Global population decline does not preclude new chapter of economic growth from happening:
In different times economic growth kicked-off of gains from newly identified efficiencies and broad behavioural change
Originally a post on a possible vector of economic growth and societal change because of the decline of the population and the increase of the average age — this is in part a personal reflection of a great book by Walter Scheidel — The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century.
Florence lost between 1/2 and 2/3 of its population during the Black Death that swarmed Italy via Geonese Kaffa and then took over Europe in the 14th century. What came after was an industrious and meticulous rise of the pan-european trade controlled by Florentine merchants-turned-bankers.
German lands (part of Holy Roman Empire) suffered deeply during the religious strife of the 17th century and the 30-Year War: 1 in 2 died during the period: then followed the accumulation of capital and investment in new capital stock that powered the industrial revolution. Those fleeing the personal catastrophies formed pliable labout stock in new territories (the New World), where new social contracts could have been formed.
Deficit of labour induced authorities to deregulate wage alloted by structured (by ordonance or guilds’ regulation) payments to different workers — and forced to do more with less — as well as experiment, since often old ways and knowledge (passed though apprenticeship) were gone.
“High wealth inequality of at least 0.75 was a standard feature in the major cities of late medieval and early modern western Europe. Augsburg, one of Germany’s leading economic centers in this period, provides a particularly extreme example: recovery from plague-related leveling witnessed an increase in the urban wealth Gini from 0.66 in 1498 to a stratospheric 0.89 by 1604.”
The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century — Walter Scheidel
Where the immediate period after the shock drives down inequality (Sheidel’s book is educative and frightening — showing wars and plagues being the most effective agents of equality) — they lay waste to profligate behaviours of the past and open doors to new norms: new societal frameworks.
“In 1337, Parliament decreed that only nobles and clerics with the lavish annual income of at least 1,000 pounds were entitled to wear furs, considered a marker of status. But within fifteen years of the arrival of the Black Death, a new law of 1363 permitted everyone except the lowliest manual laborers to wear furs. ... It was a sign of growing mass affluence and eroding status barriers that even these more modest restrictions came to be disregarded.”
The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century — Walter Scheidel
It went beyond just attire: it formed new consumption and pushed people out of the (breaking) societal castes — to explore and venture beyond the realm of known: the acceleration of trade happened both by virtue of accounting and redistribution of new wealth — and via access to new technologies facilitating their speedy delivery:
Fast forward to today — the onset of COVID in 2020 interrupted the real-world — yet pushed forward the virtual mediums of interaction. It contributed to the uptake of digital payments, ecommerce, appreciation and expression of value of totally virtual art forms and virtual goods for metaverse.
A longer term trend that would add to the massive societal change is the population decline and the parallel increase of average age: as the world matures, the mix of services and goods — will follow.
Manufacturing countries, due to expiry of labour dividend — have to fend off numerous simultaneous threats: silent resignation, cost of onboarding and training of new staff — so they choose to retain (and retrain) workers longer.
The landscape of available workers — and consumers — changes too: a number of countries now mull a career beyond a career as life expectancy after one gets to 65 years of age improves.
The adjustement of social safety nets and rebalancing of social spending vs collected tax revenue will inevitably happen: hopefully a fair and responsibly managed. A sizeable chunk of the safety net budgets would go towards treatment (and prevention) of behaviour and age-related risks (e.g., falls progressing up the ranking of fatal and non-fatal disease tells something).
Defined contribution schemes would change — people staying employed for longer: so would the investment mix between shares and bonds.
Employers will have to choose to spend more capital on medicare and other related expenditures of their “greying” staff vs spending it wisely to enable productive longevity of the talent pool.
The mix of services consumers (workers out of work hours) consume would change too.
These changes are not out of the ordinary — they have been witnessed in previous cycles. It is up to the design and available tools to enable yet another transition.
