Introduction

Bad times are coming to Planet Earth, but the worst threats are probably not what you think. If you are worried about climate change, rising sea levels, drug-resistant disease, nuclear war, cybercrime, natural disasters, killer asteroids, the rise of would-be dictators and the decline of global democracy, you better make space in your nightmares for a whole different class of disasters that could arrive sooner and cause more damage.

These disasters are demographic, meaning they have arisen from changes in human populations over the past half-century. The most obvious demographic changes since the 1960s have been the fall in birth rates in most countries and the aging of their populations. In nearly all industrial countries, there are far fewer children than there once were and many more old people. These changes have crept up on us slowly and may seem benign, but they can be just as devastating in their own way as rising sea levels.

You may have heard of the “population explosion”—the theory that worldwide population is growing so fast that it will soon outstrip our environmental resources. It turns out this issue has largely evaporated in the 21st Century. Only a few isolated countries are still experiencing a population explosion, mainly in equatorial Africa. Most developed countries are closer to a population implosion, where not enough babies are being produced to maintain the population and sustain the country’s economy. This birth shortage traces back to the invention of reliable birth control in the 1960s, but thanks to economic and statistical quirks, the full effects are only starting to be felt today.

When birth rates fell from high to low, as they did in the United States following the 1950s Baby Boom, hardly anyone saw it as a crisis. Fewer children meant lower education costs for the government. Couples who eschewed children had more time to work and more money to spend, so they produced greater value for their economy. In most countries, the initial fall in birth rates was accompanied by an overall boom, called the demographic dividend, which buoyed the economy for decades. The dividend occurs when the number of productive workers is high and the number of children and old people is low. Since kids and elderly absorb more resources than they produce, it is better in the short term to have fewer of them.

The demographic dividend ends when the people from the high-birth period start to retire from the workforce in huge numbers—as the Baby Boomers are doing today. The retired workers demand their pensions and healthcare, which are mainly supported by active workers who are still paying taxes. When the ratio of retired workers to active taxpayers exceeds a critical level, there is a pensions crisis, where the government doesn’t have enough money to pay for its obligations to retired workers.

That’s where things stand today in the United States, Japan and dozens of other industrial nations. The temporary economic benefits of low birth rates have run dry, and now it is time to pay the piper on pensions and elder care. Governments usually respond to a pensions crisis by borrowing more money. They issue pieces of paper called bonds and somehow convince investors to pay for them as though they were worth the value printed on their face. This could be the greatest Ponzi scheme in history, but for a politician, selling paper is a lot easier than angering voters by raising taxes or cutting benefits.

The only trouble, of course, is that you can’t keep borrowing indefinitely. The total government debt of the USA and many other countries has already far exceeded the amount that can possibly be repaid under even the rosiest future scenario. In Japan, government debt is more than 250% of Gross Domestic Product (GDP). In the USA, federal debt is "only" about 100% of GDP. This may seem like a reasonable number until you realize that a relatively small portion of GDP is available to the government in the form of taxes—roughly 26% in the USA. Most of that tax revenue has to be used for standard government services—roads, courts, military, aid to families, etc.—leaving little residue to pay down the debt. As of this writing (mid-2018), the U.S. government is spending roughly 30% more than it is collecting in taxes each year, so obviously its debt is rising, not falling.

The U.S. government today is roughly equivalent to a consumer who makes $3,400 a year in after-tax salary, spends $4,400 a year in expenses and has credit card debt of over $22,000, growing every day. (Those are Fiscal Year 2018-19 projections of the federal budget and debt, divided by $1 billion.) Even if the interest rate is close to zero, you can see there is no happy way out of this dilemma. Debt will keep piling up so long as the government keeps spending more than it takes in. If the interest rate on that $22,000 rises—say to 5% or 10%—the government will be pushed into a hole it has little chance of digging itself out of. It will be paying roughly $1100 or $2200 in annual interest alone, all on an income of $3400.

There are dubious economic theories that say a big government like the U.S. can rack up as many debts as it wants and never has to pay the piper. I call these perpetual motion theories because they defy basic physics. Some economists say the government can print as many bonds as it wants, and investors will have to buy them because there is no better alternative. Interest rates will always be low, they say, so borrowing more adds little cost. 200% of GDP is no problem, and even 1000% doesn’t bother some of these theorists. Trying to refute these theories is like arguing with a mad scientist. Each perpetual motion machine looks like it should work, but there has to be a logical flaw in each of them. All of these theories are refuted by this simple question: If the U.S. government can borrow as much as it wants without consequences, then why does it need to collect taxes at all? Why can’t it just borrow all the money it needs and let the taxpayer keep his money?

