Wednesday, October 20, 2010

Resources Depletion and Demographics

A very common concern going forward is resource depletion .  However there is another ongoing concern that will act in synergy with this problem, and at other points will work against it.

That problem is global demographic shifts.  As Europe and Japan grow older, the “developing” world is relatively young and continuing to grow.  Even China, with its one child policy, is so young that its population will probably continue to grow for another 20 years.  It is estimated that that will add another 160 million people over the next 20 years (roughly half the US population today) and the much more quickly growing India would gain 170 million people within that time frame.
To continue the discussion I will quote Jack Goldstone in   Flash Points and Tipping Points: Security Implications of Global Changes
[F]our major trends that are likely to pose significant security challenges to Europe, Japan, and
most other developed nations in the next two decades:
1.    Disproportionate population growth in large and Muslim countries;
2.    Shrinking population in the European Union and European former Soviet countries;
3.    Sharply opposing age shifts between aging developed countries and youthful developing countries; and
4.    Increased immigration from developing to developed countries.
The security and conflict problems caused by population growth are not mainly due to shortages of resources. Rather, population distortions— in which populations grow too young, or too fast, or too urbanized—make it difficult for prevailing economic and administrative institutions to maintain stable socialization and labor force absorption (Goldstone, 2002; Cincotta et al., 2003; Leahy et al., 2007).

This slowdown in population growth has major implications for overall economic growth (Eberstadt, 2001). The economies of aging nations will not be stimulated by growing numbers of consumers and demand for housing. The capital growth generated by larger generations of young people approaching their peak earning years and saving for retirement will cease as well. Even if the growth of Europe’s income per capita remained constant, its overall economic growth rate would be cut in half as the population declines over the next 30-50 years.

An overall growth rate this small allows few margins for accumulation to invest for the future. As Benjamin Friedman (2005) has argued, substantial growth rates allow more groups to share to some degree in growth, and provide social resources for a variety of services and investments. Overall growth rates below 2 percent per year, by contrast, allow for little redistribution or investment, and tend to heighten social conflicts over such issues as pensions, migration, and labor/employer relations— situations we might see as the global economic downturn progresses.
The declining advanced economic countries are going to have very low growth already because of declining demand (population), but a decline in population is how countries, empires, etc. got broke out of the Malthusian squeeze prior to the industrial revolution.  Even if the size of the pie stayed the same, their was less people to share it.  So the slices got bigger.

But the developing countries are going to be in an extreme bind,  their increasing population would normally increase demand and drive production.  But the energy/resource costs will be increasing.  This is very much a Malthusian scenario in its negative phase.  Countries, empires, etc. prior to the industrial revolution would see people at the individual level get poorer.  Unfortunately, simply because there was less money per person, did not mean there was less money overall.  The surplus was very likely to be fought over by the elites, and in very early empires (Rome) it was often a driving force for expansion.  You made the pie bigger by taking away the surplus from some other group of elites.

The threat of nuclear warfare will probably limit some scenarios.  But access to resources/energy is going to become even more important.  The New York Times had a recent article stating that our military was upset that the Chinese military saw us in adversarial terms: not potentially cooperative.  Do you think the Chinese military is possibly looking a little more clearly into the future?

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