Capital in the Twenty-First Century (15 page)

FIGURE 2.2.
   The growth rate of world population from Antiquity to 2100

The growth rate of world population was above 1 percent per year from 1950 to 2012
and should return toward 0 percent by the end of the twenty-first century.

Sources and series: see
piketty.pse.ens.fr/capital21c
.

These forecasts are obviously rather uncertain. They depend first on the evolution
of life expectancy (and thus in part on advances in medical science) and second on
the decisions that future generations will make in regard to childbearing. If life
expectancy is taken as given, the fertility rate determines the demographic growth
rate. The important point to bear in mind is that small variations in the number of
children couples decide to have can have significant consequences for society writ
large.
⁴

What demographic history teaches us is that these childbearing decisions are largely
unpredictable. They are influenced by cultural, economic, psychological, and personal
factors related to the life goals that individuals choose for themselves. These decisions
may also depend on the material conditions that different countries decide to provide,
or not provide, for the purpose of making family life compatible with professional
life: schools, day care, gender equality, and so on. These issues will undoubtedly
play a growing part in twenty-first-century political debate and public policy. Looking
beyond the general schema just outlined, we find numerous regional differences and
stunning changes in demographic patterns, many of them linked to specific features
of each country’s history.
⁵

The most spectacular reversal no doubt involves Europe and America. In 1780, when
the population of Western Europe was already greater than 100 million and that of
North America barely 3 million, no one could have guessed the magnitude of the change
that lay ahead. By 2010, the population of Western Europe was just above 410 million,
while the North American population had increased to 350 million. According to UN
projections, the catch-up process will be complete by 2050, at which time the Western
European population will have grown to around 430 million, compared with 450 million
for North America. What explains this reversal? Not just the flow of immigrants to
the New World but also the markedly higher fertility rate there compared with old
Europe. The gap persists to this day, even among groups that came originally from
Europe, and the reasons for it remain largely a mystery to demographers. One thing
is sure: the higher fertility rate in North America is not due to more generous family
policies, since such policies are virtually nonexistent there.

Should the difference be interpreted as reflecting a greater North American faith
in the future, a New World optimism, and a greater propensity to think of one’s own
and one’s children’s futures in terms of a perpetually growing economy? When it comes
to decisions as complex as those related to fertility, no psychological or cultural
explanation can be ruled out in advance, and anything is possible. Indeed, US demographic
growth has been declining steadily, and current trends could be reversed if immigration
into the European Union continues to increase, or fertility increases, or the European
life expectancy widens the gap with the United States. United Nations forecasts are
not certainties.

We also find spectacular demographic turnarounds within each continent. France was
the most populous country in Europe in the eighteenth century (and, as noted, both
Young and Malthus saw this as the reason for French rural poverty and even as the
cause of the French Revolution). But the demographic transition occurred unusually
early in France: a fall in the birth rate led to a virtually stagnant population as
early as the nineteenth century. This is generally attributed to de-Christianization,
which also came early. Yet an equally unusual leap in the birth rate took place in
the twentieth century—a leap often attributed to pronatal policies adopted after the
two world wars and to the trauma of defeat in 1940. France’s wager may well pay off,
since UN forecasts predict that the population of France will exceed that of Germany
by 2050 or so. It is difficult, however, to distinguish the various causes of this
reversal: economic, political, cultural, and psychological factors all play a part.
⁶

On a grander scale, everyone knows the consequences of the Chinese policy to allow
only one child per family (a decision made in the 1970s, when China feared being condemned
to remain an underdeveloped country, and now in the process of being relaxed). The
Chinese population, which was roughly 50 percent greater than India’s when this radical
policy was adopted, is now close to being surpassed by that of its neighbor. According
to the United Nations, India will be the most populous country in the world by 2020.
Yet here, too, nothing is set in stone: population history invariably combines individual
choices, developmental strategies, and national psychologies—private motives and power
motives. No one at this point can seriously claim to know what demographic turnarounds
may occur in the twenty-first century.

It would therefore be presumptuous to regard the official UN predictions as anything
other than a “central scenario.” In any case, the United Nations has also published
two other sets of predictions, and the gaps between these various scenarios at the
2100 horizon are, unsurprisingly, quite large.
⁷

The central scenario is nevertheless the most plausible we have, given the present
state of our knowledge. Between 1990 and 2012, the population of Europe was virtually
stagnant, and the population of several countries actually decreased. Fertility rates
in Germany, Italy, Spain, and Poland fell below 1.5 children per woman in the 2000s,
and only an increase in life expectancy coupled with a high level of immigration prevented
a rapid decrease of population. In view of these facts, the UN prediction of zero
demographic growth in Europe until 2030 and slightly negative rates after that is
by no means extravagant. Indeed, it seems to be the most reasonable forecast. The
same is true for UN predictions for Asia and other regions: the generations being
born now in Japan and China are roughly one-third smaller than the generations born
in the 1990s. The demographic transition is largely complete. Changes in individual
decisions and government policies may slightly alter these trends: for example, slightly
negative rates (such as we see in Japan and Germany) may become slightly positive
(as in France and Scandinavia), which would be a significant change, but we are unlikely
to see anything more than that, at least for the next several decades.

