Thomas Malthus' theory on the dynamics between food supply and population growth highlighted a fundamental mismatch: population numbers tend to grow exponentially (2, 4, 8, 16...), resembling a geometric progression, whereas food production increases linearly by a constant amount (1, 2, 3, 4...), akin to an arithmetic progression. This discrepancy implies that only significant shocks in the form of natural or man-made disasters (earthquakes, droughts, famines, and wars) can temporarily restore the balance between population size and resources.

Economics earned the moniker "the dismal science" from Scottish intellectual Thomas Carlyle, partly in reaction to such bleak theories. Fast forward to 2013, and French economist Thomas Piketty's book "Capital in the Twenty-First Century" emerges, possibly validating Malthus' argument through a historical and quantitative lens. Piketty's analysis revealed that the accumulation of wealth is outstripping the rate of general overall economic growth.

Without brakes on this wealth accumulation, economic equilibria could be thrown into disarray, fostering widespread poverty and instability. Piketty observed that disastrous events like the Great Depression and the world wars of the last century, decimated populations, redistributed wealth, and braked wealth accumulation. This coincided with a decline in populations and shifts in production, consumption, and reconstruction efforts, inadvertently giving some credence to Malthus' theory. Yet, Piketty does not fully engage with the newer theory that posits innovation as the sole balancing force between resources and population, negating the need for large-scale conflicts. This theory has contributed to relative peace maintained since 1945.

Innovation as a Balancing Force

While innovation plays a crucial role in challenging the population theory and maintaining a temporary balance, the main rationale behind that theory—that there is a long-term disparity between population growth and resource availability—remains valid. 

Resource Abundance Threatened by Supply Shocks

From the end of World War II to the mid-2010s, human ingenuity and technological breakthroughs successfully addressed the scarcity of various resources. However, the outbreak of the COVID-19 pandemic, marked a shift from abundance to scarcity, highlighting the limitations of economic growth and equitable distribution of resources, despite all the new heights of human creativity that have been reached. 

In recent times, a mix of temporary and structural factors has widened the global demand-supply gap. Events like the Covid-19 pandemic, the conflict between Russia and Ukraine, and the Gaza war are non-structural, while deep-seated economic variables are unlikely to change soon. With an extrapolated global population of 10 billion by century's end, there's a looming threat of widespread famine and competition over dwindling resources. Ironically, the innovations meant to balance population and resources have fueled excessive consumption, exacerbating the mismatch between resource availability and human needs.

The Double-Edged Sword of Innovation

Innovations have carried vaccines and cures, boosting population growth and extending lifespans, often beyond productive years, increasing dependency ratios. This has intensified the supply-demand crisis and reinforced the desire for longevity. Wealthy nations, facing a shortage of productive workers due to aging populations and low birth rates, have welcomed immigrants from populous countries. However, as a result of the rising nationalism, restrictions were posed on migration and labor mobility have exacerbating supply-side shocks and contributing to a global economic slowdown. In developing countries, a surplus of labor, coupled with insufficient investment, raise their susceptibility to shocks and potential unrest.

To address labor shortages, some have turned to further exploitation of Artificial Intelligence (AI) in production, which brings its own socio-economic costs and a heightened reliance on resource-intensive technologies.

Social media platforms, as a byproduct of innovation, have played a pivotal role in fostering a culture of emulation and overconsumption, turning billions into homogenized consumers. This has led to the highest levels of needs fulfillment and welfare aspiration, that helped maximizing economies of scale for large corporations. However, the world’s limited resources are ill-prepared for this surge in consumption, especially since social media also favors virtual productivity over real productivity. Virtual products, which can generate billions in revenue, differ significantly from tangible goods that require raw materials, labor, and energy for production. The latter demands more resources and human effort compared to virtual outputs, yet, receives lower compensation

China’s Role in Global Supply and Demand

China’s integration into the global economy has unleashed its vast workforce into the international market, greatly enhancing the supply of goods and services. However, this productive powerhouse quickly evolved into a massive consumer base, embracing Western standards of welfare that have spread through globalization and social media platforms. Despite its communist roots, this new entrepreneurial China eagerly adopts the latest Western technologies, including state-of-the-art smartphones.

