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Capitalism’s Overlooked Contradiction: Wealth and Demographic Decline

In the mid-1860s, things were looking up for Karl Marx. After years laboring in poverty and obscurity in a small apartment in London, his fortunes seemed to be turning around. In 1864, his friend and benefactor Friedrich Engels became a partner in his father’s factory, gaining a generous income for himself and offering Marx a path out of poverty. That same year, Marx’s political isolation—which had been acute since his expulsion from Germany in 1849—came to an end with the founding of the International Workingmen’s Association. In 1867, the first volume of his masterpiece, Das Kapital, was published.

In developing the critique of political economy laid out in Das Kapital, Marx believed that he had discovered a fundamental problem in the nature of capitalism. What he called “the tendency of the rate of profit to fall” not only allowed him to make predictions about the economic system’s future but also guaranteed that communism was the inevitable outcome of capitalist development. In the end, Marx maintained, capitalism would eat itself.

The Tendency of the Rate of Profit to Fall

Marx’s insight about the tendency of the rate of profit to fall was an outgrowth of his theory of surplus value, which in turn grew out of the labor theory of value characteristic of the classical economics of the eighteenth and nineteenth centuries. The labor theory of value stated that the value of goods produced ultimately came from labor; human labor is the beginning of all economic activity and therefore the source of value. Surplus value, for Marx, is the profit that capitalists skim off the top of productive labor. Marx observed that as technological devel­opment progressed, the labor share of production fell and the capital share rose. This led him to the conclusion that, since labor was the ultimate source of value and thus also of surplus value or profit, the rate of profit in a capitalist economy would fall as the labor share of production fell.

In a letter to Engels in 1868, Marx wrote that what capitalism was “striving for is capitalist communism,” and that the tendency of the rate of profit to fall was “one of the greatest triumphs over the pons asini of all previous political economy.”1 Marx believed that he had come up with a logical proof that capitalism would self-destruct; that the forces of capitalist production would eventually drive profits to zero and necessitate the victory of the working classes, who would seize the means of production.

Yet history has proven Marx wrong. The rate of profit has not fallen inexorably toward zero, as any stock analyst could attest. Investors do not typically deploy Marxian language, but they discuss the return on invested capital (ROIC) and the weighted-average cost of capital (WACC). If the ROIC for a given company is higher than the WACC, that company is creating value for the investor—that is, the company is turning a profit for the investor. Outside of severe recessions, the ROIC of the stock market as a whole remains consistently higher than the WACC, which is why investors in the market make money.2

Marx’s logical error was simple enough: he confused what might be called an ontological question with an economic question. Ultimately—ontologically—it is true that all economic value emerges from human labor. But it does not therefore follow that you can infer economic truths from ontological ones. Economic value is not really a “thing” or a “substance.” Rather, it is a subjective assessment placed on a product by an end consumer. This consumer does not typically care how much labor went into the product, only that the product satisfies a particular need. One pair of shoes may be made entirely by robots, another may be made entirely by men, but an end consumer could still assess both as having the same value.

Still, there is something haunting about Marx’s vision. The machinery of the capitalist economy is enormously impressive, but it often seems to drive ahead blindly. And the capitalist system also seems to contain internal contradictions that destabilize it. I shall argue here that a clear-eyed assessment of empirical data suggests that Marx’s vision may not have been entirely mistaken, and that capitalism, if left unchecked, could destroy itself. Indeed, I believe that we now find ourselves feeling the early effects of such contradictions.

The Tendency of the Rate of People to Fall

Marx was no doubt correct that a capitalist economy requires a positive rate of profit in order to continue functioning in the long term. If profits were forever zero, there would be no incentive for investment and the economic engine would sputter and break down. Since Marx’s time, however, it has become clear to economists that capitalism needs more than just profits to survive.

Today, we think of prosperity in terms of economic growth, typically measured in terms of inflation-adjusted or “real” gross domes­tic product (GDP). The idea behind this metric is straightforward: measure how many transactions are made in the economy, adjust for inflation—that is, for the effects of price increases—and thus gain a sense of the total value of goods and services exchanged. An increase in the rate of real GDP growth thus reflects an increase in total economic output and gives us a sense of how much overall material wealth has increased.