Of course the very long-run forecasts are much more uncertain. Note, however, that
if the rate of population growth observed from 1700 to 2012—0.8 percent per year—were
to continue for the next three centuries, the world’s population would be on the order
of 70 billion in 2300. To be sure, this cannot be ruled out: childbearing behavior
could change, or technological advances might allow growth with much less pollution
than is possible to imagine now, with output consisting of new, almost entirely nonmaterial
goods and services produced with renewable energy sources exhibiting a negligible
carbon footprint. At this point, however, it is hardly an exaggeration to say that
a world population of 70 billion seems neither especially plausible nor particularly
desirable. The most likely hypothesis is that the global population growth rate over
the next several centuries will be significantly less than 0.8 percent. The official
prediction of 0.1–0.2 percent per year over the very long run seems rather plausible
a priori.

In any case, it is not the purpose of this book to make demographic predictions but
rather to acknowledge these various possibilities and analyze their implications for
the evolution of the wealth distribution. Beyond the consequences for the development
and relative power of nations, demographic growth also has important implications
for the structure of inequality. Other things being equal, strong demographic growth
tends to play an equalizing role because it decreases the importance of inherited
wealth: every generation must in some sense construct itself.

To take an extreme example, in a world in which each couple has ten children, it is
clearly better as a general rule not to count too much on inherited wealth, because
the family wealth will be divided by ten with each new generation. In such a society,
the overall influence of inherited wealth would be strongly diminished, and most people
would be more realistic to rely on their own labor and savings.

The same would be true in a society where the population is constantly replenished
by immigration from other countries, as was the case in America. Assuming that most
immigrants arrive without much wealth, the amount of wealth passed down from previous
generations is inherently fairly limited in comparison with new wealth accumulated
through savings. Demographic growth via immigration has other consequences, however,
especially in regard to inequality between immigrants and natives as well as within
each group. Such a society is thus not globally comparable to a society in which the
primary source of population growth is natural increase (that is, from new births).

I will show that the intuition concerning the effects of strong demographic growth
can to a certain extent be generalized to societies with very rapid economic (and
not just demographic) growth. For example, in a society where output per capita grows
tenfold every generation, it is better to count on what one can earn and save from
one’s own labor: the income of previous generations is so small compared with current
income that the wealth accumulated by one’s parents and grandparents doesn’t amount
to much.

Conversely, a stagnant or, worse, decreasing population increases the influence of
capital accumulated in previous generations. The same is true of economic stagnation.
With low growth, moreover, it is fairly plausible that the rate of return on capital
will be substantially higher than the growth rate, a situation that, as I noted in
the introduction, is the main factor leading toward very substantial inequality in
the distribution of wealth over the long run. Capital-dominated societies in the past,
with hierarchies largely determined by inherited wealth (a category that includes
both traditional rural societies and the countries of nineteenth-century Europe) can
arise and subsist only in low-growth regimes. I will consider the extent to which
the probable return to a low-growth regime, if it occurs, will affect the dynamics
of capital accumulation and the structure of inequality. In particular, inherited
wealth will make a comeback—a long-term phenomenon whose effects are already being
felt in Europe and that could extend to other parts of the world as well. That is
why it is important for present purposes to become familiar with the history of demographic
and economic growth.

There is another mechanism whereby growth can contribute to the reduction of inequality,
or at least to a more rapid circulation of elites, which must also be discussed. This
mechanism is potentially complementary to the first, although it is less important
and more ambiguous. When growth is zero or very low, the various economic and social
functions as well as types of professional activity, are reproduced virtually without
change from generation to generation. By contrast, constant growth, even if it is
only 0.5 or 1 or 1.5 percent per year, means that new functions are constantly being
created and new skills are needed in every generation. Insofar as tastes and capabilities
are only partially transmitted from generation to generation (or are transmitted much
less automatically and mechanically than capital in land, real estate, or financial
assets are transmitted by inheritance), growth can thus increase social mobility for
individuals whose parents did not belong to the elite of the previous generation.
This increased social mobility need not imply decreased income inequality, but in
theory it does limit the reproduction and amplification of inequalities of wealth
and therefore over the long run also limits income inequality to a certain extent.

One should be wary, however, of the conventional wisdom that modern economic growth
is a marvelous instrument for revealing individual talents and aptitudes. There is
some truth in this view, but since the early nineteenth century it has all too often
been used to justify inequalities of all sorts, no matter how great their magnitude
and no matter what their real causes may be, while at the same time gracing the winners
in the new industrial economy with every imaginable virtue. For instance, the liberal
economist Charles Dunoyer, who served as a prefect under the July Monarchy, had this
to say in his 1845 book
De la liberté du travail
(in which he of course expressed his opposition to any form of labor law or social
legislation): “one consequence of the industrial regime is to destroy artificial inequalities,
but this only highlights natural inequalities all the more clearly.” For Dunoyer,
natural inequalities included differences in physical, intellectual, and moral capabilities,
differences that were crucial to the new economy of growth and innovation that he
saw wherever he looked. This was his reason for rejecting state intervention of any
kind: “superior abilities … are the source of everything that is great and useful.…
Reduce everything to equality and you will bring everything to a standstill.”
⁸
One sometimes hears the same thought expressed today in the idea that the new information
economy will allow the most talented individuals to increase their productivity many
times over. The plain fact is that this argument is often used to justify extreme
inequalities and to defend the privileges of the winners without much consideration
for the losers, much less for the facts, and without any real effort to verify whether
this very convenient principle can actually explain the changes we observe. I will
come back to this point.