Monday, May 4, 2009

Implications of World Population Decline

Philip Longman, in his book, The Empty Cradle: How Falling Birthrates Threaten World Propserity and What to Do About It, (Basic Books, 2004), mounts a convincing case that predictions of a "population explosion" and "overpopulation" are not true. Paul R. Ehrlich, in an enormously influential 1968 bestseller proclaimed "The battle to feed all of humanity is over. In the 1970's the world will undergo famine - hundreds of millions of people are going to starve to death in spite of any crash programs embarked upon now." (The Population Bomb, 1968) But his predictions did not come true. The price of food, according to the World Bank, adjusted for inflation, declined by 53% between 1980 and 2001. Famine today is caused by politics and greed, but not by overpopulation.

What will be the implications of long-term, widespread population decline? For many people, this idea is a marvelous one; with less population there will be less pollution, more wealth, less crowding and more opportunities. This kind of thinking, however, flies in face of history, logic and economics.

1. An aging population means fewer workers to support retirees. This has several implications. Payroll taxes and other taxes for entitlement programs like pensions will have to increase dramatically. Fewer workers per retiree mean each worker must contribute an increasingly higher percentage of his income in the form of taxes to support retired people. At some point, there will need to be a reduction of benefits to the elderly or a cut back in the welfare state in general. In reality, we must expect two things to happen simultaneously: just at the moment that the welfare state becomes unaffordable, the family structures that took care of people before the rise of the welfare state will have crumbled.

The fact that a country has a high population to begin with is no help when demographic decline begins. There is no absolute "right" number regardless of age ranges for a given country. The country that begins to shrink experiences an imbalance between working-age people and retired people that leads to social breakdown regardless of whether the new population figure is closer to someone's "ideal number."

As family size decreases, the many elderly who are still today cared for in families will need to be cared for in government funded institutions. In China, today there is the 4-2-1 phenomenon in which a grown child is responsible for two parents and four aging grandparents as a result of the one child policy. There are no siblings to spread the work around. Europe is fast becoming a society in which people have no biological relatives (eg. aunts, uncles, siblings, cousins) only parents and grandparents. By mid-century, 60% of Italy's children will have no siblings, cousins, aunts or uncles. An increase in isolation and loneliness will be the inevitable result.

Parents and grandparents will soon become economic liabilities in the same way that children have become economic liabilities. If contraception and abortion was answer to the latter problem, can we doubt that euthanasia will be the solution to the former? Longman does not discuss euthanasia and he is not writing from a Christian perspective. But it is the 800 pound gorilla in the room all through the book.

2. We should be wary of putting our hope in rising productivity to solve the problem of too few workers for too many retirees because rising productivity is dependent on stable or rising population levels. Rising productivity depends on growth in the number, as well as the efficiency, of workers. The hope held out by many today is that fewer workers will be able to support more retirees without being taxed to death is that they will be able to do so because of increasing productivity. This is simply the hope that something will happen because we need it to happen.

But all major productivity increases in the past have happened as a result of a combination of a rising population creating demand for more goods and services plus a real increase in the numbers of workers plus the entrepreneurship and risk-taking inventiveness of mainly younger persons. In an aging, shrinking population there will be still be some inventions and some increase in productivity, but not likely enough.

3. Without an adequate labor supply of working-age people, wealth will be less useful to us in our retirement years. Money is only useful if it can buy the food, clothes, transportion and other goods and services we need. Many people are convinced that as long as they save a lot for retirement, they can enjoy a high standard of living no matter how much the population declines or how much lower the number of workers in the next generation is compared to our generation. But this assumption is flawed.

The purchasing power of our money depends on prices remaining low and stable. But if there are not enough workers, the price of labour goes up. So people who have no children of their own are really counting on other people having lots of children so that there will be people to keep society running at stable costs in the future. The basic problem identified in this book is that our economic system, as it is, rewards people who do not have children and penalizes those who do. The result is going to be disaster for all of us. Any one individual who declines to reproduce is an anomaly. But demgoraphic trends of this sort constitute disaster.

4. Getting more women into the workforce is not the answer for two reasons. First, this is a strategy with a high payoff initially, but with severely dimishing returns as the total number of women in the workforce comes to equal the total number of women in society. Second, the more women in the workforce (especially full-time in the child-bearing years) the few children will be produced. So, while this seems like a helpful short term strategy, it makes the long term situation even worse.

A similar dynamic can be observed in raising the retirement age. The political cost of doing it may be prohibitive for any politican wishing to be re-elected, given the electoral "grey-power" out there. But even if such reform were accomplished, there would be a diminishing rate of return because many people get too sick too work long before they die.

5. We can expect whole countries to disappear as the population ages, declines and eventually is absorbed into other ethnic groups of immigrant or invaders. Longman is not optimistic for the survival of Europe as we know it. This leads me to mention the real fear expressed by Longman in the book that the future belongs to Fundamentalist of all religions. By "Fundamentalists" he appears to mean anyone who takes the teachings of his religion (Islam, Christianity, whatever) seriously, as opposed to someone who accommodates the teachings of his religion to the dictates of liberal modernity. Religious people have more children than secular liberals in every religion. So we can expect that the world will get more, not less, religious in future as secular liberals breed themselves out of existence.

In sum, based on recent demographic history, Longman expects the world of the late 21st and 22nd century to be poorer, more religious and less populated. If this is your idea of utopia, then keep up the pressure for contraception, abortion and population reduction programs and support economic policies that penalize child rearing and reward childlessness. This puts the Obama administration recent decision to fund agencies that do abortion in third world countries in a curious light; as the triumph of ideology over reason.

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