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| -Image generated by Microsoft Bing AI |
As we've seen in the previous post, many countries have successfully reduced their birthrates in
recent years and that should be a cause for celebration. The earth will most certainly be better for it – less resource and energy use, less water demand, less
pollution, lower emissions, less encroachment on the land needed by other
species.
According to one report in the Scientific American, we have already lost an estimated of 50% of our wildlife and transformed between 70 – 95% of the land and
ecosystems, many of which are necessary for our own survival, so why are economists and others are wringing their hands instead?
See for example, the rather nicely produced video called “The Myth of Overpopulation” below which considers reducing birthrates unnecessary. It's a bit long but you might want to have a quick look at it before I start criticising it and debunking a few myths myself.
Assuming for a moment that its predictions for the next 80 years are correct, and not forgetting that they can easily be disrupted by a major war, another disease outbreak or even another scientific breakthrough such as the contraceptive pill, the main reasons for their concern are:
1.
That there will be a
falling number of workers and thus a smaller
tax base to support non – workers such as the young and the elderly, especially
as people are living longer. In Australia in the 1970's for example, there were 7.5 workers to support each person over 65. However, by 2020 this had fallen to five workers having to support 2 older people and for far longer, since life expectancy has also increased from 71.21 years in the 1970s, to 81 years for males, 85 years for females at present.
However these concerns are based on a number of false assumptions:
1.
That increases in
population are necessary to keep the economy growing and that economies always need to keep growing, even
when populations are in fact static or declining
2.
That the younger generation
must always financially support the previous one
3.
That the tax base will remain static in rate and composition
4.
That all elderly people
will be frail and in need of extended medical care
5. As far as those still expanding populations of Africa and India in “The Myth of Overpopulation" go, while the individual footprint of people in these regions is presently quite small compared to those of individuals in developed countries, the sheer number of people still creates a significant impact, especially if those populations continue to expand.
On current projections the UN estimates that the world population will continue to rise to 10 billion by 2061, before beginning to decline. The video producers assume that still growing populations will not aspire to things which developed countries take for granted – electricity, flat screen televisions, cars roads, education, medical health, or even the basics such as adequate food and water?
In a world already
struggling to meet the needs of existing
populations and at the risk of complete breakdown of the very systems which it
needs to survive, where will the resources for those additional 2 billion
people or the wherewithal to buy them, come from? By bulldozing more forests?
Digging up more of the few places we have reserved for nature or by burning more fossil fuel? No one blames the people involved. That belongs to those who deny them the option to choose and to those who are urging people to have more children, whether they want them or not.
7.
What most statistical
models fail to show is the extreme
hardships the world is likely to be facing over the coming decades. Even for those uninterested in the environment, the sheer cost of the growing number of environmental
disasters which the World Bank expects to reach $US 2.7 trillion by 2030, should surely give pause to expanding one’s population or even one’s family. Even kangaroos – not known for
their high intelligence, have the wisdom not to breed in poor seasons, though countries with very low or negative birthrates may have some leeway.
8. It’s true that demand for some businesses will decline – pram makers for example, may have to start diversifying into mobility aids and there will perhaps be less demand for housing, which is good news for those who do want to start a family, but there is no reason for the economy to decline otherwise. Given sufficient means, seniors do spend, but usually on services and fewer but more durable products, both of which are less environmentally destructive than an endless stream of poorly made consumer products.
Why declining populations won’t necessarily affect economic performance
As we've seen in the previous post, larger, growing populations tend to depress economies, while smaller ones can enhance economic performance. Some studies have shown that per capita income could in fact increase by 10% by 2055 with smaller populations. I think Germany's post war history is instructive in that regard.
The German Experience
Due to the loss of many men of reproductive age in World War II, and poor economic conditions both before and after, Germany has had a very low birthrate - below replacement value and with more deaths than births for many decades, even dipping into negative territory in the 1950s. However, it has clearly demonstrated that neither declining nor ageing populations need to be barrier to economic growth.
Between 1951 and 1961 its GDP rose by 8% per year, double that of the UK and the USA, and its exports trebled, thus forming the basis of the “German Economic Miracle” in the 1970s. Apart from occasional setbacks such as during the 1973 -74 oil crisis and the early days of reunification as Germany absorbed large numbers of East Germans, the German economy has gone from strength to strength and is the envy of the world.
It is true that Germany boosted its industrial output with ‘guest workers’ from Southern states such as Italy and Turkey and later through reunification with East Germany in 1990 and more recently still through the admission of 1 million refugees from war -torn countries such as Syria and Afghanistan in 2015, causing an initial dip until its population again stabilised to the same level of low family size.
However, in contrast to the video makers, I do not believe that migration will stop any time soon. As climate emergencies continue to bite, there will be refugees from places which have become to hot to live in or are no longer suitable for growing food, or where there has been sea level rise or societies have become too unstable to live in safety and security.
