The UK’s Royal Society has just announced a major new research project on the implications of population growth. The study is to be headed by the Nobel Laureate, Sir John Sulston. As the RI points out populations studies is quite a cyclical area of research. The ‘60s and ‘70s were a boom time for the field with less focus being given the the subject in the ‘80s and ‘90s. The fact that the topic is moving back up the political agenda probably has much to do with the intersection of population on two key policy issues; economic growth and climate change.
The political debate about population growth has being going on for nearly three hundred years. Thomas Malthus, seen as the father of demography, clearly held the view that exponential population growth would outstrip improvements in agricultural production, condemning economies to a permanent state of subsistence. Adam Smith on the other hand believed that economic growth and improvements in people’s socioeconomic circumstances would reduce fertility rates over time.
There’s a prima facie case supporting Smith’s assertions. The fertility rate of many of the world’s most developed economies (Much of Europe, UK, Japan etc. but notably not the United States due in large part to the impacts of immigration) has tumbled over the last forty years. That decline has mirrored a period of massive economic growth and rising living standards in these countries. The ‘Baby boom’ has become the ‘Baby bust’ with very significant implications for affected geographies. As the demographic mix inverts there are fewer and fewer younger workers able to carry the social cost of the rising number of elderly in the population.
Interestingly, even though the total global population is still growing the rate of growth has in decline since the mid-sixties. There is a diversity of research which shows that fertility rate has an inverse relationship with factors like educational level (Particularly in Women) and income level. If the RI study is to be useful in guiding policy makers then it needs to deliver some definitive research on which factors really do impact fertility rates, and in what manner.
There is a perspective (One I do not subscribe to) that a growing global population is required to sustain the needed levels of economic growth. The argument is put forward that continued growth in the production of manufactured goods will require and expanding workforce to make those goods. This gets to the heart of one of my personal interests regarding the impact of technology on economic growth. I would argue that the opposite scenario is more likely i.e. that even an increasing supply of manufactured goods will requires less, not more workers over time.
The number of workers now employed in building cars in the most advanced and automated factories today is diminishingly small compared to just thirty years ago. With continued advances in robotics, process control technology and information systems this trend is likely to continue. Fifty years from now its likely that many factories will ingest raw materials at one end and spit out finished good at the other with very few human workers required in-between.
To date this trend has been countered by the relative ease with which manufacturing facilities can be trans-located into low wage economies. However, the very act of introducing manufacturing into low wage economies has the effect of raising living standards and worker expectations which in turn leads to demands to higher wages. When combined with worker shortages this can place a significant upward pressure on wages undermining the location’s original cost advantage. China is now witnessing this phenomenon with many manufacturers now looking to move to other lower wage cost East Asian economies. In my view this will over time lead to a leveling of the global wage cost ‘Playing field’. As we reach that point the pressure to innovate in manufacturing automation will become extreme because that will be the only way to avoid being caught between the ‘Pin factory’ and the ‘Invisible hand’. As global manufacturing competition shifts from trying to find the lowest wage economy to finding the cheapest way to manufacture through automation we will see a dramatic reduction in the global manufacturing work force.
The challenges with this scenario are daunting. If there is truly a correlation between rising income levels and declining fertility rates then a long period of technology lead efficiency improvements in manufacturing and its concomitant positive impact on economic output should correlate with a continued slowing of the global population growth rate. If the point is reached where global population growth rate becomes negative then you enter into the potentially ‘Utopian’ situation where a smaller and smaller global population shares an ever growing economic pie. Alternatively, if the global manufacturing work force continues to shrink due to automation while the population continues to grow and those lost manufacturing jobs can not be more than offset by growth in services sector employment then you have a political time-bomb on your hands.
I seriously hope the RI study will look at the the correlation of population dynamics and economic growth and will factor in the role that technology will play on both sides of the equation. The likely impact of climate change on these issues I will leave for another post.