase
environmental problems but also reduce per capita GDP—i.e.
incomes—keep unemployment higher, and eliminate various cost
savings associated with lower joblessness.
In a depopulating
world, family expenses would be lower from a smaller number of
children. The opposite would occur under population growth
policies. How are parents supporting bigger families and earning
less income going to be better able to pay for the costs of a
larger-than-usual number of retirees?
The economics of
population growth to address the age boom problem are about as bad
as they get. Those advocating it as a strategy fail to consider the
decrease in per capita income associated with a larger population.
In order to improve a
country's ability to support a larger-than-usual number of retirees
as they depopulate—or as baby boomers age—and if the inactive
labor pool is to be used instead of population growth as a means to
address the issues discussed so far, productivity will have to
increase and the system, improved.
in labor-saving technologies would free up workers and allow a
country to do more with fewer people. As well, for an economy to be
able to function at low unemployment levels, the skills and
education of economically inactive people would have to closely
match what is needed in the industry. It is not much use to have a
thousand computer technicians available to take up jobs if the
demand in the marketplace is for a thousand legal assistants or
A Closer Integration of Education and Industry
One of the obstacles
to reaching full employment, as already explained, is complaints by
the industry regarding the shortage of skilled labor as countries
approach 2% to 3% unemployment levels. Integrating education more
closely to the needs of markets would alleviate the problem and
enable countries to function at much lower unemployment levels
without wage inflation or labor shortages.
There is no point in
producing twice as many engineers as we need and having half of them
unemployed. Vice versa, educating too few people in sectors and
professions of high demand is equally unproductive for the economy.
Admissions to faculties are wide open in many countries regardless
of the number of jobs actually available at graduation in the
This aspect of the
education system is costly to society on several counts: many
graduates are unable to find employment, students are trained for
nothing at high costs to both individuals and governments—and
often end up having to go back to school in order to pursue a second
degree—and the needs of the industry are not met.
One way to approach
the problem would be to limit enrollment in individual faculties to
the anticipated demand (plus a certain margin of error) in the
market for their graduates. The approach would prevent both
shortages in some fields and oversupplies in others. Limited
enrollment would, however, stop some people from studying their
Another way would be
to use financial incentives or disincentives to boost enrollment in
areas of high demand and reduce it in others. For instance,
bursaries and student loans could be increased or made more easily
available in certain fields of study. Tuition fees could be set at
higher levels to decrease admissions in sectors of low demand in the
This approach would
enable countries to more closely meet the needs of the industry and
reap the associated benefits but would make it more difficult for
poorer people to study in their first choice of subject area when
those are the object of financial disincentives.
With proper and active
management of education systems, countries would be able to make
sizable gains in terms of productivity by avoiding redundancy. They
would also increase their ability to function at lower unemployment
levels, reduce the cost of the education system for taxpayers and
students, improve graduates' satisfaction by increasing their
success at finding jobs in their own field of study, as well as
better meet the needs of the industry.
Lightening Up the Education System Burden
There are a number of
other ways that education can be further adapted to allow people to
enter the job market sooner, which would both reduce costs to
society and increase countries' labor pool and ability to support a
larger-than-usual retiree population.
Many university and
college programs comprise 30% to 50% of general courses. These add
up to a year or more on an average degree. Is this broad scope of
education still needed and appropriate in today's society? The
Information Age has transformed the world we live in. Nowadays,
children and youths learn far more from the hundreds of television
channels available and the Internet than they do in school. They
are also exposed to a much broader scope of values and information.
Do we really have to
force everybody to spend an extra year of higher education sitting
on a school bench? The need for higher education to provide a broad
scope of knowledge has much decreased. It certainly does not
justify forcing everybody into an additional year of learning, or
the added cost of it for both students and society, especially in
today's context of abundance of alternative sources of knowledge and
competitive and specializing world.
A Universal Language
Another area where
substantial gains could be made in terms of eliminating wastefulness
and improving productivity is language. There are literally
thousands of them currently in use around the world today. Of
those, about two dozens are being spoken by at least 50 million
people. That alone represents a massive amount of duplication.
