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Page added on January 14, 2015
Declining Population Could Reduce Global Economic Growth By 40%
Declining population growth that shrinks the pool of available labor over the next 50 years will reduce by 40% the rate of growth in global economic output for the world’s 20 largest economies compared to the past 50 years, according to a new study.
The report from the McKinsey Global Institute says that to compensate for the drop in the growth of the labor force, productivity needs to accelerate 80% from its historical rate to keep global growth in gross domestic product from slowing.
Over the past 50 years, global growth increased six-fold, and average per capita income nearly tripled. McKinsey researchers estimate that around half the increase stemmed from gains in productivity and half from the growing labor force.
Now, the workforce isn’t going to grow nearly as fast, and it could peak in most of the 20 countries analyzed in the report over the coming 50 years. Employment growth averaged 1.7% since 1964 and is set to drop to 0.3% in the coming decades. “In a world in which we can no longer rely on…the supply of labor to drive GDP growth, productivity is largely it,” says James Manyika of McKinsey & Co.
Among the 20 nations studied, only Nigeria will see employment growth and GDP growth increase over the coming 50 years, based on recent demographic patterns, says McKinsey. (On a per capita basis, Turkey, Argentina and South Africa will see GDP growth increase.) Several nations will see outright declines in employment, including Japan, Germany, Russia, Italy and China.
McKinsey sees GDP growth in the U.S. slowing by around one third, from an annual rate of 2.9% to 1.9%. (That’s better than Canada, where growth will drop by more than half to 1.5% from 3.1%). On a per capita basis, GDP growth is seen falling to around 1.3% from 1.9%.
The big question: Can productivity make up for the declining growth in employment?
McKinsey says the answer is yes, but it won’t be easy. Researchers estimate that for the 20 countries as a whole, around three-quarters of the needed productivity acceleration can come from using things that governments and businesses already know how to do, or what they term catching up to best practices. For developed nations, best practices can account for around 55% of the productivity spurt to close the growth gap.
The rest of the productivity boost will have to come from innovations that don’t currently exist. Among a broader debate among economists over whether the biggest innovations have already been discovered, McKinsey puts itself firmly in the camp that says they haven’t been.
To get there, the researchers offer a list of 10 potential enablers to fuel long-term growth. It includes several well-known-but-harder-to-execute tasks like boosting workforce participation among women, the young and the elderly; improving education and job-market flexibility; and increasing cross-border trade and infrastructure investment.
Mr. Manyika cites the example of Japan as a possible cautionary tale. “We’ve known for a long time that large swaths of the Japanese economy are not productive,” he says. “We’re seeing the results, which is stagnation.”
What’s the practical impact of a 40% decline in global growth? It means the global standard of living would rise 2.3 times in the next 50 years, down from 2.8 times over the past 50 years. Later generations, in other words, would see less prosperity than their parents and grandparents.
32 Comments on "Declining Population Could Reduce Global Economic Growth By 40%"
FriedrichKling on Wed, 14th Jan 2015 8:57 pm
After reading the title of this article, I immediately looked for the source. Surprise, surprise, “The Wall Street Journal”. Therefore, deposit in file 13.
Apneaman on Wed, 14th Jan 2015 9:22 pm
No worries kids.
The American Dream is coming back
http://money.cnn.com/2015/01/13/news/economy/american-dream-coming-back/index.html
Joe Clarkson on Wed, 14th Jan 2015 9:46 pm
For all the hand-wringing over Japan’s lack of economic growth (all those “lost decades”), growth of GDP per capita over the last 25 years has been very close to that of the US.
If the population is declining, the economy can theoretically decline also and still keep everyone living in the style to which they’ve become accustomed. Of course that’s not easy to do in the presence of lots of debt.
GregT on Wed, 14th Jan 2015 9:53 pm
Economic growth is not determined by the amount of human labour available. It is determined by the amount of energy we consume.
