Economic growth occurs two ways: increasing population and increasing productivity per capita (which can be achieved through technological evolution and improvements in organistation/management/systems). Both increase overall GDP.
World population has grown exponentially over the last 2000 years:
As has GDP per capita:
A principle of the globally adopted capitalist economic model is that compound growth enables long term poverty reduction: that people can pursue their own self-interests and help themselves to disproportionate shares of the pie as long as the whole pie grows so that more people find themselves better off than less. Hence countries typically target 2%-10% annual growth, which when compounded means exponential growth. To achieve exponential economic growth we need either exponential population growth or exponential per capita growth (ideally both). The latter reflects human progress and technological evolution whereas the former is more of a ponzi scheme, requiring ever increasing numbers of people to maintain an ‘illusion’ of increasing prosperity.
Something changed around the 1970s. The growth rate in world population went into decline:
World GDP growth and GDP per capita growth also trended to a peak.
The pick up in GDP and per capita GDP in the 2000s is now rolling over again, suggesting the secular trend remains down:
The peak in population, GDP and GDP per capita growth rates fits with the peak in solar variation: the grand solar maximum:
The trend in long term solar variation suggests we are now headed for another minimum, like the Dalton or Maunder. These historic minima corresponded to lower GDP growth and lower population growth, cementing the relationships between the three.
Inflation also peaked around the 1970s:
As did growth in energy supply.
Declining rates of growth in population, GDP, GDP per capita, inflation and energy supply spell major trouble for a global system reliant on exponential economic growth as well as inflation and employment targetting. However, the true impact of this has been postponed in two ways.
Firstly, the ‘gap’ has been filled by increasing debt:
However, we have reached the point of debt monetisation in US, UK and Japan, i.e. the end game. The question is how long the end game can last.
Secondly, sub-demographic trends of the major economic nations have largely been supportive since the 1970s, peaking out in phases.
Here is US population growth per decade. Forward it by 40 years so that the births become the important ‘middle’ age bracket and we get the secular trends in real US stock prices: down into 1980, up into 2000, then down projected out to 2030.
Source: Business Insider
Here is Japan’s 5-yearly population growth rate. Again, forward it 40 years and we have a big spike in the middle bracket to deliver a major peak in equities and real estate around 1990, a small relief uptrend in the current window 2010-2015 (as we have been seeing) and otherwise a fairly grim outlook.
Collective dependency ratios, middle-to-old ratios and net investor ratios in the major nations were largely positive until recently, with China the last to break down:
In summary, we have postponed the impacts of the major growth rate peaks (GDP/GDP per capita/population) of the 1970s through debt until we have reached the point of monetisation, and the support from demographic sub-trends of the major nations has now expired. Solar maxima have historically given way to recession, and solar variation predicts a new grand minimum ahead which has historically correlated with low GDP and population growth. I am therefore led to the fairly bleak conclusion that this solar maximum speculative peak will turn out to be a major historic peak for the world.