Obviously, it can’t. There has to be a threshold where investors stop buying government debt or demand high interest rates to compensate for the growing risk. At that point, the U.S. government will run into a wall where it can’t even pay the interest charges on its current debt, let alone paying down the balance. One way or another, it has to default on its debt, which will will be a calamity for everyone.

The only possible outcome of untenable government debt is a colossal worldwide economic crash. The 2008 global financial crisis was frightening enough, but it was just a foreshock of an even worse disaster yet to come. As of this writing, the global economy shows few signs of overt weakness. In the United States, employment is at an all-time high, and stock markets are booming in spite of undisciplined tax cuts and spending bills that commit the U.S. government to huge future deficits. Behind the cheerful façade, however, is the ugly reality that government and private debts have risen to impossible levels. Governments have maxed out their credit cards and will eventually lose the use of them.

Like the stress of plate movement on an earthquake fault, the world economy is building up debt-related tension. You know the fault has to break eventually, even if you don’t know exactly when and how. When the rupture happens, it will have a cascade of disastrous effects in every part of the economy and every corner of the globe.

The U.S. government is the world’s biggest debtor, but it certainly isn’t alone. Even China, which has little direct government debt, is burdened with huge private debt largely built up since the 2008 crisis. On a worldwide basis, total debt is said to be 325% of total world GDP (according to the Institute for International Finance, October 2017). That’s not just government debt but all measurable forms of debt, like credit cards, mortgages, student loans, bank loans and corporate bonds. To put this in perspective, this is equivalent to a consumer earning $26,000 a year (the usable portion of $100,000 of GDP) who now owes $325,000 in credit card debt.

Ultimately, there can be no escape from this crisis apart from a complete abandonment of that debt. If debtors can’t pay, eventually they will give up the pretext of even trying. If enough individuals, governments and businesses can’t make their payments, the banks and other investors that hold these debts will collapse. Debts will vanish overnight, but so will bank accounts, investments, utilities, services and plenty of jobs. As rich people find themselves instantly poor, they will stop buying things that don’t absolutely need, which will throw even more people out of work.

It is impossible to predict where the crisis will start. It could begin with a stock market crash in the U.S., a collapse of the Chinese real estate bubble, a sovereign default in Italy, a geopolitical crisis in the Pacific or something totally unexpected. The triggering event is almost immaterial. It doesn’t matter which fuse you light in bundle of dynamite; as soon as one stick of it goes off, the whole bundle is going to blow. Banks will fail. Governments will collapse. Utilities and services will stop working. It hard to even imagine what society will look like after the Big One strikes.

It will be a nuclear Armageddon of sorts, but a very odd kind. The coming crash will be like the dropping of a special kind of bomb that does no direct damage to people, buildings or infrastructure. This bomb will only destroy the financial systems that make everything work, like banks, markets and regulatory structures. After the bomb drops, you may be left with nothing but your home and what is inside it, but at least you will be alive. Your neighborhood may look like it always has, but there might be no power, water or trash pick-up. Streets and vehicles will still exist, but there may be no fuel to run the cars and buses.

Perhaps you can see now that climate change is not the biggest of humanity’s worries. Long before London and Miami are flooded, the world will go through a violent economic transition. I call it the Great Reversal. This is the forced adjustment period from the breakneck growth we saw in the late 20th Century to the static or negative growth that will mark most of the 21st Century. It is not just a matter of learning to "live within our means". Before we can adjust to a lower income, we have to deal with the huge, destructive momentum of our past commitments.

U.S. Treasury bonds aren’t the only instruments that are currently overvalued. So are assets of all kinds, including stocks, real estate, corporate bonds and collectible art. The trading prices of most assets still assume permanent economic growth, where a foolish buyer will always come along to pay more for the asset than the seller did. This can’t be sustained when the pool of workers and consumers goes flat and interest rates rise. If government debt becomes a crisis, bond prices will fall, but so will most other assets. There will be few safe havens. Trillions will be wiped off investment portfolios overnight, leading to panic and retrenchment by the owners of those investments.