Bandits on Wed, 14th Jan 2015 10:50 pm
Joe population isn’t declining. It’s growing by 75 million eaters a year. And if you suspect the environment has been trashed by the run-up to 7 billion, how can humans continue to live (especially the western style of living) in the manner to which they have become accustomed, while that many people continue to, in an ever increasing manner, consume, develop, engineer, construct, reclaim, deforest, degrade, mine, farm, irrigate, house and burn.
To arrest growth, we all must either eat less or fewer people eat. There are quite a few hundred million that cannot eat less, they are on the verge of starvation anyway, and for sure, we fat *ucks (I’m not fat but I am certainly part of the problem) of the west are not going to go on a permanent diet. How do we get to fewer people eating? The ecology of the planet certainly cannot survive 7.2 billion people for an indefinite time.
Makati1 on Wed, 14th Jan 2015 11:25 pm
Once upon a time in Lala Land called the US …
Rodster on Thu, 15th Jan 2015 3:09 am
I guess the WSJ is worried about the infinite growth BAU economic model.
FriedrichKling on Thu, 15th Jan 2015 5:41 am
Previously “redpill” posed an excellent question to Makati1. For lack of a response, I repeat the question:
“So, have you fully disavowed being from the U.S.?
When you cash those S.S. checks, do you think of us still in the states as chumps?”
Davy on Thu, 15th Jan 2015 6:18 am
This article and the forecast are as we see on a regular basis the BAU meme of growth. This article is the typical econometrics of the BAU meme complete with issues of population, growth forecasts, and the abstracts of innovation. First thoughts are the complete lack of reality in the forecasts based upon our predicaments at least beyond a few short years. This reminds me of a Catch-22 as related in this definitions:
The Army will grant your release request if you’re insane, but to ask for your release proves that you’re not insane. If X and Y, then Z. But X implies not-Y. That’s a Catch-22.
The following is the many “IF”s of a bumpy descent beginning:
If we are at limits of growth and diminishing returns of the most important economic components of growth being energy, resources, and population.
If our foundational commodities of oil, food, and water are maxed out.
If our financial system is in disequilibrium and barely stable.
If our geopolitical situation in and near TBTF regions and countries is fracturing.
If our global ecosystems are in decline with increasing localized collapse.
If our stable climate of the last 10,000 plus years is destabilizing.
If social fabric is destabilizing from wealth transfer and carrying capacity overshoot.
Then we cannot have further growth.
The growth numbers and forecasted painted by BAU economist is not valid in a bumpy descent. We have new economic relationships. These new relationships are based on carrying capacity decay, entropic decay of complexity, population overshoot reactions, and foundational resource abandonment. We have to start gauging contraction not growth. We have to completely leave the current BAU economic thought behind in tandem with BAU. BAU thought structures must be still in use because that is the global here and now reality and support. BAU is working now but just barely because the numbers are being “goal seek’ed” on a massive abstract spreadsheet of global BAU with ssumptions being made, numbers forced, and adverse results ignored.
For anything over just a few years we have to use the new economics of descent as the tipping point shift of BAU’s inflection away from real aggregate growth. This economic thought does not seek to give a forecast with numbers it is forecasting ideas of what may happen in descent and contraction. It established those locals that have no future in descent. It identifies foundational commodities and resources that will soon be abandoned for lack of economic contribution. It looks at the possible outcomes of unstable support all our delocalized locals face from a global reaching limits of growth and diminishing returns. It acknowledges geopolitical realities of TBTF regions and countries and how any conflict of trade or military could lead to a sharp loss of foundational infrastructure billions depend on. Finally this new economics both acknowledges the near impossibility of voluntary population decline. It accepts inevitable large population losses and migrations. It proposes tough and by normal standards cruel population measure that can maybe be applied locally, regionally, and just maybe in some nations.
This new economics says we are on the cusp of systematic bifurcation from limits of growth and carrying capacity overshoot so it draws up plan B’s per location, per time frame, per tipping point, per converging tipping points, per contraction degree and duration, and per reboot possibilities. This economics will have to function in tandem with BAU economics until BAU economics is no longer valid. This economics acknowledges BAU and recognizes its importance but announces BAU’s end is near. Time frame is recognized as not being part of a forecast nor obtainable but a paradigm shift is in the vicinity.