Think of the Internet
needing to be 24 times bigger without offering any more information
or of all the books, television programs, films, software, research,
product labels, and educational materials needing to be translated
or created in 24 different languages instead of just one. Society
is really making 23 extra copies of a lot of what we do today for
non-English-speaking countries, there are literally millions of
people that are forced to spend money and months of their lives to
learn a second language to be able to either perform a job, study,
travel, or just gain access to a much larger amount of information
on the web or elsewhere. The added burden of having to learn a
second language lowers a country's competitiveness by increasing
many costs relating to translation and education.
As the planet
depopulates, the burden of maintaining a multi-language
infrastructure worldwide will increase relative to the number of
taxpayers. While languages offer certain cultural aspects that many
value and identify with, they are costly and do put many countries
and individuals at a significant disadvantage.
The Economics of Poverty
last chapter showed that people in countries around the world would
be much better off today had the world population not doubled since
the mid 1960s. There would be not only plenty of food to feed
everyone but also much higher income per capita.
chapter shows that the gains achieved by spreading the costs of
various social and infrastructural systems are much smaller than the
losses incurred by having to share wealth among a larger number of
growth is the road to poverty.
12. Depopulation: The Road Ahead
In the last chapter,
we reviewed a number of issues relating to the economics of
population growth. We will now examine the mechanics of
depopulation, including the main trends in population control
The Population Question: Perspectives
control is not going to occur through increasing death rates. That
leaves us with one option, decreasing natality. Ann F. Wolfgram and
Maria Sophia Aguirre (2004) examined the main perspectives on the
argue that poverty is at the root of the population growth problem,
rather than a consequence of it. In their view, economic insecurity
and the inequality of women are the most important factors
responsible for high birth rates, especially in developing
countries. Social reform and education would address the causes of
population growth. Improving the lot of the poor would lead to
lower birth rates as has been the case in advanced countries.
resources perspective contends that resources are limited, and
as Ehrlich and Ehrlich (2004) phrased it, continued population
growth will put humanity on a “collision course with nature” (p.
68). Along the same line, Jared Diamond talked about social
collapse occurring as a result of resource and environmental
people-as-a-source-of-instability view claims that excessive
growth will increase world instability.
women-and-human-rights take on the issue makes the case that
the lack of equality and empowerment of women in many countries is
the main cause of the population growth problem.
perspective considers people to be polluters in an environment with
limited tolerance and resources. While its scientific basis might
be correct, some of its proponents lean to the right politically,
and the perspective is generally viewed as lacking in compassion.
people-as-problem-solvers advocates deny that population
growth is an issue and view it as a positive factor. It is based on
the belief that human intelligence will overcome all the problems
posed by nature through science and ingenuity.
pronatalist view is also
in denial that population growth is a problem. This view is based
on religious objections to contraception (p. 8-12) rather than
science and the best interest of the planet.
Approaches to Population Reduction
The redistribution of
wealth and fundamental social reforms as approaches to population
control may be sound strategies for the long term. However, as
discussed throughout this book, there is a need for urgency and
prompt action. As such, other options must be contemplated.
Countries around the
world have different financial means to address the problem of
population reduction. While this rules out some choices for some
countries, there is still a broad range of options available to
most. China's One-Child Policy offers old age security to parents
for the sacrifice of having a smaller family. The state of
Rajasthan in India recently offered cars and other prizes in a
raffle to those willing to undergo sterilization. Both of these
approaches have their critics, and no one claims that they are
perfect; they may only reflect the massive population problem that
China and India have.
Most other countries
could probably address the issue with a range of milder incentives
and disincentives. At the moment, many governments are actually
spending money to increase their population. A first step could be
for them to gradually reduce and eventually eliminate the various
family allowance programs currently in existence. These promote
population growth and are costly for taxpayers.
would be to restructure income tax systems based on a family's
number of children. Lower rates would apply to people without any
and go up with each child a person has. The increases could be
gradual, for example 3%, or geometric (1% for the first child, 3%
for the second, 6% for the third, etc.), reflecting the exponential
impact an additional offspring has on a country's population while
making the system relatively painless on single-child families.
Both these strategies
would reward those willing to make sacrifices for the greater good.
In addition they would reflect the fact that larger families and
population growth are costly to countries.
