To The Guardian
A wise man has said that there are only two kinds of people who believe that the growth of anything can continue forever on a finite planet: idiots and economists. It was presumably one of the latter who wrote the sub-heading, “Birthrate fall is a threat to economic prosperity”. Even if GDP is accepted as a measure of well-being (a dubious proposition) the relevant number is GDP per capita. It doesn’t matter if GDP shrinks as long as the population does too.
The only people for whom GDP growth is a must are those irresponsible politicians who run up huge deficits assuming that the debts can be repaid out of next year’s larger GDP.
(Graham Andrews, Spokane, Washington, USA (Guardian Weekly 18 September)
I agree. But you cannot have capitalism without growth. Or can you?
The logical conclusion of this is that the population should fall, of course. Now from an ecologist perspective, or if you are simply fed up of overcrowding in your area, that makes sense. The problem is, societies that have a falling population also have a rapidly ageing one. Assuming you want state pensions to exist, as most people do, that means that taxes on those of working age must go perpetually upwards, because there are proportionately fewer people of working age. As you point out, it may not matter that the higher taxes that result from a falling population hurt growth. But what certainly matters, is that higher taxes will reduce the standard of living of those of working age, in order to pay for a greater number of retirees. This is true even of countries where the population is merely stagnant, or even increasing at a slower pace.
From an Epicurean perspective, higher taxes may generally be a good thing, if they result in better quality public goods, such as roads, schools, railways etc. But if you are having to raise taxes simply to prevent pensioners from becoming poorer, then you have a problem, because the higher taxes aren’t actually making things better, they’re simply preventing them from getting worse. Overall, if we are to have a falling population, we need a radical re-think of our welfare and pensions system. This will certainly mean having to make tough choices. Initially, it will mean raising the retirement age or reducing pensions for wealthier people. But eventually, the system will become unsustainable, even if the tax increases required fall disproportionately on the rich. This is for two reasons: rich people will pass the cost of taxes onto the poor (its why welfare states tend to be expensive places), and the rich will resent having to pay ever higher taxes, and feel disillusioned with the current political settlement. We’re already seeing this in France, where a staunch conservative, Francois Fillion, has won the Republican nomination for president. France traditionally has high taxes and generous welfare and pension systems. They have all sorts of benefits, from lower poverty rates to more risk-taking amongst entrepreneurs (knowing the state is there to support them if they fail.) But you cannot alienate a certain proportion of your population forever, especially not the rich, who vote at higher rates.
If the growth is “intensive” rather than “extensive” it matters less if the investment capital is public or private or a combination. Intensive growth would mean innovative ways of meeting human needs which did not require acquisition of new territories but developed from more creative and effective use of internal resources. That would work, eh?