This may sound like a word salad of brain farts ramble and it is. But is that not what this article was above. Is there any difference in the many academic discussion and reports today. Is any discussion of a BAU future nothing more than fantasy and fiction applied as economics and policy? All you need to know is “A” civilizational predicament in a catch-22 then you will have a starting point. Apply that to your local and go from there.
steveo on Thu, 15th Jan 2015 7:28 am
Declining population is something only an economist would hate.
Rodster on Thu, 15th Jan 2015 8:06 am
“Declining population is something only an economist would hate.”
Add Bankster because this is all part of the Ponzi scheme economic system that was created when the Federal Reserve came on the scene back in 1913.
Exponential and compound population growth is required to keep the system functioning.
bobinget on Thu, 15th Jan 2015 8:17 am
Well thought through, DAVY.
If mankind gets through the NEXT ten years,
we have a shot at another forty.
If sea levels rise as predicted, available, arable land
will certainly inhibit population growth by starvation.
“Predictions are hard, especially about the future”.
World population now stands around seven billion three hundred million. Since January 1, 2015
we added 3,200,000 new, (deductions for deaths included)
How many cities in Canada have over 3,000,000?
Toronto at about 2,600,000 is highest.
This means every 14 days (or so) another city the size of Toronto is hatched.
In one month SIX and half million new people (again adjusted for deaths)
If 2065 rolls round, we’ll check back.
ghung on Thu, 15th Jan 2015 8:35 am
“Declining Population” and “declining population growth” aren’t the same thing at all. I’m sure the author(s) expect most folks won’t notice the difference.
Northwest Resident on Thu, 15th Jan 2015 9:43 am
Or, much more likely, a rapidly declining global economy will reduce population by 40% or more. “Global Economic Growth”?? That’s history.
Plantagenet on Thu, 15th Jan 2015 12:07 pm
I’m surprised how many people don’t understand what this article is even about.
This article isn’t about declining population. Its about declines in the LABOR FORCE.
This is happening in the US and EU and Japan right now and its one of the reasons economic growth is stagnating in the western developed economies.
Rodster on Thu, 15th Jan 2015 1:41 pm
“This article isn’t about declining population. Its about declines in the LABOR FORCE. This is happening in the US and EU and Japan right now and its one of the reasons economic growth is stagnating in the western developed economies.”
The decline in work force is a bunch of hooey. All over the world people are discouraged and have stopped looking for work because the jobs no longer exist. In Spain you have over 50% youth unemployment, Italy is around 45%, France is around 25%. That’s not counting Greece, England and other parts of the EU. In the US the real unemployment rate if the Govt didn’t lie would be around 26%, depression numbers. There’s your declining labor force.
The result of a collapsed global economy in a full blown depression, because the global system can’t take on anymore debt. Cheap oil made exponential economic growth possible. Cheap oil giveth and expensive oil taketh away.
Population is not the problem, debt levels are and so everything is now contracting. The system has been in collapse mode since 2008.
Plantagenet on Thu, 15th Jan 2015 1:59 pm
Rodster
You’ve put your finger right on it. Young people are discouraged and stop looking for work. The boomers age out and retire. The overall effect is a decreasing labor force which results in slow or even negative GDP growth.
Here is the US we “define” those people out of the labor force so we can claim to have shrinking unemployment at the same time we have more and more people out of work. In the EU they tend to count them so they wind up with ca. 20-50% unemployment rates for young people in some EU countries.
But whether you count the discouraged workers as unemployed or not, the number of people in the labor force is still clearly declining.
Davy on Thu, 15th Jan 2015 2:14 pm
Sounds scary to have exploding population and declining labor participation IOW more people with less people support. Population and consumption increasing with less people support can be added to the scary. That is until it is declining population, declining labor participation, and declining consumption which we know is highly possible. That sounds scary too. I guess scary is the new normal
hculliton on Thu, 15th Jan 2015 2:47 pm
Fucking shills. This is tantamount to praising cancer because it’s great for weight loss.