Retrenchment means that consumers and businesses stop initiating new projects and buying thing they don’t have to, which are both terrible news for our vanity-based economy. The market will instantly vanish for marble countertops, new cars, fashion, entertainment, lawn maintenance, home improvement and every other optional service. Most of the services supporting a modern city can be easily cancelled or delayed in times of economic stress. Most of these businesses will lay off workers, which in turn will worsen the retrenchment. Unemployed workers are stingy with their money, causing more unemployment and leading eventually to a drop in the prices of nonessential products. This is called a deflationary spiral. This phenomenon was last seen on a large scale during the Great Depression, and it is a recipe for disaster.

When Americans stop buying nonessential products, Chinese companies will be among the first to suffer, since they supply the lion’s share of those superfluous goods. Loss of exports will probably trigger a collapse of China’s own debt bubble. Since most modern countries are linked together by trade and monetary policy, what happens in one is bound to sink the others. Economic collapse in the United States and China is sure to lead to contagion in Europe. Even though some countries like Germany have handled their debts responsibly, they will be drawn into the abyss by their brethren in the E.U. who haven’t.

All of this has happened before—or nearly did. When mortgage-backed securities collapsed in 2008, they nearly took down the entire world economy. We were saved only by coordinated efforts by major governments and central banks. They lowered interest rates, bailed out the feckless banks and stimulated the economy with massive deficit spending. These techniques worked, in that they eventually brought the world economy back to life, but in doing so they set us up for a coming crisis where the same tricks may not work. In 2008, we were “staring into the abyss". In the next crisis, we will probably plunge into it, finding out just how deep it goes.

The good news is that humanity will probably survive. The fact that this kind of bomb spares people and physical infrastructure suggests that many systems can be restarted again. City leaders will say: “We have a power plant in our community, but the company that owns it has failed. How can we get it running again on our own?" Somehow, people will learn to survive in a post-Reversal world. It will be a much less affluent society than we know today because most of today’s wealth is an illusion, but the world will still have valuable resources—goods and services that can be traded among citizens. Maybe you have food that you grew in your garden while I have the tools and skills you need to fix your roof. After a painful transition period, a new equilibrium will eventually be reached where people find ways to trade with each other without relying on debt or government regulation.

That doesn’t mean we will be out of the woods. Even as we resolve the immediate economic crisis, all our other problems will still be with us: climate change, threat of nuclear war, etc. This time, however, demographic woes will become more obvious and pressing. By the time the Great Reversal is over, we will have dealt with the delayed consequences of the shift from high birth rates to low, but low birth rates themselves will not have been addressed. If nothing else, an economic crisis is certain to suppress birth rates even further, because no one wants a baby when times are tough.

Over the past half-century, efforts to control population have been more successful than anyone expected. Now, we have overshot our goals and underpopulation has become the most pressing risk. A growing list of countries in Europe and Asia are already losing population in absolute terms, and the populations of nearly all countries are aging.

The worst case is Japan. Its total population peaked at 228 million in 2010 and is now heading down at an accelerating pace. By 2050, it will be losing a half-million citizens a year while the median age rises to 53. By then, Japan will be shadow of its former self, with shriveling industries and vast numbers of elderly with no one to care for them. These predictions are not speculation but are as close to provable fact as any prediction can be. It is undisputable that there can’t been more young Japanese adults 20 years from now than there are children today. Even if the government finds some miracle formula to coax people to have more babies, there won’t be many wombs available to do it. Japan’s median age for women today is 48, which means at least half the country’s female population will never bear children again no matter the inducements.

A few lucky countries, like those in North America and Northern Europe, have been able to compensate for their anemic birthrates by attracting talented immigrants. Instead of paying to raise and educate their own workers, they steal them from other countries. This is a fantastic deal for the receiving countries but devasting for the donors. It can’t be good for the planet as a whole if a few vampire countries are draining the life-blood from all the rest.

Finally, we have the unsettling problem, in every country, that the most talented and best equipped parents are not the ones having the most babies. No matter how you measure it, the best educated, most intelligent and most successful members of society are having far fewer children than the poorly educated, less intelligent and less successful. One reason is simple: They have better things to do. Becoming a doctor, for example, takes up a decade of a woman’s life that in previous eras would have been used for baby making. The most intelligent adults are also capable of calculating the true costs and risks of parenthood, which are humbling for even the wealthiest parents. While every country needs children as future taxpayers, few governments are willing to compensate parents for the many sacrifices they make to raise them. Intelligent adults are reasonable to opt out, while less intelligent adults, driven my custom, impulse or religion, are ignoring logic and having children anyway.