In the short term, this rate of growth is most directly dependent on immediate economic conditions, including the rate of employment, the balance of trade, and the stage of the business cycle. But when we abstract away from these short-term effects, the rate of growth in real GDP in the long run is driven mostly by two factors: the pace of technological change (which includes efficiency gains from better resource management) and the rate of growth in the labor force.

Economists often assume that the rate of technological change is a given or exogenous consideration—that new technologies descend like manna from heaven. Likewise, they typically absolve themselves of responsibility for assessing the rate of change in the labor force. They may occasionally discuss immigration and its impact on the economy, or incentives and disincentives for labor force participation. But the funda­mental question of how many new workers a given economy is actually producing is ignored as outside the purview of the field, a topic reserved for demographers rather than economists. As a result, the core contradiction at the heart of capitalism has gone unnoticed.

In demographic circles, on the other hand, it is widely known that the fertility rate of a country—that is, the number of children each woman has—is a reflection of economic conditions, including the wealth of the country as measured in per capita GDP. Economic and population data across the globe demonstrate this demographic truth: a second-order polynomial regression on five decades of data from forty-three countries yields an R-squared of 0.33 and a p-value of < .00001.3

Demographers point to several underlying forces to explain why, as a country grows more prosperous, its people have fewer children. In the first place, large families become less desirable in more advanced economies. In poorer countries, which typically have agriculture-heavy economies, children are seen as an asset to the household because they are useful for farm work. Parents also rely on them for economic security in their old age, as less developed countries tend to lack adequate pension systems. As countries become wealthier, however, economies are transformed in ways that undermine these incentives toward childbearing: the agricultural sector shrinks relative to the total economy; agricultural labor becomes mechanized, requiring fewer workers; and pension systems are created. Children therefore are no longer seen as an asset to their families.

But the shift from an agrarian to industrial economy can account for only some of the decline in the birth rate. It perhaps explains why people might opt to have only two or four children instead of six or eight. But it does not explain why economies that achieve great wealth stop even having enough children for the population to replace itself (an average of 2.1 children per woman). It appears that in wealthy societies people increasingly see themselves as workers and consumers first and progeni­tors second. Family life is no longer a core aspiration of every person but becomes a “luxury,” another consumer choice to be made when one’s career goals are achieved and one’s optimal material con­sumption level has been reached. Recent studies show, for example, that 83 percent of women over the age of twenty-five purposely postpone starting a family so that they can focus on their career, thus maximizing work and material consumption. This decline in family formation has introduced a number of social pathologies, including an epidemic of loneliness and isolation. It also contributes to the mortality rate, insofar as nonparents on average have shorter lifespans and a higher rate of suicide than parents.4

In addition to these human-scale effects, the expected economic consequences of this decline in birth rates are clear. In short, this trend is already raising obstacles to continued growth, and the economic and political effects seem likely to intensify. The phenomenon is perhaps most pronounced in East Asia, where rapid growth has gone hand in hand with rapid collapses in fertility. Countries that were among the most successful in transitioning from agrarian poverty to advanced economies in the last half century have experienced astonishing declines in birth rates. South Korea and Taiwan have the lowest fertility rates in the world, at around 0.8 and 1.1 births per woman, respectively. China’s fertility rate, estimated at 1.16 in 2021, has been well below replacement for years. Beijing has notably shifted from its infamous “one-child policy” to limit population growth to policies intended to encourage more children. Of course, Japan’s population has been shrinking for some time, limiting overall economic growth despite reasonable per capita performance.

The observed correlation suggests that as capitalist growth proceeds and a society becomes wealthier, the birth rate falls; eventually, as the overall population ages and fewer people join the workforce, economic growth collapses. I refer to this tendency, which appears to be inherent in capitalism itself, as the “tendency of the rate of people to fall.”

We can show this tendency by using regression analysis to provide fitted models.5 This analysis, based on the previously mentioned five-decade, forty-three-country sample, is illustrated in the charts below.

