Some 18 months ago, the news broke that China’s population was beginning to contract. There was a knee-jerk reaction from business commentators who were wringing their hands eagerly over the implications this will have on China’s economic forecast and its place in the world—namely that fewer people will result in less consumption, ultimately slower growth, and thus alter the trajectory of its rise.
To quote a report from the Brookings Institute, “Any sense of Western defeatism based on fears about the People’s Republic of China’s (PRC) economic and strategic rise should be tempered with the many constraints affecting that country, beginning with its demographics.” Beyond betraying the geopolitical fears of the West, this sentiment also exposes a perverse and intellectually dishonest economic logic.
Fast forward to today, and we are seeing the same response to the news that India’s population is beginning to decrease. One recent headline in Asia Nikkei states, “India fertility fall puts policymakers on clock to avoid Japan-like strain.” Why on Earth would a country bursting at its seams have to worry about its population leveling out?
Yet in these same publications, one might see headlines related to curbing climate change, resource constraints, large-scale pollution, and mass extinction. These challenges are directly related to the number of people on the planet and the fixation on the perpetual growth model: as if the only way to manage an economy and to allow everyone access to a decent life is through their participation in wasteful and destructive mass consumption.
Should we really view population decrease as a risk for a country’s economic future or celebrate it?
Population stabilization is an opportunity to redefine the very purpose of the economy on a planet faced with existential threats. No longer should economic function be narrowly associated with the creation of more wealth under the unproven fallacy that without unbridled growth, everything comes to a halt. It is an opportunity to create new and much-needed economic theories and norms that accord with the limits to growth, as common sense should make crystal clear.
The truth is that we should not let economists drive the agenda on the population-growth-resources trifecta. Our global thirst for never-ending growth—predicated on the archaic view of “rational economic man”—has created the defining existential threats of our time, including environmental degradation and numerous societal traumas. In this context, conversations around population can be sensitive. Who is to “blame” enters the subtext very quickly.
Thus, if we are willing to understand the nature of these threats and not be in denial, we should see population contraction as a good thing. After all, it is not resulting from our wars, pandemics, or famines. It is driven mainly by human progress: education, awareness, women’s rights, shifting societal values, and the economics of the cost of living.
It is also a natural biological phenomenon: The world’s population has tripled in the last 70 years—and will settle into a new dynamic equilibrium as limitations are reached, with an expected ten billion by 2050. The first millennial was born about forty years ago into a world that was half-empty, with a population of 4 billion compared to 8 billion today.
Yet archaic economic theories that recognize no limits and respect no boundaries prevailed, while humans entered an unprecedented period of exponential growth during a period of 40 years—a blink of an eye in human history. Modern classical economics was blind to this or deliberately negligent as its proponents furthered the growth-at-all-cost model rooted in wastage and consumption. Its ideological underpinnings are rooted in European colonial expansion as resources including labor (slaves) were taken for free, stolen, or traded unfairly.
An almost unanticipated opportunity
To date, all the scientific evidence suggests that even before peak population is reached, human-made threats to the planet can result in catastrophic impacts and large-scale collapse of societies.
To prevent a precipitous collapse, the real challenge lies in adapting our economic models to fit this new global reality.
As populations decline and age simultaneously, economies must transition from a quantity-driven growth paradigm to one that values quality of life and rights to basic needs as the most critical indicator of economic success. This shift requires a fundamental rethinking of how goods and services are produced and consumed and for what purpose, rather than further relentless consumption, which is abused and enjoyed by a minority. The political economy will shift to one where the priority is placed on building shared prosperity—meeting basic needs and rights that are still out of the reach of the global majority. A declining global population provides an almost unanticipated opportunity that must be seized.
Businesses will naturally adjust, as they will be compelled to innovate and compete based on new opportunities, including producing superior quality products and services rather than pumping out sheer volume—and even junk—to meet growth targets. This is not a new expectation: such are society’s demands for a more sustainable private sector with higher standards and better customer satisfaction.
Fewer soda cans will be drunk. Less junk food will be eaten. Fewer cars will be sold. Less fossil fuel will be extracted. The world will not be weakened by these disruptions—new jobs will be created just as is argued for the post-fossil fuel era. For anyone with common sense and who does not believe in end-of-history fantasies, these are welcome transitions for societies around the world.
Within mainstream economics, a narrow view of growth takes precedence, highlighting the intellectual and moral bankruptcy of traditional economic thinking. It is all too easy to politely acknowledge existential threats yet demand people to consume more. The current paradigm is fundamentally incapable of devising a new means of approaching the building of societal resilience.
It should be abundantly clear that we cannot consume our way out of the current predicament. After all, a wretched attachment to a consumption-driven perpetual growth model is what got us into the current mess. As we hit the ceiling of resource use, our contracting populations should make that very clear.
Just look at the most crowded parts of the world—megacities that most economists have never stepped foot on or lived in—where the quality of life is dire and worsening. By 2050, Mumbai will reach 42 million. Kinshasa will hit 35 million. Karachi, 31 million. Mexico City, 25 million. Most residents would welcome reduced populations.
With fewer people, these cities may start to become more governable and liveable. A key component of governance will be equalizing the socioeconomic imbalances between cities and rural peripheries—an effort which again flies in the face of traditional economic thinking, in which urbanization for economic hubs is vital for growth, while the hinterland is seen as unproductive except for the extraction of resources.
The public and private sectors will therefore need to rapidly develop products and services tailored to the needs of rural populations, aging populations, and urban poor, such as advanced healthcare, appropriate housing, water and sanitation, and age-friendly infrastructure.
These aren’t charity cases, but new growth areas. Investors will need to adjust to returns that are more responsible and reflective of a new era of purposeful capitalism. This will also allow for the formulation of a well-defined and inclusive social contract where the prices of goods and services come closer to reflecting the true costs and investors can be more assured that profits are not derived from underpriced externalities.
In this context, the free market is not a panacea. Governments will need to wield long-term vision in public policy and incentives to guide more meaningful investment.
The global decline in population should not be feared but embraced as an opportunity to rethink and reshape our economic models for greater equity and resilience. We have scant choice otherwise. As Sir David Attenborough famously once said, “Anyone who thinks you can have infinite growth in a finite environment, is either a madman or an economist.”
Let us not permit either to foster fear as populations decline and instead celebrate the great transition to an economic approach that is not at war with the natural and social systems that sustain us.
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