Overpopulation isn’t the terrible scourge environmentalists would have you think it is. The real problem is population decline, which leads to economic decline.

Just look at Japan…

When I was a kid Japan was all anyone could talk about. Every current events project in grade school was about Japan, the trade deficit, manufacturing and electronics, and Japan’s soaring stock market and crazy real estate prices.

If you’re old enough, you probably remember the ‘80s bull market in Japanese stocks. It was a huge bubble. The Nikkei stock index peaked at 38,916 in December 1989, and it hasn’t come anywhere close to that since.

Meanwhile, Japan has been experiencing deflation, where prices go down, for decades. Deflation is really a psychological problem. People think prices will continue to go down, so they put off buying stuff until it’s cheaper. This turns into a vicious cycle—no one buys anything, prices go down, rinse and repeat.

Japan has been trying to climb out of this hole for years, and it hasn’t been able to. Its economy isn’t growing. It has negative interest rates. And its central bank, the Bank of Japan, does all kinds of crazy stuff, like print money to buy stocks to buy bonds.

The situation is a mess. And to top it off, people in Japan are not having sex and the population is declining. Not just growing more slowly—actually declining. The country has about 500,000 fewer people than it did a year ago. And the birthrate is at its lowest point since the 1870s!

Europe is headed in a similar direction. They don’t have deflation, but they don’t have inflation, either. There’s been no growth in the stock markets there for 15 years, and no growth in the economy.

Europe also has negative interest rates. And, while they’re having more sex than people in Japan, it’s still not a lot, and population growth is slowing because of it.

Japan’s troubles are a leading indicator of what will happen in Europe… which is a leading indicator of what will happen in the US, and it’s not a good story.

More People = Economic Growth

I’ll let you in on a little secret: Most economic growth is driven by population growth.

If the population doesn’t grow, people and businesses have to be more productive for the economy to grow, and that isn’t happening. Productivity isn’t going up.

Over the last 200 years, the global population has exploded and our overall standard of living has improved dramatically. Those two things are correlated. People have grown wealthier because more people are working. It’s that simple.

If we have fewer people working, we will become less wealthy, and the whole process will go in reverse. Yet all these environmentalists say overpopulation is a problem and we’re going to run out of resources. But there’s no sign of that happening.

In fact, global population growth is already starting to slow, and it will probably start declining in 20 or 30 years.

The Internet Is a Powerful Diversion

Japan was at the front of this trend, with Europe and the US following close behind.

Crazy stuff is already starting to happen here. In the US, 27% of men under 30 identify as virgins. That figure was in the single digits just 15 or 20 years ago. Meanwhile, 28% of men and 18% of women under the age of 30 have not been sexually active at all in the last year. Those figures were in the low single digits 20 years ago.

I want to keep this family friendly, so I won’t get into detail about why this is happening. Suffice it to say, technology is driving some massive cultural changes. The internet is a powerful diversion, and people are spending their time doing “other things.”

The Most Important News in Economics

The people who do have kids are waiting much longer to do it. In the US, the average age of first-time mothers is 26 years old, and the average age of first-time fathers is 31 years old. In 1972, it was 21 and 27, respectively.

I know a couple in town who had their first kid when the husband was 40 and the wife was 35-ish. That’s not at all unusual, and the late start translates into fewer kids.

Wall Street people are an anomaly here. They have a lot of kids, which is funny. Three is kind of the minimum, four is average, and there are certainly some with five, though I think that will probably come to an end.

This isn’t showing up in the numbers yet, but global population growth is about to stop and go backwards. There isn’t any news in economics that’s more important.

People don’t appreciate this yet. The world is going to change massively, possibly for the worse, all because of a reversal in population growth.

Jared Dillian