Our Vanishing Ultimate Resource: Plummeting birthrates threaten prosperity worldwide

City Journal:

In Kamikatsu, on the Japanese island of Shikoku, officials have set up an agricultural cooperative whose members log on to computers daily to check the fluctuating prices of the produce that they grow. Then they go out and pick whatever is fetching the best price that day. Unusual, yes, but what’s truly surprising about this cooperative is the average age of its members: 70. In a country where lots of folks retire at 60, Kamikatsu’s residents are working well into their senior years—and they’re doing so not only to buoy retirement earnings but also to energize the local economy. With nearly half of the town’s residents 65 and older, the government realized that there simply wasn’t enough of a traditional workforce available to build or staff most typical industries.

Kamikatsu shows in microcosm what Japan and several other nations now face—and what others soon will. For decades, demographers and economists have watched the world’s fertility rate plunge as countries grew wealthier and more urban. These days, fertility rates in much of the industrialized world are far below replacement levels—that is, the number of kids that parents must have to replace themselves and adults who remain childless. Though the steepest declines happened first in wealthy countries like Japan, Italy, Germany, and Spain, even many developing countries have seen their fertility rates head downward.

The demographic shift brings extraordinary new challenges. Economists are increasingly recognizing that the struggles of places like Japan and Italy to extricate themselves from economic slumps that began in the 1990s result in part from extreme “birth dearths” that have shrunk labor pools, dried up consumer spending, and made businesses, staffed by older employees, more risk-averse. Decades of government efforts to reverse birth dearth have largely proved fruitless.

Yet one industrialized country resists the trend: America. True, the American fertility rate has also fallen in recent decades. But it has surged of late and now stands at population-replacement level, about 2.07 children per woman. That reality has led to projections of vigorous U.S. economic growth in the next half-century. What’s behind the relative fecundity? A good guess is American-style free-market capitalism, which (despite recent economic woes) encourages long-term optimism, taxes less of parents’ income, and affords them easier mobility into and out of the job market than they’d find in more regulated economies.

News of a population bust might come as a surprise to many Americans. More than two centuries after English scholar Thomas Malthus argued that population growth exceeded the earth’s ability to feed us—“The power of population is indefinitely greater than the power in the earth to produce subsistence for man,” he wrote—the media continue to warn us about impending environmental catastrophe and mass starvation caused by an exploding human population. These Malthusian alarms persist even though the last 200 years have proved Malthus completely wrong. As the world’s population shot up, starting around the time of the Industrial Revolution, worldwide standards of living rose in tandem. People proved far more resourceful in expanding food production, tapping new veins of natural resources, and inventing technologies to accommodate a growing population than Malthus dreamed possible. When mass deprivation has occurred in modern times, it has invariably resulted from political tyranny and social chaos, not from an inability to derive enough resources from the earth.

Even as modern societies became more productive, something else happened that contemporary Malthusians have ignored: fertility rates began declining. In England, the number fell from an average of nearly six children per woman in 1775 to 3.35 in 1875 to 1.96 today. In Germany, the rate slumped from more than five children per woman in 1850 (earlier data aren’t available) to 1.4 today; in Italy, from nearly five children in 1850 to 1.3 today.

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