Here we see clearly why there is a tendency for the rate of people to fall. As per capita GDP increases, the total fertility rate (TFR) declines, shown in figure 1, top left. This decline in fertility leads to a population that skews toward old age (the potentially offsetting effects of immigration are discussed further below), bringing with it an increase in the old-age dependency ratio (OADR)—that is, the ratio of the number of retirees to the number of workers. And the economic burden of a large dependent population acts as a drag on growth, leading to a decline in the real GDP growth rate, shown on the top right of figure 1. This presents a stark contradiction illustrated by the fitted model in figure 2: higher wealth—which leads to lower fertility and rising old-age depend­ency ratios—means lower growth. But growth is the lifeblood of a capitalist economic system. And so it seems that Marx’s insight was fundamentally right: in the long term, if left unchecked, capitalism will undermine itself. At the very least, capitalist wealth accumulation introduces significant economic and demographic chal­lenges that are already causing political instability around the world.

Regional Disparities

The model outlined above is highly abstract and is the result of regressions across many countries over an extended timeframe. My intention is to create a general model—albeit one that fits the data—that can be manipulated in a similar way to standard macroeconomic models like the investment-savings/liquidity-money (IS-LM) model or the aggregate supply–aggregate demand (AS-AD) model. In order to get a better sense of the empirical reality on the ground, however, it is also worthwhile to examine regional data. These can show whether the general trends hold across different regions, whether there are any interesting outliers that we should examine in more detail, and whether our regression holds up when the data are reorganized.

Careful examination of regional data reveals where unique trends emerge and allows us to classify them along geographical lines accordingly, as shown in the following chart. These data show that global demographic patterns fall into nine distinct regions. Many of these regions are intuitively obvious, but it is worth noting the few that are not. The first are the ex-communist countries, which have long shown demographic trends distinct from those of their Western counterparts. During the 1970s and 1980s, communist countries had higher birth rates than Western nations, but the transition away from communism seems to have greatly accelerated the decline in birth rates, which collapsed to their current lows in the former Soviet bloc much earlier than in the West. Now, ex-communist countries have very similar birth rates to Western countries.

Among the broader group of former communist countries, those that have majority Muslim populations are here separated out as a distinct group exhibiting specific demographic patterns. Unlike in formerly Christian nations, where religion and traditional social norms were mostly repressed under communism, Muslim countries have more successfully retained their traditional cultures. For this reason, in conjunction with their generally lower standards of living, majority Muslim ex-communist countries continue to have high birth rates comparable to those of the Muslim nations of the Middle East and North Africa.

Also exceptional with respect to global demographic trends is Israel, the demographics of which are so interesting and so idiosyncratic that they merit separate consideration. Israeli birth rates in the 1960s are most comparable with those of Western capitalist and (non-Muslim) communist countries. Yet unlike in these countries, Israel has basically maintained a steady birth rate over the intervening decades—a unique achievement among developed, Westernized societies. Two main forces appear to be at work behind this success. The first is the overtly pro-natal policy of the Israeli government. In the second half of the twentieth century, while the rest of the developed world was fretting about overpopulation, the Israelis were concerned about the prospect of falling birth rates.6 This was because the Israelis were focused on relative rather than absolute fertility rates, specifically the relative birth rate of Jews in Israel versus that of Arabs. These concerns had emerged from the mathematics department of Hebrew University in the 1940s:

A. H. Fraenkel, a distinguished Professor of Mathematics at the Hebrew University, Jerusalem, suggested in a number of pub­lished articles between 1942 and 1944 that the demographic and political implications of continued demographic patterns between Arabs and Jews in Palestine would be grave. . . . Leaders from the Zionist and religious camps alike pushed for a demographic rever­sal in response to ominous birthrate projections.7

