Ethical economy: The 7 billion people question

By Edward Hadas
November 2, 2011

By Edward Hadas
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

A child is born. For almost every parent, everywhere and always, the entry of a new person into the world is a welcome wonder. Economists generally have a different outlook on births. They prefer hard numbers to hope. This week they have a big demographic number to discuss: the world’s population has just reached 7 billion.

When economists talk about demographics, Thomas Malthus usually comes up. The early 19th century British thinker decided (without providing any reasons) that people would always have more children than the physical world could possibly support. Death from want would always restrain population growth. At the time he wrote, the world’s population was about one billion. Malthus’s gloom was often cited in the 1960s, when the population had increased to about 3 billion people. Some ecologists then claimed that the combination of industrial production and overpopulation would inevitably lead to environmental catastrophes – and many deaths from want.

Up to now, Malthus has been wrong, in two basic ways. First, human resourcefulness has proved much greater than he imagined. The economic story of the last two centuries has been one of increase – of people and production. The most recent years have been particularly impressive. The 135 million births this year will be almost 30 percent more than 50 years ago, according to UN data. Those lives will be longer; this year’s children can look forward to an average 68 years of life, 18 more than newborns a half-century ago. And the current crop will have much more of the goods of industrial prosperity, from clean water and adequate food to free education and mobile phones.

Second, Malthus was wrong to assume that women would always bear just about as many children as physically possible. In the last 40 years, the total fertility rate, the number of children the average woman could be expected to bear, has declined from five to 2.5. The fertility reversal has reduced the annual rate of global population increase from 2 to 1.3 percent since 1980. The UN expects that to fall to 0.1 percent by 2085. An absolute population decline is quite possible. It is happening already in Japan and Russia.

The demographic slowdown reduces the danger of exhausting the earth’s physical resources. Still, it cannot be proven that Malthus was wrong, that the world will never run out of stuff or that humanity’s resourcefulness will always rise to environmental, economic and social challenges. There is no way to persuade fervent Malthusians, but after two centuries of steady progress dire predictions look unduly pessimistic. The world is starting to catch on. While grim environmental forecasts are still easy to find, the demographers these days talk more about the stresses that come with ageing and declining populations.

There will be shrinking pains, of course, and the economic and political standing of low fertility nations is likely to fall. Still, the practical challenges can be met easily. Prosperity has freed up so much labour that unemployment is now a more serious problem than poverty in most of the world. Some of those searching for work can find it caring for the old and weak. Pension promises made when populations were increasing quickly will have to be reduced, but that requires little toil; financial arrangements can be changed with a stroke of the pen.

Instead of worrying, economists should take the latest demographic milestone as an opportunity to stop thinking like Malthus – that when it comes to people, more is generally worse than less. A good starting point would be to stop relying on GDP per capita when comparing the wealth of nations. In this calculation of average income, population is the denominator. If that increases, the per capita GDP will fall, unless the numerator, production, increases commensurately. In effect, this measure makes each new person an economic drag.

That is unfair. A new person is indeed a consumer who will need to work to avoid being a net drain on the world’s resources. But he or she is also a wonder worth celebrating. Parents know it, and economists should recognise that reproduction is a sort of production – brought forth through maternal labour and parental care. Economic activity should aim at the promotion of life, not merely at the production of stuff. John Ruskin, a fierce 19th century critic of Malthusian thinking, declared, “There is no wealth but life… That country is the richest which nourishes the greatest number of noble and happy human beings”. The parents of Danica May Camacho, the Philippine infant identified by the UN as the 7 billionth, would surely agree.

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