Capitalism, Part II: Will Population Growth Deplete the Earth’s Natural Resources?

“If you want one year of prosperity, grow grain.

If you want ten years of prosperity, grow trees.

If you want one-hundred years of prosperity, grow people.”

– Chinese Proverb


In this second installment of our series on capitalism, we attempt to tackle one of the most frequently heard objections to the free-enterprise system, that an ever-growing world population will eventually deplete all our natural resources. Economic growth is therefore unsustainable, as we rob future generations by using up all of Earth’s natural resources. Let’s look at some facts.

A recent Barron’s article on China quoted a money manager who said, “Many people don’t realize how the world has changed in the past two decades with regard to birthrates, demographics, and shifting population structure…The shortage of suitably skilled workers for jobs around the world has highlighted that people quietly have been retiring early, and fewer people are entering the workforce.”[1]  This is a problem because real economic growth is a function of both the growth in the working-age population and the growth in real output per worker.

For the past two decades, real GDP growth in the U.S. averaged only 2% per year, versus 3.7% for the previous two decades.[2]  The biggest contributor to the decline was slowing growth of workers, as shown below:

The U.S. is not the only country facing slower long-run economic growth due to slowing population growth.  Here are projections for the U.S., U.K, EU, Japan, and China:[3]

According to a research piece from Northern Trust, the world’s population growth has slowed to under one percent, and the “populations of 61 nations are projected to decrease by 1% or more between now and 2050. Global fertility rates have been in secular decline for years,” as shown below (a fertility rate of 2.1 is known as the required replacement rate):[4]

Northern Trust cites global prosperity as a key contributor to the decline in global fertility rates, as “countries that get wealthier have fewer children.”[5] We’ve written before about how the spread of capitalism has raised the global standard of living over the past 250 years (click here), called the Great Enrichment. Economics blogger Noah Smith writes that “for the last three decades income growth has been concentrated in low-income countries. Poverty is down at every level, not just in rates but in absolute numbers.” This graph dramatically shows how incomes have grown even as the global population grew from about 5 billion to over 7 billion people:[6]

There is another, more sinister, side to the story behind some of the world’s demographic problems, touched on briefly in the Barron’s China article: population-control ideology, of which China’s One Child policy is a notorious example. The roots of this ideology can be traced back to Thomas Malthus (1766-1834), a political economist who argued that human reproduction, growing geometrically, will quickly outpace the world’s food production, assumed to grow linearly, eventually leading to mass starvation. Over the ensuing decades, this idea spread, though many economists and philosophers challenged its underlying assumptions.

The population-control ideology reached its apex in the late 1960s and early 1970s, with the publication of The Population Bomb in 1968, by Paul Ehrlich, and Limits to Growth and A Blueprint for Survival in 1972, by the Club of Rome. Ehrlich famously predicted “In the 1970s the world will undergo famines – hundreds of millions of people are going to starve to death.”[7] The Club of Rome’s Blueprint stated “continued exponential growth of consumption of materials and energy is impossible. Present reserves of all but a few metals will be exhausted in 50 years if consumption rates continue to grow as they are.”[8]

In 1978, Song Jian, a Chinese official who had read the two Club of Rome books, convinced China’s leadership that the “ideal size” of China’s population should be between 650-700 million (about 300 million less than the population at the time). In 1980, The People’s Congress adopted the One-Child policy, which remained in place for the next 35 years, often implemented in inhumane and brutal ways, and enforced by 500,000 bureaucrats.[9] According to the Chinese government, the policy prevented 400 million births.[10] It also caused there to be 30 million more men than women in the country, creating “biological dead ends” of many Chinese families.[11] Since 2016, China has been trying desperately to reverse course, in an effort to deal with the economics of an aging population, fewer workers, and declining birth rate.[12]

It has been over 50 years since the publication of those Doomsday books and none of their dire predictions have come to pass. Not even close. Author Gregg Easterbrook writes, “When Malthus’s Essay on the Principle of Population appeared, there were one billion people. Now the human family has seven times as many members, and there is sufficient food that obesity is a public health problem not just in rich nations but in parts of the developing world.”[13] We hear of famines in places like North Korea, South Sudan and Venezuela, but they are war- or government-created food distribution failures.

What happened? One of the best arguments (among many) against population controls is that human ingenuity can deliver increasing returns. Marian Tupy and Gail Pooley, authors of the excellent book Superabundance, put it this way:

Human beings are the only animal capable of sustained innovation. The greater the population the more likely it is that a creative mind will emerge to invent a solution to a pressing problem. Moreover, human beings are the only animals capable of building on past inventions. Therefore, as the population grows, information accumulates and innovation accelerates.