The other reason for Israeli divergence from the Western norm is the large number of ultraorthodox Jews in Israel who maintain their religious customs and traditional lifestyles largely unaltered by modernity and capitalist development. These ultraorthodox Jews have been enthusiastic clients of Israel’s pro-natalist policies and rely on the support handed out to large families by the state as an economic basis for their traditional lifestyles and their continued study of the Jewish scriptures. The more traditionally religious also have higher birth rates than other Israeli Jews. In 2019, ultraorthodox women in Israel had a TFR of 6.6, significantly higher than the TFR of national-religious (TFR = 4), traditional-religious (TFR = 3.2), traditional nonreligious (TFR = 2.5), and secular women (TFR = 2.2).8 As we can see, a wholly secularized Israel, even with its pro-natal policies, would only barely achieve replacement fertility; it is religious Israelis that are keeping the nation’s birth rate at 1960s levels. And as the religious make up a greater proportion of the population over time, the average birth rate should rise accordingly.

The table below outlines the GDP per capita of each of our nine regions in 2020, as well as the TFR of the region and the percentage change in both variables between 1960 and 2020. A second-order polynomial regression on data tracking changes in per capita GDP and TFR—excluding Israel because it is obviously an outlier—corroborates the connection between rising wealth and falling birth rates. We find an R-squared of 0.48 for all countries except Israel; if we remove from the sample those with limited data, the regression yields an R-squared of 0.38. This lends confidence to the model proposed here, as it shows that we can cut the data in different ways and still see a correlation. But as we can see from the table, there is still some marked regional variation. South Asia stands out, for example, in that it has a very low per capita GDP and yet has a birth rate only just above replacement. It seems likely, however, that this phenomenon can be attributed to the very rapid economic development that has taken place in that region. This also appears to be the case in Latin America and the Caribbean which, despite being relatively poor, have a TFR below replacement.

What we might glean from this regional study is that it is not just the level of wealth that appears to drive down birth rates, but also the pace of the accumulation of wealth. If a very poor country grows very quickly—even if it remains poor in absolute terms—it too can see its birth rates fall to or below replacement level. This pattern also raises questions about the sustainability of high birth rates in certain parts of the developing world. Contrary to the popular assumption, it is not necessarily the case that, if these countries remain poor, they will continue to provide a ready source of immigrants to prop up the labor force of more developed nations. The only totally reliable defense against falling birth rates appears to be the existence of traditional religion, as observed in the Muslim countries and in Israel.9

Intranational Impact

Despite regional disparities that suggest the influence of religion and traditional values, the negative relationship between wealth accumulation and birth rates is remarkably consistent across countries and regions. Within any particular country, the data likewise show interesting variation among demographic groups.

Recently, there has been much discussion about class divergence and the influence of economic class on the capacity to form stable families. Popular discourse on the subject was spurred about a decade ago by Charles Murray’s Coming Apart.10 In this work, however, Murray is interested primarily in family formation; he does not actually discuss birth rates. In his chapter on marriage, Murray is more focused on whether children are growing up in stable households than he is on whether children are being born in the first place. The term “fertility” is mentioned only three times in the book: twice in relation to falling birth rates in Europe and once in a statistical appendix.

So, what do the data tell us about American birth rates across regions and social group? A regression run on per capita income by state and state fertility rate does not produce any statistically significant results. This holds whether we compare the level of the fertility rate (R-squared of 0.03) or the change in the fertility rate through time (R-squared of 0.0005). This suggests that within countries—or at least within the United States—the level of wealth of a given geographic region and its fertility rate are not related. Yet while there is no statistical relationship between regional wealth and fertility rate, there is an obvious, strong relationship between birth rates and income group. In 2017, households with an income of less than $10,000 per year had a birth rate of 66.4 children per 1,000 women, compared to a rate of 58 for households in the mid-range of $35,000–49,999, and of 44 for the top income group of $200,000 or more.11

The most striking intranational trend, however, is not class-based but cultural: the fertility rate of Americans varies significantly according to their religious affiliation. A very interesting picture emerges from the data. For one, the largest religious groups in the American population—Protestant, Catholic, “Nones,” and Atheist/Agnostic—have a combined fertility slightly below replacement rate. On the other hand, “believing” religious groups who adhere to traditional ways of living have birth rates far above replacement, including traditionalist Catholics (3.6), Orthodox Jews (3.3), Mormons (2.8), and Muslims (2.8), not to mention voluntarily isolating sects like the Amish. This suggests that the current tendency for American culture to secularize will not last forever; at a certain point, groups with a more robust capacity to reproduce will replace groups with less robust capacities in a simple Darwinian manner. Currently, these groups represent a very small fraction of the American population, but because human reproduction follows a multiplicative path these groups could grow rapidly in numbers, especially as the other groups decline.

