QED

Scary Population Tales — a Response

population crowdPeter 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

14 thoughts on “Scary Population Tales — a Response

  • nfw says:

    “Until we have a government willing to put the interests of ordinary people above those of property speculators and multinational corporations,…” Tell Ms O’Sullivan she’s dreamin’.

  • Keith Kennelly says:

    Governments do not include anyone understanding the needs of most people so how could they possibly be aware of ordinary people’s interests?

  • brian.doak@bigpond.com says:

    Governments don’t see the downside of rapid immigration growth because so many of their business mates see their businesses grow at the same rapid rate: mobile phone companies, food retailers, car sales, Harvey Norman, Meriton, security companies, etc.
    Government expenditure from taxation or deficit must grow in parallel but, like a lottery where a few gain a lot but where many each lose a little, who cares about rapid government expenditure on: gaols and justice systems, police and multicultural crime squads, welfare and welfare housing, schools, migrant language schools, hospitals, roads, public transport, contracts for security, migrant ethnic councils, rorted welfare, rorted multicultural daycare etc.

  • bemartin39@bigpond.com says:

    The second paragraph of this article is most baffling, to say the least, which makes it almost impossible to continue reading. Some might grasp the reasoning that the statement quoted from Peter Smith reveals any sort of blindness on Smith’s part but it is far from obvious.

    Far from being an economic boffin, I find Peter Smith’s articles on the subject more convincing than that of any of the others published in Quadrant. His constant reference to classical economists, from Adam Smith to John Stuart Mill are most convincing of his intimate understanding of the “dismal science”, unlike others who tend to question the veracity of the old masters, often by advocating for the “poor” against the “rich”. It is folly to doubt the skill of the “invisible” hand by supporting certain measures to improve its effectiveness.

  • prsmith14@gmail.com says:

    Thanks Jane for responding to my article. Just a few points. Your response takes issue with my neglect of the costs of population growth. My focus was a narrow one of considering the implications of sluggish population growth. At the same time, I agree with you that insufficient attention is given to the infrastructure and congestion costs, and to the demands on the provision of education, health and housing, of a high immigration intake.

    You are right I did imply that causation goes from wealth to falling birth rates. Most of the literature I’m familiar with makes that assumption. But I could well imagine a feedback mechanism which results in a lower birth-rate increasing per capita income. It is certainly worth thinking about and is consistent with my view that the free market has away of working productively with fewer workers.

    On the role of saving and capital accumulation, I disagree with your contention. Certainly debt finance can be seen to fuel investment but for the most part this is a veil. Capital accumulation is dependent on real saving. If everything that is produced is consumed all the debt finance in the world will not work to increase real investment. That is one reason why we need rich people. They save and through that make everyone more prosperous.

    Point taken on the effect the free market might have in increasing workforce participation of an aging population.

    I don’t think I suggested cutting off safety nets. I simply said that publicly provided safety nets tend to reduce saving and that privatising such safety nets, where this was possible, would contribute to saving. The economy shouldn’t be viewed through a rich/poor prism, in my view. Anything which contributes to saving, even among the rich, has a potential pay-off in productive investment to the benefit of all.

    As an empirical matter, you might be right about aged countries being more innovative in recent times. I find that interesting and refreshingly contrary to the received wisdom. And, while this bears out my scepticism about the received wisdom, you are also right that I haven’t researched this.

    Finally, I share your view about the current high levels of immigration into Australia. I am not at all sure of the rationale. I am sure that most people don’t know. And I can’t recall any recent government explaining it.

    Thanks again for your response. Regards Peter

  • kingkate@hotmail.com says:

    “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.”

    This assumption is questionable. I have been an economist for over twenty years and the literature is very much divided on this. Over the long term if your population is not replacing itself ie if you have a birth rate below 2.1 you would expect your economy to suffer. Hence there are number of excellent research pieces predicting a slowdown in China in the next twenty years (ie we have seen the peak) and that there will big problems ahead in terms of who will look after their aging population.