A stellar example of this comes from the work of a man you’ve probably never heard of, Norman Borlaug (1914-2009). Borlaug was a farm boy from Iowa, who grew up to become a real-life hero. He is credited with saving one billion people from starvation, starting what is now called the Green Revolution. Working as an agronomist in many foreign countries, Borlaug and his colleagues discovered ways to accelerate how plants become hybrids and developed high-yielding hybrid wheat and rice strains. Famines in India not only disappeared, but India eventually became a net exporter of food in 2013. These agricultural techniques have allowed more food to be grown on less land. Dr. Borlaug won the Nobel Peace Prize in 1970.

But what about other non-agricultural commodities? Have the world’s seven billion people exhausted our known supply of metals such as iron, aluminum, zinc, copper, platinum? If so, the law of supply and demand would dictate that the prices of these metals would skyrocket as their scarcity increased. We could just look at the nominal prices of commodities to answer this, but Tupy & Pooley devised a clever and much better way to measure this.

Using Adam Smith’s 1776 observation that the “real price of everything is the toil and trouble of acquiring it…What is bought with money…is purchased by labour,” the authors calculate what they call the Time price (TP). TP is the amount of time that a buyer needs to work in order to earn enough money to buy something. The beauty of it is that TPs can be calculated for any country for any time period where accurate price and per capita GDP data exist.

We can also calculate the percentage change in TP between two points in time, which, in turn, tells you how much better off you are now than before, based on how much time you need to work to buy something. Here’s an example. Between 1850 and 2018, the average hourly wage of an unskilled worker in the U.S. rose from $0.05 to $12.78, while the TP of coffee declined -95.7%. This means that coffee for an unskilled U.S. worker became 23 times more affordable since 1850. Wool has become 25 times more affordable, pork 75 times, sugar 100 times.

We can extend this thinking to the metals mentioned above from a global perspective, by calculating TPs using average global GDP per hour worked and nominal prices for the time period between 1980 to 2018:

Across 50 essential commodities, including agricultural, energy, fertilizer, plywood, rubber, metals, the average TP declined -71.6%, all while the world’s population increased 73% from 4.4 billion to 7.6 billion people.[14] This leads Tupy & Pooley to conclude, counterintuitively, that “resource abundance increased faster than the population. On average, every additional human being created more value than he or she consumed.”

We close by stating that, from an investment perspective, pessimists will always have difficulty keeping a proper long-term perspective as long as their focus is on short-term, transient things, the things that typically dominate the daily headlines. At Coyle Financial, we try to guide clients past the never-ending noise of worry-inducing soundbites to see and appreciate the miracle of free enterprise, innovation and human ingenuity, based on a foundation of human rights and freedom. Such things are seldom discussed in the popular media, but successful investors will keep an optimistic eye on the future and trust that these long-term drivers of wealth creation are alive and well in the world today.

John Finley



John Finley, CFA, serves as Chief Investment Officer for Coyle Financial Counsel and is responsible for overseeing the investment process. John’s prior experience includes managing institutional fixed-income portfolios for corporations, pension funds, non-profit organizations and foundations at several large, global asset managers. With more than 20 years of institutional investment experience, he is energized by helping individuals understand the role investing plays in meeting their long-term financial goals.
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All information is from sources deemed reliable, but no warranty is made to its accuracy or completeness.   This material is being provided for informational or educational purposes only, and does not take into account the investment objectives or financial situation of any client or prospective client.  The information is not intended as investment advice, and is not a recommendation to buy, sell, or invest in any particular investment or market segment.  Those seeking information regarding their particular investment needs should contact a financial professional.  Coyle, our employees, or our clients, may or may not be invested in any individual securities or market segments discussed in this material.  The opinions expressed were current as of the date of posting but are subject to change without notice due to market, political, or economic conditions. All investments involve risk, including loss of principal.  Past performance is not a guarantee of future results.

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[1] “A Trend Spotter Sizes Up China’s Baby Bust”, Barron’s, 2/27/23

[2] J.P. Morgan Asset Management, “Guide To The Markets”, 2/28/23

[3] Advisor Perspectives, “The Decline of Demographics”, Tandon & Boyle, Northern Trust, 9/16/22

[4] Advisor Perspectives, “The Decline of Demographics”, Tandon & Boyle, Northern Trust, 9/16/22

[5] Advisor Perspectives, “The Decline of Demographics”, Tandon & Boyle, Northern Trust, 9/16/22

[6] Noah Smith, “Don’t be a doomer”, Noahpinion Blog, via e-mail received 2/22/23

[7] Robert Zubrin, Merchants of Despair, Encounter Books (2013)

[8] Marion L. Tupy & Gale L. Pooley, Superabundance, CATO Institute (2022)

[9] “China’s Notorious Family Planning Agency Fades Into History”, WSJ, 3/14/18

[10] Marion L. Tupy & Gale L. Pooley, Superabundance, CATO Institute (2022)

[11] (accessed 3/9/23)

[12] “China Is Haunted by Its One-Child Policy as It Tries to Encourage Couples to Conceive”, WSJ, 1/3/23

[13] Easterbrook, Gregg (2018-02-19T22:58:59.000). It’s Better Than It Looks. PublicAffairs. Kindle Edition.



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