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Wednesday, February 23, 2005

Demography and the Future, Part Two

This is shockingly late, but life has intervened over the last couple of weeks. Anyways this is the second in a three-part series on the Richard Kurtz article "Demographics and the Culture War". Part one can be seen here.

In the comments at GNXP to the first part of this series David B said, "As a general comment, I don't share the common assumption that population growth and economic growth are necessarily desirable. We seem to have gone from over-anxiety about a population explosion to over-anxiety about a declining population without an intervening state of sanity!" It's a fair point, and I don't want to come across as a "the sky is falling! Argh!" type of doom-monger, but I do think that sub-replacement fertility is an issue of legitimate concern, something that public policy has to deal with.

I must admit to being unconvinced by some of the comments that ran along the lines of, "don't will save us." This is, I think, an unwise course of action. It's not that I doubt that there will be major scientific advances in my lifetime, simply that I think it's quite difficult to be sure as to what form these innovations will take before the fact, and predicting their potential social, economic, and political impacts is an even murkier business. As a graphic example, all you have to do is look back at predictions made in the 1950's and 60's about the scientific/technological situation of the early 21st century to see how wrong people were about so many things. In the intervening period no one has come up with a fool-proof way of seeing into the future, so I think that public policy approaches to dealing with sub-replacement fertility and (possibly) naturally declining populations have to proceed on the basis of currently available technologies and knowledge, while being flexible enough to adapt to changing circumstances.

At this point, though, I should insert a caveat. Just as no one can accurately predict what technologies will be available to us when (and what their effect on society will be) so demographic predictions beyond a couple years in the future are no more than educated guessing. It is impossible to predict future events or social, political, or cultural shifts before the fact, so all predictive demographic timelines assume unchanging circumstances. If there's one thing that history has shown, it is that circumstances change, and they can change very rapidly. Even quite short-term predictions as to future compositions can turn out to be wrong. An example: in 1993 the Jennifer Cheeseman Day of the US census board issued a population projection that predicted that the non-Hispanic white population of the United States would be slightly under 72% in 2000. As it turned out, the non-Hispanic white population was slightly over 69%, the result of higher than expected immigration from Latin America and Asia.

So, why do I think that sub-replacement fertility, at least as it currently stands, poses serious questions about the future? At heart, I think that my most serious concerns surround economic issues. The most obvious economic side effect that everyone knows, and worries, about is the probability that, under current conditions at least, the major state pension schemes of the industrial world will collapse under the dual strain of caring for ever-larger proportions of retired people who, due to medical advances, are living longer anyways. Obviously, this is a political issue that has been playing an increasingly large role in public debate throughout the industrial world over the last several years, and Kurtz does discuss it. However, he also raises what I think is a more pertinent question: is capitalism itself equipped to cope with national populations where those of working age make up an ever-smaller percentage of the population?

Population growth...drove the Industrial Revolution, and there has never been economic growth under conditions of population decline. Thus, for example, he ascribes Japan’s current economic troubles to its declining fertility. And though Longman doesn’t point to Germany, it is interesting to note that this particular low-fertility country is also struggling economically to the point of revisiting the famously shorter European work week — a phenomenon obviously related to the struggle to reduce the pensions promised to an aging population and premissed on more younger workers than actually came to exist.

Both Longman and Wattenberg raise the question of whether markets need population growth in order to thrive. As Wattenberg puts the point, it hardly makes sense to invest in a business whose pool of potential customers is shrinking. That much might be true, even if entitlement programs like Social Security and Medicare were fully funded. But Social Security and Medicare are not fully funded. On the contrary, America’s massive unfunded entitlement programs have the potential to spark a serious social and economic crisis in the not too distant future. And the welfare state in the rest of the developed world is on even shakier economic ground.

The section I've highlighted is, I believe, the essential point, perhaps the single most important thing in the entire article. It is a point so intuitive, so obvious, and yet so often it is not made when discussing the possible impact of declining fertility. How will the economic systems of the capitalist world react to a shrinking population?

Who, indeed, would want to invest in a business where the pool of potential customers is shrinking? In individual cases it might make sense, for instance in those businesses that make the move from mass-market to luxury goods, but for the overall economy it seems like a road fraught with difficulty.

One solution that has been floated is that of continued immigration. Indeed, America's high rate of immigration (as well as relatively high fertility rate) is the main reason that its population is projected to grow by around 50% between 2000 and 2050, unlike European and East Asian nations that will see essentially stable and possibly actively shrinking populations. For America, Canada, and, probably, Australia, continued high levels of immigration are probably enough to offset the effects of declining fertility and an aging population, but I seriously doubt that it will be politically possible to let in the necessary numbers of immigrants to the various European nations and Japan. In their case, other solutions will have to be found.

One thing to remember in regards to immigration is that fertility decrease is not happening just in Europe and the other major industrial nations, but virtually everywhere else. Many nations still have above-replacement fertility, but TFR rates have been consistently dropping over the last several decades and it is not hard to imagine that countries like, for example, Mexico or Turkey will follow the major industrial nations to below replacement fertility. Assuming that this process continues unabated, where is the rich world going to source its immigrants from?

|| RPH || 1:46 AM || |