    Probably though the best example is Japan which is further down the shrinking population road than other countries because they haven’t had big immigration to fall back on. Well there is no doubt that a key reason for its stagnating growth is a lack of population growth.

    Often the argument that we should stymie population growth to increase wealth is used in developing countries. But again the evidence remains mixed. The UN in the Philippines is using this argument to introduce “women’s health programs” ie contraception and abortion. There is no doubt that their agenda is being influenced by feminism. Whilst key studies on population/growth which suggest otherwise are being ignored.

    Also where there are advocates that China’s one child policy has brought greater wealth (for some and certainly not in the long term) it has been at the enormous cost of life and people’s freedom. It is likely China has committed economic suicide by instituting such a nightmarish policy.

  • bemartin39@bigpond.com says:

    A couple of further comments, if I may.

    As a layman, I always understood that the decline in population growth, especially in primitive, underdeveloped societies, was a result of increasing prosperity, i.e. the reduced need for numerous children to care for the aged. As societies became wealthy, the decline in population growth became the norm in advanced western nations.

    Concerning China, very serious social and political upheavals seem guaranteed to convuls that vast nation over coming decades, made all the more perilous, not only for China but the world, by the rigid, inflexible nature of the one party communist system, precluding the possibility of smooth, peaceful change to suit evolving circumstances.

    • kingkate@hotmail.com says:

      There are few statements in the above which have been put up as factual. They are not factual. They are an opinion. Population growth – either from immigration or from births – does not necessarily “impede growth”. In the short to medium term the evidence is mixed. Depending on where a country is on its growth cycle population growth can speed up or weigh on an economy.

      In the longer term unless you replace your population your infrastructure/capital will not only be under utilised, there is no incentive to replace/maintain it and you risk a downward spiral – which is what Japan appears to be facing. Japan has a huge debt and a huge tax bill – which is why so many of them are working into their twilight years. A significant proportion of their capital works, which were undertaken to pump prime their economy to little avail, will go to waste.

      Australia doesn’t have a population problem. The problem is overcrowding in a limited number of cities and poor infrastructure planning by state governments. Sydney is done. It has been hamstrung by a lack of land and building restrictions. And I agree that politicians have used immigration to keep Sydney’s house prices high in particular. This is unfortunate because there is an obvious unfairness between those who own property and those that do not. High-cost housing also stops as many people having families.

      But you can’t turn around and blame this on immigration. Australia needs immigration for the long term because the birth rate is too low. Indeed even with our large immigration intake this is still not sufficient to avoid an economic problem here in the coming years.It has already begun. Peter is quite right in saying women need to be encouraged to have more children.

      • kingkate@hotmail.com says:

        Also saying that we should avoid greater population growth because that means additional infrastructure expenditure is a tad shonky. And that is the case even if it is borrowed. That’s what happens in growing economies.

  • kingkate@hotmail.com says:

    The more I read this article and understand it the more ludicrous it is. It’s gobbledygook from someone who obviously still believes in Malthusian theories even though they have proved wrong over and over again.

  • brian.doak@bigpond.com says:

    Some additional thoughts for population boosters Kit, Kit and Kit.
    Scandinavian countries are mostly more prosperous than Australia and have a stable population. Similarly Switzerland.
    China has become vastly more prosperous with rigid population control during the one child period.
    Crowded Vietnam [population about 100 million]is growing richer with a two child policy.
    India with a surging population can’t lift the majority of its residents out of poverty and fails to catch up with China.
    Similarly the Philippines where the capital city was declared a contraception free zone because of religious loyalty.
    Australia, like Dick Smith and Pauline Hansen say, must reduce its immigration rate to less than 100,000 pa as it was at the turn of the millenium. Presently the net overseas immigration is 181,000 on top of a natural increase of 146,000. No wonder housing is excessively expensive in Sydney and Melbourne.

  • mgkile@bigpond.com says:

    AND YET….