Overall, then, we see a somewhat unusual demographic picture at the intranational level. Regression analysis shows that there is no relationship between the wealth of any given American state and its fertility rate. Despite this, it is clear from the statistics that there is a link between wealth and fertility, with lower-income groups reproducing at a much more rapid rate than higher-income groups. This could be viewed as a microcosmic version of the larger-scale trend we see in countries across the world. Further, religion and traditional lifestyles seem to act as a brake on the trend toward lower birth rates, as is also seen in global data.

The Anti-Malthusian Problem

In the nineteenth century, a heated debate also raged over demographics and the related issue of capitalist development—namely, the controversy around the theories of Thomas Malthus. Unlike the tendency of the rate of people to fall proposed here, which suggests the demographic limits of economic growth, Malthusian doctrine emphasized the economic limits to population growth. Malthus pointed out that the rate of human reproduction is multiplicative while the rate of economic growth is additive. Specifically, while people could reproduce rapidly—one woman in Malthus’s Britain gave birth to around five children on average—the agricultural economy could only increase food production gradually. The growing gap between these rates of increase, Malthus concluded, would result in famine and mass starvation.

Many at the time pointed out why he was wrong, arguing that technological progress could allow farmland to yield more output—a fact that should have been obvious even at the time Malthus was writing. In 1420, the average Englishman was consuming around 1,760 calories per day; in 1798, when Malthus published his pamphlet on population, that had risen to around 2,436 calories per day.12 Such accurate measures may not have been available at the time, but it should have been manifestly obvious that the average Englishman was better fed than he had been in the past. Marx, who thought that capitalism tended toward overproduction rather than a Malthusian underproduction, was partic­ularly cutting about Malthus’ work, seeing it as an arch-reactionary tract aimed at proponents of social reform. “Malthus’s book On Population was a lampoon directed against the French Revolution and the contemporary ideas of reform in England (Godwin, etc.),” Marx wrote, “It was an apologia for the poverty of the working classes.”13

Capitalism’s ability to escape the “Malthusian trap” has long been touted by its proponents. A recent iteration of this theme, for example, is J. Bradford DeLong’s essay “Pessimism amid Progress,” which offers a bleak picture of humanity’s demographic history:

Until just a few generations ago, humanity marched to a Malthusian drum. With technological progress ploddingly slow and mor­tality extremely high, population size was everything. In a world where almost one-third of elderly women had no surviving sons or grandsons, and hence no social power, there was immense pressure to have more children in one’s childbearing years. The resulting population growth (without commensurate growth in the size of farms) offset any gains in productivity and incomes from better technology and kept typical living standards low and stagnant.14

But this dilemma was ultimately solved, DeLong explains, by the arrival of capitalism. There is some truth to this, although the case is slightly exaggerated. Data from England show, for example, that be­tween 1750 (the rough start of the Industrial Revolution) and 2018, the number of calories consumed per day by each person increased by about 49 percent. But in the 270 years prior to 1750, the average number of daily calories consumed per person had increased by about 23 percent. Precapitalist England may not have grown as rapidly as capitalist England, but it grew regardless. One suspects that the Malthusian strawman is often pulled out to justify present inadequacies—a similar rhetorical trick to invoking the supposed horrors of medieval dentistry against those who might question the inevitable progress wrought by capitalism.