As tastes change in populous East and Southeast Asian nations, the pressure on limited resources intensifies. Demand curves are shifting upward, and with increased purchasing power, there’s an enormous “effective” demand that current innovations cannot meet in the short to medium term.

Climate Change and Innovation 

Climate change is rapidly advancing due to industrial and technological growth, necessitating innovations for an “energy transition” to reduce carbon emissions and mitigate global warming. However, these new technologies often require more minerals and materials than traditional methods. For instance, electric vehicles use six times the minerals of internal combustion engines (ICE), and solar energy generation demands four times the materials of gas-fired plants. Additionally, the irregular nature of wind and solar energy increases the need for metals for power storage.

Addressing climate change by reversing its effects, paradoxically leads to the overconsumption of raw materials and minerals. Current energy transition innovations are still premature and inefficient in using raw materials. This imbalance in resource consumption enhances the bargaining power of resource-rich developing countries over the developed world. In the developed world, raw materials are less abundant but higher-value products are manufactured at greater costs. This raises the question: what is the benefit of resource-intensive innovation if the resources are either restricted or exploited in their place of origin?

Supply Chain Wars and Capital Mobility

The shift to tighter monetary policies acts as an indirect tax on capital movement, deterring resource-rich countries from overexploiting their natural assets. The pretext of inflation targeting is used to justify this shift, although such targets need to be re estimated due to the evolving supply dynamics.

In terms of investment trends and preferences, there's been a noticeable decline in secular investments, which are crucial for long-term, sustainable economic growth and are not influenced by economic cycles. Instead, there's a growing preference for opportunistic investments that seek to exploit economic fluctuations for maximum returns. This change in investment patterns, coupled with a shift in debt markets towards more volatile financial products, poses significant risks to economic development and makes achieving a balance between production and population growth increasingly challenging and expensive.

Moreover, consumer excess is leading to the hoarding of scarce goods and services by a diminishing wealthy class, depriving a larger segment of the population of basic necessities for survival. This scenario echoes the predictions of Thomas Malthus, suggesting a return to his theories. The potential outcomes of this imbalance include famines, conflicts over scarce resources like water and energy, and the heightened risk of warfare over these necessities. The world is currently in a precarious state, with a vast stockpile of weapons of mass destruction. Any significant decline in global stability could lead to catastrophic consequences, far beyond the loss of lives and redistribution of wealth and resources. The hope is that the capital and investments tied up in these weapons will never be utilized, as their deployment would mean the destruction of humanity itself.

Secular Investments and the Changing Preferences

Secular investments have begun to diminish to the benefit of opportunistic alternatives. This implies that long-term investment, which is independent of economic cycles and essential for sustainable growth, has become scarce, in favor of investments that hunt out cycles to capitalize on them with the best possible return. This shift in the structure of investment flows, along with the structural shift in the debt market flows towards hot money products, put economic development at high risk and makes the projected balance between output and population extremely difficult and costly.   

Consumer greed, on the other hand, increases the likelihood of the accumulation of scarce products and services among a shrinking class of the rich, while depriving a growing proportion of people of the fundamental requirements required for survival. This puts Malthus' assumptions back to the forefront. Famines and conflicts caused by a lack of resources, as well as fighting over water and energy supplies, are all possible symptoms of this deteriorating condition. 

But the world today sleeps on top of a terrifying arsenal of weapons of mass destruction, and any severe deterioration in its public sentiment will not have consequences limited to the death of a few million people and the reallocation of wealth and resources among a fewer number of living populations! In this type of upcoming wars, humanity will be destroyed, especially since the aforementioned arsenal of weapons, where innovation played an important role to develop, stores a lot of untapped capital and investments, which we cross our fingers it will never be exploited.

In today's world, the race between greed and innovation is essential to our existence. Greed may result in overconsumption and the depletion of natural resources since it is frequently motivated by short-term ambitions and the accumulation of wealth. Innovation, on the other hand, stands for the ability of humans to create, adapt, and advance. It's the power that has always allowed us to overcome obstacles and stretch the bounds of what is thought to be possible. Innovation may result in the creation of sustainable technology, more effective use of available resources, and solutions that benefit society as a whole. However, this innovation has many limitations to overcome the evolving rate of consumption.