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While most people fret over the notion of world overpopulation, count me as a contrarian. I'm worried that our population isn’t growing fast enough. It’s not that I’m eager to have more  people on the highways or see endless sprawling suburbs. I don’t really want to wait more than an hour to enter a National Park or spend 20 minutes looking for a spot to sit on the beach. And I know it would be better for our planet if we as a species just stopped our relentless expansion. It's not that I love crowds, I'm just coming to grips with the potential consequences of a smaller population growth rate.
For some time, we have lived in a golden age of population expansion fueled by extensive resources, medical advancements, and increased longevity. The last time the earth’s population shrank was in 1400 when there was a little thing called Bubonic Plague ravaging Europe. Since then, we've enjoyed six centuries of continuous population growth. In 1930, the world’s population was approximately 2 billion people and today it’s just shy of 7 billion.
Let’s say you were Coca-Cola, the size of your customer base went up by a staggering 5 billion in the last 80 years. That’s 250% growth on an already massive number. Of course, the real market growth was much larger since transportation systems developed, countries opened up for trade, refrigeration was introduced and disposable income increased. But Coke’s stock market performance included at minimum a 250% increase in its worldwide customer base.
It’s not just Coke, any company that has been in business for the last 100 years has gotten a massive benefit from the population explosion. Those who predict that the stock market will continue to return 10% as it has for the last hundred years seem to discount the torrid population growth of the last century. Population growth averaged 1.6% per annum in the last 100 years, and likely will never repeat itself again.
In the next 50 years, current estimates project that our planet will have to host 3 billion more inhabitants and there will be 10 billion of us by 2062. The average annual growth rate will decline to 0.6%, a full percentage lower than what we saw in the last 50 years. Our growth rate is slowing and it’s slowing rapidly. People will only live so long and there are fewer gains to be made with lower infant mortality rates. In addition, growth rates in developed nations are near zero and without immigration, they would go negative in many countries in Europe. If you've been paying attention to population trends, you'll know that Germany, Japan and Russia are already coping with declining populations. Few families in developed nations just don't have four and five kids anymore, it's often too expensive.
The U.S. has worked hard to buck the trend of other developed nations. There were only 123 million Americans in 1930; today we're 310 million. Over those 80 years, we grew at a rate of about 1.1% per year which was half a percentage point slower than the worldwide rate. Even then we managed to add 150% more Americans to the Census count. The rate would have been lower except for the baby boom in the 1950s and 1960s when we had growth rates that were around two percent. With sprawling land, a burgeoning West and South and the suburban dream of kids, a dog and a white picket fence, we grew at a quick pace for a developed nation. Even with the Federal Government turning a blind eye to illegal immigration, we're barely able to grow at an annual rate of 1%.
Current projections for the U.S., estimate that we will grow by 30% by 2050 - to about 400 million. Growth on average will slow to just half a percent per year and virtually all of it will come from immigration and the children of immigrants.
Our growth projections are dependent on two things: an increased level of fertility and continued massive immigration of about 900,000 people per year. Those assumptions fail to take into account the growing backlash against illegal immigration which could seriously derail the growth projections. If the assumptions are wrong, our growth rate could go closer to zero as it will in most of Europe and Japan.
You might say, “who cares, fewer people, more for me, less burden on planet earth.” Unfortunately, in our infinite wisdom, we assumed a number of things that don’t materialize if population doesn’t keep growing at a solid clip. It’s those assumptions that I’m most worried about.
Stock Market Returns:
As we mentioned before, stock market returns of approximately 10 percent annually have been the mantra for many years. But that assumption is based on an annual population growth rate of two percent. As the world gravitates to a sub-one percent growth rate, a larger proportion of the population shifts into lower consumption “golden years.” We therefore should expect weak demand and more anemic corporate profits for nearly everything outside of health care. Offsetting this may be the growth in the international middle class which may, for some time, allow international corporations to keep up profit growth.
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