Low Birthrates Will Devastate the Global Economy If Not Reversed
With aging and declining or even collapsing populations, we lose specialization and economies of scale. Eventually innovation grinds to a halt.
NOTE: I have been warning of the impending demographic implosion for more than 30 years, one of the very few voices to stand against the consensus overpopulation hysteria. Daniel Hess’s work on this — what’s happening, why, and what to do about it — is outstanding. — RDM
by Daniel Hess
January 27, 2025
Birthrates are now below ‘replacement’ (2.1 births per woman) in most countries in the world. But the economic hit will be especially severe because low birthrate countries account for *90%* of global GDP.
How bad are the numbers? Most countries aren’t near the replacement level, but far below it. Countries at only around ½ of replacement include Japan, China, Korea, Canada, Spain, Poland, and Chile.
The scariest thing? Fertility keeps plunging lower every year.
But the crisis only hits after a lag, like a tsunami after an earthquake. South Korea shows the contradiction. Total population is near an all-time-high. GDP is still growing. But the population pyramid makes the crisis all too clear: there are now just 1/4 as many 1-year-olds as 50-year-olds.
Isn't the planet already overcrowded? No. It just feels that way because we’ve been told that all our lives, and because many of us choose to live near cities. In fact, even in populous places like California and South Korea, there is a tremendous amount of land that is basically unused.
But wouldn't we be richer with fewer people competing? No. That is a big misconception! With fewer people, but especially fewer innovators, the division of labor would dramatically shrink: we would be poorer, not richer. Economist @bryan_caplan explains how prosperity is the product of large populations cooperating together:
Another economist @robinhanson explains that with aging and declining populations, we lose specialization and economies of scale. Eventually, he says, innovation grinds to a halt.
Japan offers an ominous preview. Its share of global innovation has plummeted as it shrinks and ages.
Everyone knows Japan has been a poor economic performer for more than a generation. Economists considered it a mystery that Japan had seen little growth over 30 years. But a 2023 paper (Fernandez-Villaverde et al.) argues Japan's shrinking working-age population explains its poor economic performance.
This is a very big problem for the rest of us, because there are a whole lot of countries going the way of Japan in the next few decades.
But the economic problem looks even worse when you look at the problem through the lens of innovation. Innovation (here measured by patents) is what gave us the Industrial Revolution, and in fact the whole modern world.
Yet the most inventive countries almost all now have very low fertility. South Korea, the most innovative country in the world by patent output has a TFR of just 0.7 births per woman.
In scientific publications, we see the same pattern. It is precisely the countries that the world depends on for both invention and scientific breakthroughs that will be most crippled by population decline, hurting the whole world economy.
Immigration is not a global fix for at least 3 reasons:
One country’s gain is another’s loss (see poor Ukraine).
Rich countries skim the most talented from poor countries (brain drain)
Birthrates are falling all over the world, not just in wealthier countries
The only real solution is to raise birthrates.
Let's look at some of the variables involved with fertility. The biggest variable is culture. In Israel, the one OECD country with a high TFR, people value children above almost everything else, and it makes all the difference.
But Israel isn't the only example of pronatal culture. In another essay, I explore numerous examples where culture can be positive or negative around having children, and how this dramatically impacts birth rates.
The next big variable is marriage. The data shows most people are vastly more likely to have children if they are married, and this has hardly changed in 40 years. In this essay, I discuss all the ways that marriage matters for birth rates.
Another important variable is awareness of fertility limits. In most of the world, people actually want more children than they have, but they run out of time. This means that education advising people to plan for children early can go a long way to solving this crisis.
Another important variable is religious faith. Studies consistently shows that religious attenders have significantly more children on average. I reviewed these studies in a thread on X.
Another important variable is environmental optimism. A global movement claims that children should be avoided for environmental reasons, and yet the great problems are all being solved! Here the largest landfill in the world, Freshkills, has been made into a beautiful park!
Another variable is relations between men and women. Ideological divides are a huge problem, with young men veering right and young women veering left. I wrote about that problem and possible solutions in this thread on X.
Next is housing and especially density. Cities having mainly apartment towers tend to have incredibly low fertility rates. Compare Atlanta, left and Seoul, right. The fertility rate in Atlanta is around 3x as high as in Seoul. Is there any wonder why?
The literature confirms that high density is very negative for fertility rates, as I explain in this review. And it especially matters long-term whether pro-natal or anti-natal housing is built, because that housing will last for generations.
So there are actually a lot of things that impact birthrates, and a lot of angles for boosting family formation. This really is a problem we can fix. Culture, marriage rates, education around fertility, religious faith, environmental optimism, housing and better gender relations all can make a big difference.
Extended family help and more relaxed standards around parenting matter too. So do norms around family size. And I haven't even touched on social supports, which are valuable but beyond the scope of this thread.
The reality is inescapable: without higher fertility around the world and especially in the most innovative countries, economic (and cultural) devastation will be our future.
So come join the pronatalists! This is the cause of our lives, the cause of civilization itself!
— This essay originally appeared on X. Be sure to follow him there as well as on Substack at .
And...not killing babies in the womb would probably help.
Dense housing did not prevent families from having children prior to the 1950s. It's really a matter of affordable housing and expectations. While I know families that have two children in a bedroom in bunk beds in a luxury condo in Manhattan, the reality is that there's an expectation that each child will have their own room. And housing prices are a major issue. It's hard to have children when a one-bedroom apartment goes for $4,500 per month. The other issue with cities is the sorry state of public education. Purchasing a home at over $1,000, a square foot and spending upwards of $50,000 a year per child on private education, prices out large families even for those in the 1%. Manhattan and San Francisco are extremes, but this is an issue in many of our cities and even many suburbs. Five decades of inflationary policies and a failure of conservatives to fix public education or implement school choice have National effects.