The above-linked article appeared on CNBC a few days ago. Every once in a while I see these reports that make me believe that, ever so slowly, the field of economics may emerge from its self-imposed blindness to the real world. This article reports on a paper written by Northwestern University economist Robert Gordon. (I tried unsuccessfully to find the paper itself.) It seems that Gordon predicts that we are headed for a prolonged period – decades – in which growth in per capita consumption, “the main engine of the consumer-based U.S. economy” (the article’s author’s words, not mine), will fall to nearly zero.
First of all, it’s significant any time any economist takes any notice at all of per capita consumption since, in the field of economics, per capita consumption is one of those givens that is no cause for concern. It’ll always be there and it’ll always grow. You don’t need to worry about it.
Gordon serves up six reasons why that may not be true:
- Changing and unfavorable demographics. (It’s not clear what Gordon means by this. An aging population, perhaps?)
- Rising education costs and poor secondary school performance.
- Growing economic inequality.
- Increased competition due to globalization.
- Energy and environmental costs and challenges.
- High levels of consumer and government debt.
No, he didn’t mention overcrowding or population density, but his reasoning is a step in that direction. How many of the above factors can be blamed, at least partially, on either overpopulation or trade with overpopulated nations? All but the first, and maybe that one too, if it was clear what was meant. Number 6 is the result of the use of debt to mask the effects of worsening overpopulation (and free trade with badly overpopulated nations) for decades. That tactic is nearly exhausted and now the debt itself has become an impediment to per capita consumption.
Which led me to a realization. I don’t know why I hadn’t thought of it before – the synergism between overcrowding and poverty in driving down per capita consumption. When I researched Five Short Blasts, I tried to separate the effects of poverty from the effects of overcrowding in per capita consumption data. Poor people consume less merely because they are poor. I was looking for disparities in per capita consumption among nations of roughly comparable wealth so that the population density effect was clear.
But there’s an obvious feedback loop here that now seems so obvious to me. As overcrowding drives down per capita consumption, it’s inescapable that it will drive up unemployment. (And free trade with badly overcrowded nations will have the same effect.) Worsening unemployment puts downward pressure on wages and begins to fuel a rise in poverty. And, where the initial effect upon per capita consumption caused by slowly rising population density may have been small, the effect of declining incomes isn’t. It’s directly proportional. People who earn 10% less will consume 10% less (once their access to credit has been exhausted). When people consume 10% less, then more people are thrown out of work and the whole process can begin to spiral out of control.
It’s obvious then that anything, no matter how small, that tends to erode per capita consumption presents a serious threat to the economy. As economists like the one reported on in this article begin to ponder that per capita consumption may not be a given after all – that there may be factors that can negatively affect it – they will discover the obvious factors first. It may take a long time, but perhaps they’ll eventually discover the common thread woven through them all – the very population-driven “economic” growth, beyond some critical level, that all of them have worshipped for centuries.