Green Capitalism - Waves of the Future
Climate Change, Non-Renewable Resources, Energy, Contaminants, Carbon Pricing...The Depletion Wall
11. The Economics of Poverty
12. Depopulation: The Road Ahead
13. The Effects of Depopulation
Population Reduction and Degrowth Could Mitigate All: Toxic Chemicals, Greenhouse Gases, and Mineral Resource Depletion
Carbon emissions are not the only problem we have.
A New Strategy for Toxic Chemicals, Wastes & Contaminants
Overview Reviews
See also Book I of the Waves of the Future Series
CHAPTER 11-13
11. The Economics of Poverty
Issues and Options
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 above.
Interestingly enough, 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 revenue.
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 Countries
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 children above.
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 clear picture.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 infrastructure.
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.
The 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.
Now, 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.
Positive 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.
Higher 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.
But 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.
The 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.
Increasing 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.
Reducing Unemployment
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.Official government 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, Population Estimates, 2009).
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.
Offering job 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 for taxpayers.
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.
Increasing Productivity
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.Continued investment 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 architects.
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 subject area.
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 preferred subject.
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 marketplace.
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 absolutely nothing.
In most 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
The 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.This 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 people.
Population 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 strategies.The Population Question: Perspectives
Obviously, population 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 depopulation debate.Redistributionists 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.
The limited 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 destruction.
The people-as-a-source-of-instability view claims that excessive growth will increase world instability.
The 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.
The sociobiological 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.
The 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.
The religious 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.
Another approach 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.
Other approaches 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.
For developing 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.
Immigration Issues
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 size.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 country.
Australia, New 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.).
In 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.).
While 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.
Foreign Aid
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.
Renewable Resources
Depopulation would 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 consumers.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 prices.
Infrastructure
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.Pollution
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.
More aggressive 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.
Real Estate
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 production.Standards of Living
Assuming that 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 scenarios.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 everyday life.
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 good efficiencies.
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 still flying.
The Issue of Sustainability
Economists often 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 use.
Destructive Economics
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 else afterwards.
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 us.