Apneaman on Thu, 15th Jan 2015 3:39 pm
“Declining population is something only an economist would hate.”
Add millions of Boomer pensioners who’s fat pensions require the generations after them to maintain the system. Generations who will never see a dime. Paying into plans is not the same as paying for them. Hard to maintain the 20th century system with an impoverished minimum wage debt economy. Another Ponzi.
Rodster on Thu, 15th Jan 2015 3:59 pm
“Add millions of Boomer pensioners who’s fat pensions require the generations after them to maintain the system. Generations who will never see a dime. Paying into plans is not the same as paying for them. Hard to maintain the 20th century system with an impoverished minimum wage debt economy. Another Ponzi.”
That’s exactly why the system requires exponential and compound growth. The global financial system is just tapped out. The only thing that would prolong this Ponzi scheme would be a global “Jubilee Reset” which the Banksters won’t do.
Poordogabone on Thu, 15th Jan 2015 4:03 pm
Yep hculliton, we found a cure for cancer but it is untenable because the side effect gives you an itchy bum.
Rodster on Thu, 15th Jan 2015 4:17 pm
“But whether you count the discouraged workers as unemployed or not, the number of people in the labor force is still clearly declining.”
Exactly and that’s why the system is collapsing globally !
Dredd on Thu, 15th Jan 2015 4:45 pm
Oh, there will be a significant drop in population.
It will be eye popping, and dangerous to Oil-Qaeda.
Apneaman on Thu, 15th Jan 2015 5:45 pm
Tom Murphy: Growth has an Expiration Date
https://www.youtube.com/watch?v=o_8b6ej0U3g
trickydick on Thu, 15th Jan 2015 5:48 pm
This article reads like it is an advance memo from the banking cartel. They are putting us on notice that we will have to increase productivity way more just to keep our paychecks, so that they can accumulate the profit.
The U.S.A. hasn’t seen real wage increases in decades! After adjusting for inflation, we’ve done nothing but work our collective butts off for nothing!
Plantagenet on Thu, 15th Jan 2015 6:04 pm
Sure—there are no real wage increases and the labor force is shrinking, but look on the bright side—-thanks to Obama we’ve got obamacare and a booming stockmarket.
Newfie on Thu, 15th Jan 2015 7:38 pm
Uh… We’re at 7 billion and the UN is projecting 12 billion by 2100. Of course, there’ll be mass starvation before we get anywhere near 12 billion. But… I don’t think population will decline in the near future.
rollin on Thu, 15th Jan 2015 7:41 pm
This bonehead study thinks the economic system is going to survive the coming reductions in resource availability, climate change and food shortages. It also assumes that population will actually keep increasing for fifty years. Two major assumptions I wouldn’t put a wooden nickel on.
Everything will be different fifty years from now.
Makati1 on Thu, 15th Jan 2015 7:52 pm
Previously “redpill” posed an excellent question to Makati1. For lack of a response, I repeat the question:
“So, have you fully disavowed being from the U.S.?
When you cash those S.S. checks, do you think of us still in the states as chumps?”
Freddy, I answered that in the comments of the article following this one. You have to remember I am 12 hours ahead of the US and am not online 24/7/365.
As for disavowing my US citizenship, no, I just don’t mention it. Here I could be from any country that is white and speaks English. I never mention my nationality except to show my passport when I travel or if someone asks and I decide to reply. Many Filipinos still believe the US is the land of milk and honey, but the impression is changing.
BTW: I got a taste of government control here as the Pope is visiting and they turned off the cell phone reception in the areas he is traveling and speaking. If you think religion does not still have great power and control…
They also closed the airspace to traffic around the times he was arriving and when he leaves. Caused cancellation of some 300 flights.
The US Embassy is closed for 3 days because of traffic problems. The banks and government offices are closed. It is a 5 day holiday here.
They don’t even do that for Obama…lol.
dashster on Fri, 16th Jan 2015 5:05 am
The headline says “declining population” the story says “declining population GROWTH”.
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