A softer way to go
about depopulating would be to not penalize people for having a
family by keeping tax rates the same for the first two children but
balancing this by having a stiffer penalty for a third one.
Alternatively, a strategy could focus exclusively on offering lower
tax rates to people having only one child or none at all. It would
avoid the perception of being punished for having a family and by
the same token reward the socially conscious.
could involve bonuses for having fewer children or having them at a
later time. Disincentives or penalties could also be used but would
likely be politically unpopular. Essentially, there is a wide range
of approaches available to developed countries depending on the
depopulation speed desired.
countries, some of these options might work but not be the best
choice for a number of reasons. Certainly, monetary incentives
would have a strong appeal. As discussed earlier, in poorer
countries large families are perceived as providing safety nets for
parents as they age. Since the issue of population growth is
intimately tied to the above for them, solutions could also focus on
that aspect. As in China's example, strategies could involve
guaranteed support in old age, or a better level of it, for people
having fewer children.
Most countries in the
developed world have relatively stable populations. Others have
used generous immigration policies to boost their numbers.
Australia's and New Zealand's populations have more or less doubled
since 1965, and Canada's has also seen a significant increase in
As discussed earlier,
migration to high-consumption countries can result in a large
increase in resource depletion and environmental footprint. Based
on per capita GDP averages in North America, the world, and
developing countries (respectively $43,083, $13,580, and $8,485),
the amount of money spent on one new household in the US and Canada
could support 3.17 families elsewhere in the world or 5.08 in
developing countries. As such, generous immigration policies might
not be the best way to help.
The Canadian view on
the issue—or at least what politicians have been telling people
for decades—has long been that along with immigrants comes an
influx of capital, which creates employment and boosts economic
growth. Firstly, money and jobs are just shifted from one country
to another, helping the latter but harming the former. Secondly,
because of that, no additional amount of employment or growth is
created globally. Thirdly, it has never been clear whether or not
that influx of capital actually yielded a net benefit for the host
Zealand, and Canada boast of some of the highest percentages of
foreign-born people among developed countries. As of 2009, they had
respectively 26.5%, 22.7%, and 19.6% of their population born
elsewhere (Migration Policy
Institute Data Hub, 2011). Their gross domestic product
based on purchasing-power-parity (PPP) per capita GDP
(an adjusted GDP figure more accurate for country comparisons) grew
from 1980 to 2009 by 383%, 322%, and 342%, for an average of 349%
(International Monetary Fund. 2010, October. World economic
outlook. Data and statistics.).
comparison, Denmark, Finland, France, The Netherlands, Norway, the
UK, and the US had respectively 7.5%, 4.4%, 11.6%, 11.1%, 10.9%,
11.3%, and 12.5% of their population foreign born (Migration Policy
Institute Data Hub, 2011). Their gross domestic product
based on purchasing-power-parity (PPP) per capita GDP growth
figures from 1980 to 2009 were 357%, 389%, 336%, 373%, 414%, 400%,
and 375%, for an average of 378% (International Monetary Fund. 2010,
October. World economic outlook. Data and statistics.).
there are other factors at play, this suggests that generous
immigration policies have not paid off for Australia, New Zealand,
or Canada. In fact, they may even have had the opposite effect.
It seems aberrant that
countries like Haiti and others continue to increase their
populations, and their need for foreign aid, when they are already
unable to support themselves.
It would be
beneficial for them to look into population stabilization,
especially since many strategies are essentially free and would
increase the effectiveness of aid over time. As well, part of the
funding could focus on the provision for old age support systems.
13. The Effects of Depopulation
The world has never
depopulated in its entire history, at least neither intentionally
nor on a large scale. What is the road ahead going to look like?
From an economic perspective, will decreasing the world population
be the exact opposite of increasing it? These are some of the
questions that will be explored in this chapter.
The following is a
look at the effects of a decreasing population on various aspects of
society and the economy. It assumes that the total number of people
on the planet has started to go down—which is not expected to
happen for decades—and that there are no resource shortages in
sight. As such, it should not be taken as a prediction of the
future but rather as an illustration of the benefits of
depopulation. In practice, positive effects will still occur but
will mitigate rather than overcome the impact of the Depletion Wall.
gradually decrease the demand for renewable resources and allow them
to replenish themselves where they have not been wiped out entirely.
