Don’t worry about the global population explosion – it’s unlikely to happen

Far from being too many babies, there aren't enough

(Image credit: © ANDY BUCHANAN/AFP via Getty Images)

published 15 November 2021

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

It was installed by the campaigning group Population Matters to highlight what it sees as the growing problem of overpopulation. Go to the group’s website and you can see the numbers. Today’s global population is about 7.7 billion. We are “still adding an extra 80 million each year and are headed to ten billion by mid-century”, it says.

Scary, isn’t it? It’s also probably nonsense. One of the oddest things about the population debate is the ongoing insistence that we must worry about fast-rising population numbers – when even a cursory check of the numbers suggests rather the opposite: that one of the biggest challenges for humanity may soon be falling populations.

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The UN has slightly downgraded its peak population forecast – to 10.9 billion by 2100 – and is already noting that the world population is growing at a slower pace than at any time since 1950 thanks to fast-falling fertility.

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

However look down the list of those nine and you might wonder. One of the main drivers of the growth is supposed to be India, but India’s fertility rate is already down to 2.179 – that’s barely over the replacement rate (of 2.1). A study from The Lancet last year suggested that the global population will in fact peak at 9.7 billion in the 2060s and be well below nine billion by 2100.

All this matters. If population forecasts are out by 10% to 20%, so are most other long-term forecasts.

Our future will not have enough people in it

But worse, we are preparing for the wrong future – one filled with too few, not too many, people, and one in which such population growth as we do see is going to be driven not by new people being born but by old people not dying.

There’s a view that falling – and ageing – populations are deflationary. We are told you can see this clearly in Japan, where deflation appears to have taken an irreversible hold over the economy. This makes some sense. After all, the old are not accumulators. The older they get the more aggregate demand falls and the lower inflation goes.

But it isn’t correct. The first thing is that low inflation in Japan isn’t necessarily a function of an ageing population – it might just be a function of the same macro trends that have driven low inflation everywhere else for the past few decades (globalisation and cheap labour). It’s also not clear that aggregate demand does fall as people age.

The over-80s may not be buying much in the way of new cars but their need for (often state financed) medical care, mobility and other devices and labour is huge. Darrell Bricker, author of Empty Planet, predicts the global population of over-80s will be up by 148% in 50 years, but the working population will be up only 2%. If that happens, will prices (particularly of labour) be up or down? Quite.

Maybe think of today’s labour shortages, sharp wage rises and supply driven inflationary impulses as a taste of things to come, says Bricker. This bout might fade, but with working-age populations already falling in some countries, the long-term trend will not.

Prepare for inflation, not deflation

With that in mind we should turn to today’s inflation. In the UK, CPI inflation is 3.1%; in Germany it is 4.5%; in the US it is rising at the fastest pace for 30 years – 6.2% – and in China factory gate inflation is running at 13.5%; a 26-year high. Some of that inflation will end up in consumer prices.

Central banks may still be telling us that this is “transitory” (this is an increasingly meaningless concept) but investors look like they know better. Low interest rates have pushed them into property, infrastructure and equities for some years, but the sharp rise in inflation – which means real interest rates are lower than ever – has given the shift a new impetus.

Look at launches and fundraisings in the investment trust sector recently and you will see what I mean. A record £6.3bn was raised in the first half of this year with much of it heading for what Ian Sayer of the Association of Investment Companies – the sector’s trade body – called “income generating alternatives such as renewable energy assets and infrastructure”. Nothing says “inflation fears” like a scramble for income.

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

Analysts at Stifel say most offer some exposure to overseas markets rather than just the UK – although just the UK is fine too – and many have excellent long-term records of delivering annual dividend growth.

You can get 4.1% from JPMorgan Claverhouse investment trust (LSE: JCH) for example or, if you want to be a bit more international, 4.8% from Murray International (LSE: MYI). Also of interest might be BlackRock Energy and Resources (LSE: BERI) (4.1%).

However, if the trend for new trust launches continues, there’s one I’d really like to see. How about a fossil fuel rescue trust? It would come with an acceptance that – COP or no COP – we will be using fossil fuels for many decades and with that in mind would buy the assets that everyone else is busy backing off from – hopefully on the cheap.

It would be for retail investors only, since most institutions are too crazed by conventional tickbox ESG metrics to consider this kind of thing. And would produce a couple of benefits: it would keep oil and gas assets on the public markets (if there is one area that needs radical transparency, it is this) and it would help out all those companies that are being bullied by ESG committees to divest dirty stuff.

And, of course, while the assets would be in decline (no new exploration or drilling) it would provide us with a medium-term high yield – one that we can squirrel away to pay the exorbitant wages the few remaining young people in the world will demand to look after us when we are in our 80s.

• This article was first published in the Financial Times

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Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.