Don’t fall for the myth of rapid population growth

If you were at COP26 this week, you might have seen a massive (but still quite cute) inflatable baby wearing a slogan (“smaller families, fresher planet”) t-shirt floating around the international summit on the weather.

It was installed by the activist group Population Matters to highlight what it sees as the growing problem of overpopulation. Go to the band’s website and you will be able to see the numbers. The world population today is approximately 7.7 billion. We are still “adding 80 million more each year and we are heading towards 10 billion by the middle of the century,” he says.

Scary, isn’t it? It is also probably nonsense. One of the strangest things in the population debate is the constant insistence that we need to worry about the rapid increase in population counts – even as a quick check of the numbers suggests the the contrary: that one of the greatest challenges for humanity could soon be the fall of populations. .

The UN has slightly lowered its maximum population forecast – to 10.9 billion by 2100 – and already notes that the world’s population is growing at a slower rate than at any time since 1950 thanks to the rapid decline in fertility.

So many countries have now fallen to or below replacement rates that the majority of population growth “will now be concentrated in just nine countries,” according to the UN.

However, look at the list of these nine and you may be wondering. India is said to be one of the main engines of growth. But India’s fertility rate has already fallen to 2.179. This is barely above the replacement rate (of 2.1). A study by The Lancet last year suggested that the world’s population will actually peak at 9.7 billion in the 2060s and will be well below 9 billion by 2100.

It all counts. While population forecasts are 10-20% lower, so are most other long-term forecasts.

But even worse, we are preparing for a bad future – a future filled with too few, not too many people, and one in which the population growth we see will be due not to the birth of new people, but to older people. not dying.

Some believe that the decline – and the aging – of populations is deflationary. We’re told you can see this clearly in Japan, where deflation seems to have taken an irreversible grip on the economy. It makes sense. After all, old people are not accumulators. The older they get, the more aggregate demand falls and the more inflation falls.

But this is not correct. The first thing is that low inflation in Japan is not necessarily a function of population aging – it could simply be a function of the same macroeconomic trends that have led to low inflation everywhere else in recent decades (globalization and labor force). cheap work). It is also not clear that aggregate demand is decreasing as people age.

People over 80 may not buy a lot of new cars, but their need for (often state-funded) medical care, mobility and other devices, and manpower is enormous. Darrell Bricker, author of Empty planet, predicts that the world’s population over 80 will increase by 148% in 50 years, but that the labor force will only increase by 2%. If this happens, will prices (especially labor) go up or down? Quite.

Perhaps think of today’s labor shortages, sharp wage hikes and supply-side inflationary impulses as a taste of things to come, Bricker says. This fight may fade away, but with already declining working-age populations in some countries, the long-term trend will not.

With that in mind, we should look to today’s inflation. In the UK, CPI inflation is 3.1%. In Germany, it is 4.5 percent. In the United States, it is growing at the fastest rate in 30 years – 6.2%. And in China, factory exit inflation has reached 13.5%, the highest in 26 years. Some of this inflation will end up in consumer prices.

Central banks may still tell us that this is “transient” (an increasingly meaningless concept), but investors seem to know better. Low interest rates have pushed them into real estate, infrastructure and stocks for the past few years. But the sharp rise in inflation – which means real interest is lower than ever before – has given new impetus to change.

Look at the launches and fundraisers in the investment trust industry recently and you will see what I mean. A record £ 6.3bn was raised in the first half of this year, much of which is earmarked for what AIC’s Ian Sayer called ‘income-generating alternatives such as assets and infrastructure renewable energy ”. Nothing says “inflation fears” like an income race.

The good news for investment trust investors is that you don’t have to risk new, overpriced things (there may be a bubble in renewables, for example) to earn a good income. There are 23 equity trusts in the UK that earn 4% or more.

Stifel analysts say most offer some exposure to overseas markets rather than just the UK – although the UK is fine as well – and many have excellent long-term track records in investing. annual dividend growth.

You can get 4.1% from JPMorgan Claverhouse for example, or if you want to be a little more international, 4.8% from Murray International. BlackRock Energy and Resources (4.1%) could also be of interest.

However, if the trend of launching new trusts continues, there is one that I would really like to see. How about a fossil fuel rescue trust? It would come with an acceptance that – COP or not COP – we will be using fossil fuels for many decades, and with that in mind, we will buy back the assets that everyone is busy saving – hopefully on the cheap.

That would only be for retail investors, as most institutions are too crazy about conventional ESG tick metrics to consider this sort of thing, and would produce some benefits. He would keep oil and gas assets in the public market – if there is one area that needs radical transparency, this is it. It would help all companies that are intimidated by ESG committees to get rid of dirty things.

And, of course, while the assets were in decline (no new exploration or drilling), that would provide us with a high return in the medium term – the one we can skim off to pay the exorbitant wages to the few remaining young people in the world will require to look after us when we are over 80 years old.

Merryn Somerset Webb is the managing editor of MoneyWeek. The opinions expressed are personal;; Twitter: @MerrynSW

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