Despite being regularly dusted off, the debates over Malthusian theory are largely irrelevant today—the anti-Malthusians have been decisively proven right. But the continued echo of these debates in the halls of universities covers up the grim truth that the relationship between capitalism and population is in fact a self-destructive one. Capitalism may help lift people out of poverty initially, perhaps even allow them to have more children, but this trend is short-lived and inevitably reverses at a certain point. From the regressions outlined above, it appears that this point is reached on average when a country generates more than $20,000 of per capita income. It is true that there is a wide disparity at this initial inflection point: some countries with $20,000 of per capita income manage to maintain a robust fertility rate of around 2.6, while others fall to as low as 1.3. That said, no country in our initial OECD sample that has reached a per capita income level of $36,000 (with the exception of Israel, as noted above) has been able to achieve a fertility rate above replacement. Simply put, unless a country has an unusually large, fertile traditionalist religious community, it is highly unlikely that its demographics will remain intact once it achieves a per capita income of $36,000.

Instability and Immigration

The most obvious response to this is: who cares? It may be true that capitalist accumulation tends to flatten the birth rate, but there is no reason to be overly concerned about this social change or to remain attached to earlier family sizes or models of family formation. We have already seen from our fitted models, however, that this demographic slowdown will result in lower and eventually negative economic growth. Some may say that this is not a bad thing or may argue that limitless growth is not in the interest of humanity for a variety of reasons. They may also argue that countries with advanced demographic problems do not actually face economic or social risks as a consequence. Japan, to take the most notable example, has indeed seen flat real GDP growth since its demographic problems started to bite—as our model would predict—but its per capita GDP growth has averaged around 0.7 percent per year since 1990, and it has certainly not seen a societal collapse.

In fact, Japan represents a highly idiosyncratic example. It has been able to manage its demographic decline—so far, anyway—by ensuring that wages for workers do not grow. Because workers’ wages in Japan are paid heavily in the form of bonuses, Japanese employers are able to increase and decrease wages through these bonuses. Other countries will not be able to get away with this kind of wage manipulation. And even the average Japanese person will eventually have to face falling living standards as the demographic reality sets in.

Immigration has been the obvious solution to demographic decline in Western nations for some time now. But while immigration may help to stave off absolute population decline, it does not solve the problem of an aging population. The United States shows this problem starkly. Immi­gration into the United States began to increase rapidly in the 1990s: in 1990, 6.2 percent of the U.S. population were immigrants; by 2020, immigrants accounted for 13.7 percent. Over this period, population growth proceeded apace, averaging 0.98 percent annually. While this was substantially lower than the 1950–89 growth rate of 1.2 percent, it remained robustly positive. Yet at the same time, the overall population continued to age: in 1990 the average American was 32.9 years old; by 2020, this had risen to 38.6. The reason for this is simple: when immigrants move from poorer to richer countries, they lower their birth rates accordingly, due to the effect that higher per capita income has on fertility rates. (Alternatively, if immigrants do not assimilate socially and economically, the result is a combination of poverty and inequality for the immigrant population, along with social division and backlash from the native population.)

Constant immigration also seems to rest on a sort of “biological imperialism.” In order for wealthy countries to attract enough immigrants to counteract their demographic decline, poor countries must remain poor so that they can serve as breeding grounds for the developed economies’ labor forces. In an echo of historic systems of colonial resource extraction, it is almost as if poorer countries are not being allowed to develop so that they can continue to export human capital to the developed world—what commentators from these poorer countries mean when they talk about “brain drain.” Eventually, however, these countries will develop and the large pools of labor they make available will dry up. Even if immigration did work to prevent society from aging (and it does not), it could not work forever unless we forced poorer countries to remain forever poor.

Thus, while immigration and other such bandages may stave off the inevitable, they can do so for only so long. Unless the negative relationship between the accumulation of wealth and the decline in fertility rates is somehow broken, capitalism will ultimately undermine itself. It is only a question of when.

Shadows of the Eschaton

Marx was, by all accounts, a grumpy and intemperate man. His letters reveal him as a spiteful, unpleasant curmudgeon, and his outlook on the society in which he lived was almost Jansenist in its bleakness. Yet his vision of the future was a happy one. As we have already seen, he believed that communism was inevitable because, no matter what the working class did, eventually the rate of profit would fall to zero and communism would become necessary to keep society moving. Marx’s eschaton ended with heaven on earth.

