We tend to overlook the dynamics of demography and its economic impact, so let’s take a step back and break down demographics by generation and how that will dictate the future of our economies.
There are standard behaviors for each age group. You’re born as a ward, but are cheap to take care of. Then you start to become more productive and consume a lot. Then you age into a situation where you’re providing taxes. And then you revert back to your old ways and become a leech on the economy again. Fairly cyclical and predictable.
So in rapidly aging populations like Europe, Korea, Japan and parts of Africa, once you tip that scale towards people consuming more capital than they are producing…you can imagine how well that plays out. There are certain situations where population shifts could benefit an economy, but there’s no silver lining to deep population decline.
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Hey everybody Peter Zeihan here coming to you from snowy Colorado today. We’re taking an entry from the Ask Peter column on overpopulation and under population a specifically. The question is, Peter, you talk a lot about population and the negative economic consequences of it. But if we are entering a world where there’s a lot of environmental concern and damage, doesn’t slimming down the population actually argue that we could be headed towards a better world?
In addition, in general, is this going to mean that there’s more resources available for everybody else? Wouldn’t that mean we’re going to have a degree of economic growth that is qualitatively different than what came before? And, you know, there’s some there’s something to that argument. But the problem is that assumes that we lose five, ten, 15, 20%. Pick your number across the world.
Equally of every age group of every country and every ethnicity. That’s not what’s going to happen. So before I go into the nuts and bolts of it, let me kind of give you the overview. As a rule, people under age 18 only can assume things like education, a little bit of health care. They don’t contribute to the working economy.
People aged 18 to 45, these are the folks that are having kids and buying homes and going to school. It’s very heavy consumption. Most of the stuff that you will consume in your lifetime, the greatest proportion of your consumption will happen while you’re raising your kids, which as a rule, ends between 45 and 50 from 45 to 5065.
These are your mature workers. These are the people who are playing, paying lots and lots of taxes. They’re saving for retirement. They’re generating the investment that drives the private sector. And then when you turn 65, you’re still consuming, but your consumption changes dramatically to things like health care and a little bit of leisure. But you’re still occupying your home.
But your tax bill goes way down and now you start drawing pensions and health care benefits that drive government commitment to you through the roof. So you start out being a ward but not being very expensive. You move into being very productive in a lot of consumption. You age into a situation where you’re providing taxes and then eventually age to the point where you’re just this giant sucking sound.
Instead, in the advanced world. We’re not just dealing with the population. We’re dealing with very, very rapid aging. So the population structure for, say, Europe or Korea, Japan in just 15 years is going to be a big bulge of people who have retired but not died. And then a very, very small number of working age adults and even fewer children.
It’s a very different pattern because old people. Let me rephrase that. People of advanced age consume goods, but also consume a huge amount of tax take and health care. And so they are a net drain on the system instead of tax payers like they were in their twenties, thirties, forties, fifties and early sixties. So the pressure on the system is massive.
A good thing. A good example. I can give you a how this imbalance really doesn’t work out is if you look at sub-Saharan Africa, especially southern Africa, during the AIDS epidemic, you had an absolute gutting of the population structure of people roughly aged 18 to 45, leaving you with mature workers and societies where the mature workers weren’t all that skilled and then no one to raise the kids.
And so the block of people 18 to 45. Those are the people who do most of the work, pay a lot of the taxes and absolutely raise the children for the next generation. And we lost their consumption at the same time. So a lot of these countries south of Congo basically faced a 25 year period of economic just despair as their population balance changed.
The part of the world where we’re probably going to be seen that this happened most dramatically. Well, let me give you two. The first one is East Asia. These are places that have seen absolutely massive increases in health care and longevity over the last 50 years. So, for example, I believe the Koreans are now the longest live people in the world, which means that you’re going to have these massive, massive aged populations sucking the government dry while there’s no one down below to do the work, much less raise children.
The other chunk is the Orthodox world, where a combination of the post-Cold War shocks and alcoholism and a poor diet are hollowing out the working age population. Before we get to the point where we have a population collapse, and these are two very different economic models that really don’t go anywhere particularly positive. But there is a lot of nuance and difference between the two.
In the case of East Asia, assuming for the moment that we don’t have an energy or trade breakdown big, if you’re looking at a general degradation of the states ability to function. In the case of Central Europe, you’re instead looking at scene wedges of populations that are actually going to benefit quite a bit from this because if you lose everyone in the thirties, but you still have people in your fifties, you still the tax base, you still have the work and the economic inequality that will erupt in that sort of environment suggests a significant political challenge.
So everyone has their own story, but it’s really hard to make the case that deep population has a silver lining and the environmental case. Keep in mind that if people age, they’re still consuming. You’ve just lost the younger generation that can pay the taxes and generate the investment that’s necessary to maybe transition to something that isn’t based on oil and coal.
So there’s really no upside here. There are just flavors of downside.
