Scary Population Tales — a Response

Peter Smith’s welcome article “Scary Population Tales” makes some valuable points, but was marred by some glaring misrepresentations and ideological non-sequiturs. It’s refreshing to hear a devout ‘capitalist’ questioning the population growth agenda. But I find much of his position hard to stomach.

He claimed “The economic effects of falling population growth … fall broadly under a heading of the direct and indirect consequences of an ageing population.” This statement reveals a complete blindness (apparently shared among neo-liberal economists) to implications of population growth rate itself on costs of providing additional infrastructure and other physical capital. Since this is the biggest factor in the equation, its absence diminishes everything else he has to say.

Longitudinal studies put the cost at around 7% of GDP per 1% population growth rate, or in Australia’s case, at least $160 billion per year. While the direct fiscal burden is nearer $20 billion, the rest comes out of our pockets not as tax but as increased cost of living, rent and mortgage payments, all constraining the consumption which provides jobs and the savings we’ll need for retirement. Many of today’s young workers will retire with neither a home to their name nor an adequate superannuation balance, due to casualised and discontinuous employment in a flooded labour market. This represents a greater threat to the pension bill than the tiny proportion by which their numbers can be diluted through higher population growth.

On the topic of global population, Smith explicitly claims correlation as causation between “real per capita income” and “a decline in child bearing”, when historical data show that it is mostly the other way around: that fertility reduction was driven by voluntary family planning programs (even in China, a decade before the one-child policy), preceding and stimulating economic advance.

And to say “the bomb has been thoroughly defused in the developed world” is to ignore the impact of immigration on population growth. This, of course, is consistent with his view that it is all about age structure, not growth rate, since high immigration and high birth rates have opposite effects on the proportion of working-age people. The fact that population growth impedes economic development regardless of whether it is from births or immigration supports the view that it is the cost of physical capital, rather than the age structure, which has the dominant effect.

Smith’s discussion of “capital” and “saving” doesn’t mention debt, when clearly debt is a far greater source of physical capital lately than savings. The consequences of the “stock of debt” are not considered alongside the “capital stock”, nor the fact that it is “those in their middle years” who are taking on most debt.

His discussion of “open systems” pleasingly notes that a tighter labour market might lead to higher wages and consequently greater productivity. (From his “capitalist” perspective, higher wages are presented merely a factor contributing to productivity gains, not a primary goal for increasing people’s wellbeing.) But he doesn’t take the next step to acknowledge that this open system can, and demonstrably does, also lead to greater workforce participation, negating the shift in “old-age dependency”. Among the world’s developed countries, there is no trend at all between the extent of demographic ageing and the proportion of people in work. Japan (the oldest) and Australia (one of the youngest) have essentially the same proportion of workers. Ageing hasn’t led to less employment, only to less unemployment.

Peter Smith: Scary Population Tales

Having dismissed the likelihood of ageing causing recession, Smith disappointingly argues that if economic ‘stagnation’ does bite, the solution will always be “reining in government and unshackling business development”. That and cutting off “safety nets” to encourage people to save, and raising interest rates and eliminating death duties, all measures to incentivise the rich, who need no incentive, and cut off transfers to the poor, whose wellbeing should be the point of the exercise, if ideological “capitalists” didn’t think it was all their own fault.

At least he puts paid to the hollow notion that a youthful population must be more innovative and entrepreneurial. But he shows very little imagination in testing his scepticism — a brief scan of the countries coming up with the most innovation lately would show that they tend to be among the more aged. Probably because their near-stable population size eased fiscal pressures and stabilises employment, allowing more generous and stable investment in higher education, research and development. Australia, in contrast, has been pursuing the opposite agenda: the fiscal strain of rapid population growth leading to withdrawal of government support for science and industry, and the housing demand draining capital away from entrepreneurial investment into a land speculation bubble, the perverse maintenance of which is the main driver of our high-immigration program.

Peter Smith has exposed the hollowness of the ageing-related excuses for high population growth. But he misses the point that these are merely excuses. They are no more valid or sincere reasons than the claimed skills shortages behind our massive skilled immigration program, repeatedly exposed as systemically rorted – most recently in an excellent new report “Immigration overflow: why it matters” by the Australian Population Research Institute. Until we have a government willing to put the interests of ordinary people above those of property speculators and multinational corporations, the immigration throttle will remain glued to the floor.

Honorary Senior Research Fellow School of Agriculture and Food Sciences Faculty of Science