It isn’t clear whether nature or nurture is most important in forming a new citizen, but when both are defective, generation after generation, it is reasonable to expect some destructive long-term effects in the population at large. At the least, the values held by the more disciplined parents—like impulse control and logical thinking—could be lost over time. This is especially frightening in democracies where "right" and "wrong"; are less important than how many citizens can be swayed by the empty rhetoric of populist leaders. Even if your parents raised you well, it can be hard to express your intelligence if you live under a dictatorship.

So we have a massive economic crash coming, followed by decades of relative poverty and stagnation. Talent is being relentlessly siphoned from less successful economies to more successful ones, and the wrong kind of parents are having most of the babies. What do we call all of this? I call it Demographic Doom. Human society is being drawn into a new dark age by the cumulative effects of logical decision making. It is perfectly reasonable for an ambitious adult to have fewer children and to move to a country where their talents are most valued. You have to step back to see how these good things are having bad results.

I call it "Doom" because the world we are heading into is profoundly bleak, and there is little if anything that current governments can do about it. The U.S. government has shown itself incapable of managing its debt, so a violent reckoning has to take place. Governments like China have been highly effective in reducing birthrates, but no government has learned how to significantly increase them. Not even the most totalitarian government has figured out how to encourage some citizens to reproduce and not others. Undesirable citizens can be sterilized, but you can’t force the most successful to breed if it isn’t in their best interest.

Essentially, we are already strapped into a roller coaster, approaching the top of the first big hill. At this point, there is little we can do but hang on tight and ride the train wherever it goes. We can’t realistically choose our fate until most of the momentum has dissipated and we have an opportunity to change tracks.

The only glimmer of hope I can offer is that once the Great Reversal has done its worst and society has been driven into doddering old age by insufficient births, groups of concerned individuals might take matters into their own hands. There could be a concerted effort to repopulate the planet much like space travelers might colonize a newly discovered solar system. As long as no national government is involved, private groups can make decisions that no government is capable of, like choosing who should breed and how children should be raised. In these colonies, I see children being raised communally, in dorms instead of family homes, and every adult in the community will participate in the tasks of parenthood.

If your community consists of a few thousand adults, the colony as a whole can absorb risks that individual parents cannot. Communal upbringing promises lower costs without sacrificing quality of care. No child would be a spoiled prince or princess, doted on by two overprotective parents. In a communal setting, there can be a consistent level of attention, sufficient to build emotional maturity but not letting the child believe he or she is the center of the universe.

A vital factor is that the colony can choose its own membership, admitting only those adults who meet certain criteria of belief and personality. These colonies can be thought of as religious groups where everyone shares certain core values even if they don’t believe in God per se. This is where a private colony is different from a progressive government like Sweden. To a greater extent than most countries, Sweden mitigates the costs and risks of parenthood and provides a lot of material support for working parents, but it can’t determine who should have babies and who shouldn’t. Only a private organization is capable of making these hard choices. Technically, they are not forcing members to do anything, but if you don’t like the group’s rules, you have to leave.

My idea of “repopulation colonies" may sound naive and utopian, but I hope to convince you at the end of this book that it is the only way to resolve humanity’s long-term demographic problems. I’m not saying it is sure to happen, but it is one potential solution. Governments are poorly equipped to deal with demographic issues, apart from their evident success in suppressing births. If human civilization is to be preserved, private parties have to do it.

This book will explore Demographic Doom in all its many facets. There are plenty of other books on the dire consequences of government debt, the risks of falling population, the flight of talent from poor countries and the alleged degradation of the human gene pool. No other book, to the best of my knowledge, tries to bring all these factors together in one coherent worldview. Government debt doomsayers may overlook the powerful effects of falling fertility, while fertility doomsayers may fail to grasp that a major economic collapse is just around the corner, wiping out any hope of government intervention.

What I hope to do in this book is describe the current state of humanity through the wisest possible lens, as aliens would see us from afar. They will observe that our climate is changing, but that will not be their deepest concern. Earth’s whole population is changing, mostly for the worse. If aliens are considering contacting us, they may want to put it off for a while. They might say, "Let’s wait a century and see if these humans survive their greatest challenge."

That challenge, as I see it, is demographic. It is a matter of whether the human species—or some protected part of it—can master its own reproduction and childrearing so that its population doesn’t explode, implode or devolve into idiocy.

I used to have little interest in demography. It seemed a dull, statistical field mainly concerned with counting things. Now I think it’s the most important field in the world.

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