The likeliest near-term future for many wealthy countries may sit between recovery and collapse. Fertility settles somewhere below replacement. Population declines after its inherited momentum runs out, and governments become reasonably good at managing the contraction. Life remains comfortable. A town gets smaller without becoming a ruin.
This future asks for a skill modern governments rarely practice: stopping. A water network built for 100,000 residents still leaks when only 70,000 remain to pay for it. The sensible response may be to retire a distant line and help its remaining households move closer to the center. Nobody likes being told that the road, school, or village inherited from a grandparent has become too expensive to maintain. Avoiding the decision leaves fewer people paying more for a worse service.
The OECD’s recent work on shrinking regions describes the practical shape of adaptation. Land-use plans stop assuming outward growth. New homes and public services are concentrated in places that can support them. The practical aim is an ambulance within reach while the map contracts.
A country of stronger centers
Managed decline will be spatially uneven. Large cities can keep attracting young adults long after the national population begins to fall. Remote districts lose them first, then lose the births those young adults would have had. Between 2001 and 2021, nearly 40 percent of remote OECD regions shrank. The national average concealed a local future already underway.
Some settlements will endure by becoming denser and better connected. Others will lose a school, and the businesses that depended on it may follow. There is no fair formula that preserves every place. National governments can spread part of the cost, but equalization cannot supply a teacher to every half-empty building. Local officials should have room to decide where residents can still reach a decent service and where moving is the kinder answer.
Immigration can soften the descent where newcomers want to live. Automation can let one worker monitor a facility that once required three. Both adaptations concentrate opportunity as easily as they distribute it. A migrant usually chooses the growing city, and expensive machines go where demand justifies them. The remote town may still be asked to surrender first.
Prosperity without expansion
A shrinking economy can become wealthier per person. Labor scarcity may raise wages and induce employers to automate dull work. A 2026 NBER working paper found lower birth rates associated with faster growth in output per working-age adult and more labor-saving patents across the settings it studied. That result should complicate any easy story in which fewer births automatically make everyone poorer.
It doesn’t make aggregate size irrelevant. A company can improve output per worker while losing customers. A government can report rising income per person while collecting less total revenue and supporting more retirees from each worker’s production. Distribution becomes the argument. If the gains from automation belong mainly to owners while taxes on young families rise, the economy may look efficient and become less capable of renewal.
A stable below-replacement society can probably manage this tension for a long time. It can raise retirement ages as healthy life expands and make public promises fit the tax base that actually exists. It may enjoy less congestion, cheaper land in some places, and more capital per worker. I can imagine it being a good place to live.
Stability below replacement is stable only as a rate. Unless migration offsets the gap, each generation is smaller. The country becomes skilled at adapting to a direction that never arrives at rest. That may be a workable settlement for one lifetime. Over ten generations, the recurring decision about what to close begins to define the civilization.
Citations
- Organisation for Economic Co-operation and Development, Shrinking Smartly and Sustainably: Strategies for Action, 2025.
- Organisation for Economic Co-operation and Development, OECD Regional Outlook 2023, 2023.
- Daron Acemoglu, David Autor, Keelan Beirne, and Andrew Scott, “Baby Busts and Growth Booms: Demographic Change and the Macroeconomy”, NBER Working Paper 35401, 2026.