If the argument that I have just laid out is correct, our eschaton is altogether gloomier: demographic and economic transformation seems to be driving us not to a heaven on earth but toward something closer to hell. The economists Charles Goodhart and Manoj Pradhan have done us a great service by writing an entire treatise on what such a society would look like—and the picture they paint is a grim one.15 Such a society, they predict, would be rocky and inflationary. The reason for this is intuitive: workers make things, while retirees consume things; thus, as the ratio of the former to the latter rises, the number of mouths to feed outstrips the number of cooks in the kitchen. And the resulting pressure on the prices of goods and services leads to spiraling inflation.

In such a society, intergenerational conflict seems all but inevitable.16 Younger people will see their real wages stagnate in the face of inflation, while asset markets will be dominated by the elderly, who will have accumulated more savings. The cause of the problem will be obvious to all, but there will be no equitable solution that benefits both sides of the generation gap. In societies faced with such zero-sum games, social bonds fray and strife becomes inevitable—in this case, we should expect intergenerational conflict as children turn on their parents. Such a vision is almost biblical in its perversity.

One potential solution to such social upheaval is government intervention. If governments the world over become wise to the tenden­cy of the rate of people to fall and the threat that this poses, they might seek to counteract it through pro-natalist policies. Until recently, there was no reason to think that such policies would work. Socialist Sweden, under the tutelage of economist Gunnar Myrdal and his wife Avril, has been pursuing pro-natalist state policies since the 1960s—state child­care, better maternity leave laws, etc.17 But Sweden’s fertility rates have fallen and its population has aged along with the rest of Europe’s, and the country now faces a political crisis around its lax migration policies.

Yet the Swedish solution was a socialist one, in that it sought to replace the family with the state—a dream which appears already in the Communist Manifesto. More recently, nonsocialist countries have been experimenting with family policies that seek not to replace the family but to support it. The most prominent of these countries is Hungary, which instituted a series of ambitious family policies in 2015, including mortgage support, tax breaks, direct cash payments, and a sophisticated public relations campaign. And Hungary has seen some success as a result of these efforts: since 2015, the Hungarian fertility rate has risen 28 percent and the marriage rate has risen 88 percent.18

It does seem at least provisionally possible, then, that the state could step in to encourage the formation of families and support a higher birth rate. Such intervention would not refute the basic thesis of this essay, however, that capitalism, if left to itself, will eat itself. After the Great Depression of the 1930s, the state stepped in to save capitalism from itself—from its tendency toward financial meltdown and depression. But the fact that the state did this did not refute the basic tendency of the system, left to its own devices, to generate financial and economic crises. Likewise, if the state should manage to overcome the tendency of the rate of people to fall, it would not disprove the existence of the underlying tendency.

Another potential solution to the problem of demographic decline is a religious revival. We have extensive evidence, at both the national and international level, that religious groups, with their high birth rates, have a powerful evolutionary advantage over secular groups. So there is good reason to think that, if there were a mass revival of religion and traditional life in the world, it would offset the impact of capitalist accumulation on the fertility rate. An alternate version of this solution does not rely on a mass conversion from irreligion to religiosity, but simply relies on the fact that more traditional religious minority groups in secularized countries multiply at very high rates and may eventually become the majority of the population. But given the often minuscule size of these religious minorities in secular countries, the process would likely play out long after capitalism collapses under its self-generated demographic contradictions.

Left to its own devices, capitalism’s categorical imperative of work and consumption is, in the end, at odds with its structural needs, as it discourages family formation and thus stymies the capitalist economy’s ability to grow. This is the core contradiction of capitalism—much more profound than anything Marx imagined.

This article originally appeared in American Affairs Volume VI, Number 4 (Winter 2022): 173–89.

Notes
1 “Karl Marx to Friedrich Engels, London, April 30, 1868,” Karl Marx, Friedrich Engels: Collected Works, vol. 43, Letters 1868–70 (London: Lawrence & Wishart, 2010), 23–24.

