Shrinking and Aging Population Can Lead to a Permanent Great Depression

The Great Depression was a global event in the 1930s. There are proposed definitions of economic depressions, which are

* a decline in real GDP exceeding 10%, or


* a recession lasting 2 or more years.

A recession is defined as negative economic growth over two quarterly GDP measurements. This is 6 or more months of a shrinking economy.

The Great Depression is the economic Boogie Man. It was the worst economic period for the industrialized world. There are many stories, books and movies describing the hardships of that period.

I recently wrote how the world could drop from 8 billion people today to 250 million people in 2200. This means there will only be about 3% of today’s population in 2200.

One way to calculate national GDP is Number of people times the average economic activity per person.


This economy is also mostly dependent up on the working age population actually working and being productive.

How big would a global economy be that has 3% of the people and only 2% of the working age population? For the world economy to be the same size, you would need to have 33 times the per capita income. This is just to be equal and have overall economic stagnation.

I do write about and believe we can have an AI and humanoid robotics revolution. However, there is always the chance these technological things do not happen. We would be left with massive economic headwinds.

People do not get how terrible the problems will be as this happens.


People do not get how the global financial system that we have made depends upon population growth.


People do not get how fast and how hard this has already been hitting Japan.


People do not get how much this will hit China and Japan from now to 2050 and beyond.


The shrinking and aging population problem for China, South Korea, Italy, Spain and Japan from now until 2050 is pretty unavoidable at this point. These countries are 25% of the world’s economy and they have many of the largest banks in the world.


Those country could be losing 1.5 to 2% of their working age population each year and 30% of the remaining population could be shifting into productivity and spending decline. This could be 2-4% negative headwinds each year to overall economy and to real estate markets.

People think the financial and banking crisis of 2008 and recently were bad events. People think the real estate crash of 2008-2009 was bad.

Instead of Banks worth a total of $600 billion collapsing it could many trillion dollar banks and financial institutions.

If the world might normally be able to generate 3% growth but 2% came from true technology and productivity improvement and 1% from population growth, we could shift to an overall -1% GDP growth where we had 2% technology and productivity improvement but -3% from shrinking workforce and aging people spending less and becoming less productive.

This means if the population shrinkage becomes too steep, the world would fall into permanent recession. This would also be a depression because a recession that lasts more than 2 years is also a depression. There would be constant banking and real estate crisis.

There are some commenters who say, Nextbigfuture is a “future-forward” site. Why is Nextbigfuture writing about this doomer scenario? I am writing about it because it has already been happening in Japan. Japan was the second biggest economy in the world and is now third and will soon drop to fifth. I am writing about it because I see the math and the population demographics. I see there are too few babies and there are too few women of fertile age. I see the fertile women numbers dropping. This problem is over ten times bigger than climate change. I see the risk to the China and Japanese banks and the global financial system. There is no uncertainties like in some climate science. There is no disputing how many women are in each 5 year bracket of various national population pyramids. Only countries in Africa do not properly count their people. China many now be lying to say they have more people than they actually have.

We should not be allowing this to happen.

I am optimistic that this is solvable, but only if people become fully aware and we rapidly fix it. It is fixable and must be fixed. We have to do it.

I also have a belief about what humanity must do for the far future. We have to exist and exist in large numbers to achieve what I think we can and should achieve.

Serious, Boiling Frog

China will be aging at the same time that its population is shrinking. China will be going from an average age of 38 now to over 50 years in 2050. The aging population will be a 20-40% hit on GDP. China is 20% of the world economy and Japan is still 5-6%.

Population growth and productivity improvement are like two legs for running our world economy. Yes, it is possible to hop on one leg. We are purposely handicapping the world economy by not having population growth. 25% of the world population has already allowed itself to fall into shrinking population, shrinking working age population, shrinking number of fertile women. It has been happening for decades in much of Europe, Japan. Now 60% of the rest of world is clearly on track for the same situation. India and Bangledash have fallen below replacement. Japan’s economy went flat at about $5 trillion about ten years before its population peaked in 2008. Japan had a GDP of $5.5 trillion in 1994. The GDP today is $4.9 trillion. Japan got as high as $6.3 trillion with innovation but then it collapsed back over 20%. Other large industrial countries like Germany, France increased their GDP by 50-80% in the same period. They also have gone flat for the past decade. Other countries like the USA, Canada and Australia have more than tripled their national economies since 1995.

Japan has been technologically innovating but all that innovation has been barely keeping it from decline. The USA, Canada and Australia did not have some technological miracle that Japan missed out on and that Europe partially missed out on. The three countries kept immigration of young, educated people to fully make up for the same low birth rates for the existing citizens. There are only a net 4 million people immigrating around the world. The USA, Canada and Australia take over half of those people.

Below we compare Japan’s historical GDP with the USA.

The projections of working age population for China below are likely overly optimistic. China fertility rate dropped from 1.5 to 1.18. It has been 1.18 for the past 3 years. This means China goes to 1.1 billion from 1.42 billion instead of 1.3 billion. It means working age population could drop below 600 million by 2050.

If Japan had three times the GDP, by having its demographics match USA and Canada over the past 30-40 years would it be better able to handle its pension crisis?

China is going to give their next generation half as many working age people in 2050. No problem, just work three times as hard and we grow our economy 50% or come up with some extra technological miracles.