Should migration not satisfy the demand for labour, many jobs are likely to be replaced by automation and AI. See for example, what an Aged Care facility in Aalborg, Denmark, is doing, with no loss of the human touch. One facility in South Australia is trialling Chat GTP powered robots as I write. It now has 21 of them and a retirement village in Brisbane has just bought its first. Alternatively, those very technologies are also likely to displace a large number of workers who will be looking for new jobs along with a lot of pram makers.
The Japanese Experience
Japan’s birthrates began to fall in the 1950s also partly because of the war – it lost 2 million people, but also because of dire economic conditions and having to accommodate returning servicemen. Though Japan anticipates rising health costs as the last of the baby boomers reach 75 in 2025, it has found that thus far its economic performance actually improved as a result of lower birthrates.
As the population began to age, the government needed to spend less on housing and infrastructure and the profitability of its corporate sector also improved, as it no longer needed to keep expanding.
In 1997 the number of Japanese people over 80 exceeded the number of people under 14 for the first time and at an average age of 85.5 years, their life expectancy is among the highest in the world.
Is it really necessary for up and coming generations support previous ones?
Anticipating the needs of the ageing of the population without necessarily having a younger one to rely on, Germany has had a retirement fund into which every worker pays throughout their working life, for over a hundred years. This has since become the model for many other counties around the world, including The Netherlands, Iceland, Denmark, South Korea and Israel.
Australia did have a dedicated pension fund if not as generous. The National Welfare Fund was started by the Curtain Labor Government in in 1943. However, this was rolled into the taxation system in the 1950s by the Menzies Liberal Government to cut down on on administrative costs and from then on pensions were paid from consolidated revenue instead.
Recognising that populations had been declining since the 1970s, the Keating Labour Government reintroduced a dedicated Superannuation Guarantee Fund in 1990, which, with careful investment was to ensure a secure and comfortable retirement for all workers, not just the elite.
However, during the pandemic, a Liberal government again sabotaged this excellent strategy by encouraging people to draw on their super to survive – many people received no support including universities, artists and musicians, or to use as a deposit on a home, hence the concern about having enough babies and up and coming workers. There were also supposed to have been progressive increases in contributions, but with cost -of -living pressures rising, no government has been able to elicit the necessary support for this.
Tax regimes are not set in stone
The countries with the highest level of retirement benefits do not necessarily pay the lowest taxes. However, they also get universal healthcare and free quality education which ensures that their citizens can occupy the highest paying positions.
Germany also has fairly strict rules about rent increases and housing security and they may not rise much as a proportion of income. In the end, perhaps it matters less how much tax you pay, but how much you have left in your pocket afterwards, how secure you are and how much you are able to save. Lower taxing countries such as the USA are not necessarily doing better in that regard.
It is Japan’s enormous personal savings accounts which have kept its economy afloat despite an ageing and declining population and the odd financial crisis. To allow for the changing composition of its society, Japan has already slightly increased consumption taxes from 5% in 2014 to 10% in 2019 to cover the anticipated rise in the cost of aged care and medical care.
While increasing or raising new taxes is never popular as an election strategy, tax cuts for wealthy individuals and corporations as promulgated by the likes of Thatcher and Reagan and lately by Trump, have not led to greater well -being for the rest of society. The wealth generated has instead flowed to around 5% of the population. See for example what happened in the UK or in the USA.
In recent years there has been much talk about raising more revenue on the windfall profits from resource extraction or from multinational corporations who expatriate their profits thus avoiding taxes in the countries where they make them. However, given that many such corporations have larger budgets than the countries in which they operate, there are fears of capital flight or reduced investment, if forced to pay more, making this difficult unless smaller countries take united action.
Norway appears to be one of the few countries to do the former successfully– retaining 78% of the revenue from its oil fields and giving it a huge sovereign wealth fund with which to ride out economic storms, as well as ensuring a more sustainable future for its citizens. By contrast, South Africa gets a mere 5 - 7% and Indonesia around 20%.
Although Australia's resource rents are shown as being 40%, it gets nothing at all for its gas exports and must compete with other countries to buy its own gas back at inflated world prices!! This matter ought be addressed as a matter of urgency. If our trade agreements have failed us, then the companies should do it as a courtesy, as a matter of honour even, since they also contribute greatly to Australia's emissions.
I hope I have convinced you that the sky won't necessarily fall if we have declining birthrates, but it could very well if we don't. Nor are declining populations and ageing populations problems in themselves. The problem lies in how different governments respond to those challenges. Those who have not prepared for this reality in a timely way will be more affected than others. The next post will be about ways in which various countries are responding to them.
- Facts and Figures and the illustration supplied by Microsoft Bing AI
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