Historians didn’t identify the Industrial Revolution for some decades after its genesis. By contrast, the start of the Atomic Age can be dated to the second that the first atomic bomb exploded over Hiroshima. Much of the developed world has recently moved into a new era that the general populace will not notice for a few years yet: The Age of Decline.
Japan, Greece, Italy, Portugal, Russia, Germany, Spain, South Korea, China and 30 other developed countries are projected to see their populations decline in 2023. Hong Kong, Finland, Taiwan, France, Austria, Belgium, Netherlands, the United Kingdom, Denmark, the United States and another 33 countries will see their populations grow by less than one-half of 1 percent of the developed world. Population growth has largely stopped.
While this may come as good news to those who fear overpopulation, theory and evidence indicate we have far more to fear from declining populations. Four decades ago, the economist Julian Simon pointed out humans are the ultimate resource because they create resources where none existed before. Everything that makes our comfortable lives possible, from energy to transportation to communication to refrigeration to climate control to pharmaceuticals, is the result of human ingenuity.
The Age of Decline will pose a particularly difficult problem for countries such as the United States that rely on younger workers to support retirees. Within the next decade, net migration into the United States will exceed the country’s natural population growth, making us — for the first time in almost 150 years — dependent on immigration for our growth.
For decades, we have known the implications for Social Security. In 1960, more than five workers were paying into the system for each Social Security recipient drawing out. Today, it is fewer than three, and that number is expected to fall to two within another 10 years. Today’s average worker must contribute to Social Security two and a half times what the average worker of three generations ago contributed.
Changing demographics also make it less possible to institute needed change. As the ratio of workers to retirees declines, so too does the voting power of those workers. Older workers and retirees are less interested in reforms that cut Social Security benefits. To further stack the deck against them, younger workers are less likely to vote than seniors. Even if likely voters age 52 and younger unanimously supported cutting Social Security benefits and likely voters 53 and older unanimously opposed, a proposal to cut benefits would win by a scant 51 percent to 49 percent. In fact, almost 80 percent of working-age Americans oppose cuts.
The economics and the demographics favor placing the growing Social Security burden on the backs of workers. Stagnating population growth will make that burden both more financially onerous to bear and more politically difficult to alleviate. And since stagnating population growth yields slower economic growth, the problem will only get worse as time goes on.
It is no coincidence that the United States grew from a small agrarian nation to an economic superpower over the same century and a half its population grew 30-fold. But that era has ended. The United States, and much of the rest of the developed world, has entered the Age of Decline.
As developed countries’ populations stop growing, economic innovation and growth will slow. This will place greater strains on already strained retirement programs. Forcing the young to pick up the slack will make it more expensive for them to raise children of their own, which will further slow population growth.
Having survived the Atomic Age without blowing ourselves to bits and having generated wealth beyond imagining in the Information Age, we enter the Age of Decline to find ourselves victims of our own success. History tells us that impoverished societies die from war and famine. Now we see that prosperous societies die by attrition.
Antony Davies is associate professor of economics at Duquesne University and co-host of the weekly podcast Words &Numbers. He wrote this for InsideSources.