Fisheries would become increasingly easier to manage. In time,
catch limits could be increased and eventually eliminated. The cost
of harvesting many renewable resources would decrease as they become
more plentiful, pointing at a positive impact on prices for
Forests would not be
exploited as intensively as before, leading to an improvement of
many of the problems that current practices and demand create. The
pressure to harvest old growth areas would go down and eventually
disappear. The clearcutting of tropical forests for agricultural
purposes would decrease and stop as the need for food would go down.
The focus of the
industry would shift to replanting and reharvesting the same areas
over time. The best and most convenient regions would be selected
for that purpose as opposed to having to continuously expand into
new frontiers that are farther and farther away and more costly and
difficult to exploit. Again, this points to a positive impact on
Some economy of scale
would be lost with respect to expensive infrastructure, but, as
expressed earlier, most systems would generally not be affected. In
the first few decades of depopulation, a number of factors would
serve to reduce costs. A lot of infrastructure is already built and
would need only to be maintained. Some systems would never have to
be replaced at the end of their useful life as they would simply no
longer be needed.
Decreasing the world
population would have a proportional impact on the environment by
reducing contamination, global warming, smog, etc. and that, without
the need for special initiatives or additional funding.
The Corporate Sector
What would all of this
mean for the industry? Firstly, there would likely be a shift in
consumption from certain sectors of the economy to others. Fewer
people would mean a decreased need for basic types of food.
Beyond that, whether
the business sector continues to grow or shrinks would depend on the
type of strategy adopted (see chapter 10). Those involving a GDP
freeze would see total consumption remain the same, meaning no
slowdown for the economy as a whole.
approaches, those involving a GDP decrease, would result in total
consumption dropping, meaning a smaller business sector and incomes
either remaining the same or decreasing depending on the strength of
the GDP targets adopted.
The Aggressive Green
Economic Environment Strategy would mean business as usual in terms
of growth but in a much greener world and with the production system
strongly focused on the services, entertainment, communications,
information, research, software, and leisure sectors of the economy
as opposed to those of material goods. Of course, renewable
industries would thrive in such an environment.
The Industry and the Economy
Most sectors of the
economy would gradually change and become greener, as has started to
happen in the automobile industry. Others would see some
consolidation, depending on the depopulation-GDP strategy
implemented. This would occur over time, with the vast majority of
businesses adapting rather than disappearing; after all, many of
today's companies have little in common with their counterparts of
only 50 years ago.
More goods would be
produced and sold locally as the cost of energy increases, but a
thriving international trade for small high-value items like
electronics would continue.
In a depopulation
context and low unemployment environment, productivity increases
would become a strong focus of both governments and industry.
Information technology would remain a very important sector not only
because of the high-value/materials ratio of its products but also
because of its close association with green sectors of the future:
software, networking, and information access.
Overall, the potential
for future growth in various areas of the economy will depend on a
green factor. The goods, industries, and sectors that are
close to 100% green—i.e. having a minimal environmental and
resource impact—will continue to expand. At the other end of the
spectrum, those that are 0% green—having a strong negative impact
on resources or the environment—would shrink over time and
eventually die out.
Prime and quality real
estate—better houses in better locations, cottages on waterfronts
rather than blocks away from them, etc.—would be easier to buy as
their availability would increase relative to the number of people.
The excess demand created by continuously growing populations would
decrease and bring about more reasonable prices. The cost of lumber
would also drop from less intensive exploitation, furthering the
same trend. Living in the world's best cities would increasingly
become more affordable.
Food and Energy
As the world
population decreases, the demand for food will drop and production
will increasingly shift towards including a larger share of energy.
In the long term, less land will be needed. The lower-fertility
areas and those furthest away from population centers will simply be
retaken by nature. All of this will work to decrease the costs of
Standards of Living
developing countries adopt growth-freeze strategies, standards of
living should improve over time. They would be maintained or remain
reasonably good in developed countries even under growth-reduction
As mentioned earlier,
quality of life does not necessarily mirror GDP figures. While
incomes may decrease in some cases, more free time would increase
the quality of life. As well, pollution levels would go down, and
better health and lower cancer risks would significantly improve
Under an Aggressive
Green Economic Environment Strategy, economies would keep growing.