    The current world population of 7.3 billion is increasing by 83 million a year. It will reach 8.5 billion by 2030, 9.7 billion by 2050 and 11.2 billion by 2100, assuming the UN Population Division’s latest medium variant projection is accurate.

    If, however, a higher growth rate prevails this century – with an increase in average fertility of just 0.50 children per woman – it would reach 16.6 billion people by 2100, assuming another global doubling is supportable. In this scenario, India would have 2.6 billion and China 1.6 billion people.

    India – with just 250 million people in 1950 – will overtake China as the most populous country in just seven years with 1.4 billion. Meanwhile, Africa’s population will double in the next 35 years. By 2100, almost 40 percent of humankind will live on this one continent.

    Nigeria will overtake the US to become the world’s third largest country in just 35 years with 400 million people; more than double its current 170 million and eight times what it was a century ago.

    As a Nigerian central banker explained on a 2015 BBC Inquiry programme:

    The ggap between the rich and the poor has continued to grow. If conditions are so tough today for so many, what is it going to be like when twice as many live there in 2050? Yet this isn’t a question the political elite have been asking themselves. (10min.)

    My worry is that we are not making arrangements for this rising population. There is no country in the world that I know of over 70 million people that does not have a flourishing rail network, expanding social services and the rest of it. All those things need to be in place, together with better planning for population and for families.

    What if the government could not improve opportunities for the many millions more who will be living there in the next few decades? Its fast-growing young population – 108 million Nigerians are currently under 25 – could become ‘deeply frustrated’.
    The sort of thing that happened in the so-called Arab spring could happen in Nigeria.” (11 min.)

    UNPD’s report also concluded that between 2015 and 2050, half of the world’s growth will occur in just nine countries: India, Nigeria, Pakistan, Democratic Republic of the Congo, Ethiopia, Tanzania, the United States, Indonesia and Uganda.

    John Wilmoth, head of UNPD, was interviewed by the ABC’s Mandie Sami two days after public release of the 2015 Revision. He was asked whether it was ‘a positive picture’, or one that ‘worries you when you look at these numbers.’

    “That’s a very difficult question. The births have stopped increasing….But what is increasing is the number of people living at older ages and this is an enormous sign of success.

    However, you can’t deny that the increased human activity in terms of consumption and production and the impact of human activity on the Earth’s environment is TROUBLESOME to anyone who looks at it.

    To look at the change and SPEED OF CHANGE that’s taking place, it’s troublesome to think about what this may bring in terms of environmental changes and how that then could alter the Earth’s ability to support not only human life, but life of other species.”

  • brian.doak@bigpond.com says:

    Thanks Alice.
    I red today that in the besieged city of Mosul “a 49 year old welder [named Abu Mohammed] said he and his extended family of 12 had chosen to stay on for the moment”.
    Surely mandatory birth control after 3 children is the answer to any possible overcrowding.

  • mgkile@bigpond.com says:

    According to Malthus in 1798, the greatest obstacle to social progress and ‘human happiness’ was humankind’s awesome procreative power, its tendency to grow faster than the means of subsistence – or what today could be called a country’s rate of socio-economic development or ‘improvement’.

    Such heresy attracted a firestorm of abuse from many of his contemporaries – especially Enlightenment revolutionaries – and continues to this day. The French epithet ‘malthusien’ became one of the worst insults of the time. Karl Marx and his followers were unhappy with him too.

    Many still see him at best as an apologist for global social inequality and injustice. Others claim his disciples support coercive state control of population growth and reject UN Resolution XVIII that:

    […] couples have a basic human right to decide freely and responsibly on the number and spacing of their children and a right to adequate education and information in this respect. (1968 Tehran Conference on Human Rights)

    It is this resolution, Bran, that prevents mandatory state birth control policies.

    For the case of China, go to this 2015 “Born in the PRC” post:http://www.onlineopinion.com.au/view.asp?article=17819

    Hope this is helpful.

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