2 Kyle Guske II, “S&P 500 & Sectors: ROIC vs. WACC Through 4Q20,” New Constructs, April 15, 2021.

3 See also Guillaume Vandenbroucke, “The Link Between Fertility and Income,” Federal Reserve Bank of St. Louis, December 13, 2016.

4 R. S. Högnäs et al., “J-Curve? A Meta-Analysis and Meta-Regression of Parity and Parental Mortality,” Population Research and Policy Review 36, no. 6 (December 2017): 273–308; Marina Dehara et al., “Parenthood Is Associated with Lower Suicide Risk: A Register‐Based Cohort Study of 1.5 Million Swedes,” Acta Psychiatrica Scandinavica 143, no. 3 (March 2021): 206–15.

5 The equations and regression coefficients are as follows:

TFRt = 2.7054 – 0.000025989695874293.PCGDPt; (R2 = 0.22, p < 0.0001)

OADRt = –0.370320603 + 0.920113749.TFRt-19; (R2 = 0.84, p < 0.0001)

RGDPt = 6.318459389 – 16.30720392.OADRt; (R2 = 0.34, p < 0.0001)

Where TFR is total fertility rate; PCGDP is the level of per capita GDP; OADR is the old-age dependency ratio; and RGDP is real GDP growth. This is a global model based on global data, with the exception of the second equation, which I have estimated using only data from Japan. I have done this for two reasons: first, because Japan has undergone the most aging of its population and it is necessary to use a country with advanced aging to obtain a reasonable sample, since the regression operates with an optimal lag of nineteen years (estimated using a VAR lag selection model); second, because Japan is an almost “pure” test case in that it, unlike other countries that have seen some aging, has no meaningful immigration. Fertility and GDP data used here is from the OECD.

6 The classic text of Western anxiety about overpopulation is Paul Ehrlich, The Population Bomb (New York: Ballantine, 1968).

7 S. Katz, “The Fertility Dynamic of Israel’s Ultra-Orthodox Jews and Pronatalist Governmental Policy,” FocusAnthro, 2005–6, 13.

8 Gilad Malachn and Lee Cahaner, Statistical Report on Ultra-Orthodox Society in Israel: 2020, Israel Democracy Institute, January 1, 2021.

9 This appears to confirm the hypothesis put forward by political scientist Eric Kaufmann when he asked whether traditional religious groups are likely to take over the world in the long run. See Eric Kaufmann, Shall the Religious Inherit the Earth? Demography and Politics in the Twenty-First Century (London: Profile Books, 2010). It also raises a strange irony from the perspective of evolutionary theory: if the statistics are to be believed then religiosity appears to be a positive evolutionary development whereas secularization appears to be a negative evolutionary development, insofar as both trends impact the reproduction rate of an organism. Such an observation seems to run radically contrary to much of the secularist spirit that surrounds the discipline of evolutionary biology.

10 Charles Murray, Coming Apart: The State of White America, 1960–2010 (New York: Crown Forum, 2012).

11 Erin Duffin, “Birth Rate in the United States in 2017, by Household Income,” Statista, September 30, 2022. Some have also suggested that this birth rate then rises substantially for households with over $250,000 annual income and that it continues to rise in lockstep with income level, thereby suggesting that the very wealthy have fertility rates compared to those of the poor.

12   “Daily Supply of Calories per Person, 1270 to 2018,” Our World in Data, February 15, 2022.

13 Karl Marx, Capital, vol. 4, Theories of Surplus-Value (Moscow: Progress Publishers, 1971), part 3, 61.

14 J. Bradford DeLong, “Pessimism amid Progress,” Project Syndicate, January 6, 2022.

15 Charles Goodhart and Manoj Pradhan, The Great Demographic Reversal: Ageing Societies, Waning Inequality, and an Inflation Revival (London: Palgrave Macmillan, 2020).

16 See Philip Pilkington, “Generation against Generation,” First Things, December 2021, 43–47.

17 Allan Carlson, The Swedish Experiment in Family Politics: The Myrdals and the Interwar Population Crises (New Brunswick, N.J.: Transaction Publishers, 1990).

18 Gladden Pappin, “The Family Policy Imperative,” Public Discourse, April 17, 2021.


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