The Broad Picture
We would see fewer
physical goods in our lives, and those we have would be kept longer.
The throw-away society would disappear like the dinosaurs. In
essence, we would have fewer toys and take better care of them.
While this may look
strange at the moment, it did not only a few decades ago. It is how
most of our grandparents, the pre-boomer generation, lived. Of
course, other aspects of our lives (healthcare, entertainment,
pampering, information, etc.) would be much better than theirs.
Once the world
population is small enough, there would be an almost infinite supply
of power and fuel as the planet would have almost completely
transitioned to renewable energies which would be widely
distributed, produced locally, and would not depend on geopolitics.
Overall, the cost of
traveling would increase but not prohibitively so on account of
renewable sources of energy and society adapting to a new economic
environment (longer-lasting and more fuel-efficient vehicles made
with an increasing amount of green components, etc.).
The story for air
travel would be pretty much the same. The fuel efficiency of
aircrafts is increasing and would mitigate some of the rise in the
cost of energy. Airplanes are expensive and contain a lot of metal
but are already made to last longer and worth repairing more
extensively. Dividing all these costs by the huge number of
passengers they carry over their lifespan would still yield fairly
A trip by air today
is often no more expensive than one by car. This suggests that the
overall cost of air traveling is competitive with automobile
transportation and should remain so in the future. The price of oil
has gone up several folds in the last few decades, and people are
The Issue of Sustainability
perceive the world as a continuously growing economy.
Environmentalists generally disagree with that assessment. They see
limits to the ability of the planet to sustain increasing amounts of
consumption, stress, destruction, and unbridled economic expansion.
They talk about sustainable growth.
While governments do
not appear to be concerned about non-renewable minerals, the idea
that they are capital resources—and should be used as little as
possible—comes from basic economic theory, not environmentalists.
A Working Definition of Sustainability
It is clear that the
current economic system is highly destructive to the environment and
that the situation cannot continue unabated. This leaves us with
one option: moving towards sustainability. The definition of the
word sustainability is the object of debate.
For the purpose of
this book, the meaning of sustainability will be restricted to a
more practical one. A broad, yet simple definition could be that
each generation would have to manage resources and the environment
in such a way that it would bequeath the planet in better (medium
term) or in as good a shape (long term) as it was received.
This would entail a
stop to environmental destruction, the decrease of pollution to
acceptable levels, the management of renewable resources in such a
way that their yield continues indefinitely into the future and does
not decrease from one generation to the next, and ongoing incentives
to cut down to low levels the consumption of non-renewable resources
as there is no such thing as sustainability or point of balance in
the case of capital stocks and we need to move towards minimal
The first book of this
series dealt with the issue of destructive economics. Modern times
and the Industrial Revolution have greatly increased standards of
living. Capitalism works well in terms of generating production and
wealth, if not in redistributing it. The problem is that without an
appropriate framework, it is highly destructive when it comes to
resources and the environment.
On the one hand, it
lacks proper checks and balances. A lot of pollutants are not
controlled, and when they are, legislation is often not enforced or
the financial penalties are so ridiculously small that they do not
offer any deterrence. As a result, except in the worst cases and
for the worst pollutants, most violations go unnoticed.
On the other hand,
the way the system is currently set up encourages continued growth
and the depletion of non-renewable resources. The economic
incentive for the industry is to exploit those as much as possible
and cash in on the profits. This is what capitalism does: it
processes materials into finished goods, and the faster it does it,
the higher the profits. Uncontrolled, the industry will simply wipe
out non-renewable resources and only move on to selling us something
The Green Economic
Environment (GEE) strategy proposed in the first book of this series
directly addresses that issue. It does it from the inside by
changing the incentive structure of the economic system. Under it,
profitability would no longer be found in destroying the planet but
in making it greener and minimizing the use of and preserving its
capital resources. The very same system that is wreaking havoc
around the world at the moment—and could continue to do so in the
future—would become the engine of change for a green tomorrow.
Capitalism can be
highly destructive. It just depends on how it is configured by us,
on the incentive structure we set. It has traditionally been
anti-environmental, but we could turn the tables relatively easily
and put an end to the slash and burn economics. It is up to