It is something that I would like to argue against. I.e. low birth rates does not immediatly indicate that people should have to work longer, or that Europe is in trouble, or anything else.
I tend to agree. The main thing here is that there is this idea that the total social wealth must be increased. Yet on a per capita basis if the decline in population is more than the decline in total social wealth, decreased aggregate wealth may mask increased per capita wealth.
For example:
Let's say that the population of Germany decreases from 80 million to 65 million between now and 2025. At the same time, the Germany GDP decreases from 2 trillion euros to 1.85 trillion euros. So you have modest economic recession, something on the order of .25-.5% GDP decline annually.
Looked at as an aggregate, Germany is worse off. If the concern is the standard of living?
Then in the first case the GDP per capita is 25,000 euros annually. While in the latter the GDP is 28,462 euro annually. So the standard of living increases while the GDP falls.
The problem is how you deal with the aggegrate economic contraction. A shrinking population means that you have less need for expanded housing and other infrastructure needs. There is a need to maintain, not expand. How do you keep the construction industry afloat in this?
Same thing with cars and other consumer goods.
And viewed not as a matter of standard of living, but size and power in the global economy, Europe does face a problem. At the same time that its aggregate wealth is decreasing, that of China, India, and others is rapidly increasing. Which means that the relative position of countries in the global economy changes.
And the structural power of the EU may decrease as global standards are not determine din Brussels or Washington, but in Beijing and New Delhi.
And what happens when Brussels doesn't care for the decisions that Beijing makes? The reversal of position means that the old colonial countries are in the position of being dictated to by states whose ideas of democracy and social justice are often quite different than those that we have in the "West." And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
In MfM's example about Germany the contraction of GDP would lead to a precipitous drop in capitalised asset values, and a "depression". There would be class war.
More from Veblen:
The primary hardship of a period of depression is a persistent lesion of the affections of the business men; the greatest secondary hardship is what falls upon the workmen, in the way of partial unemployment and a decline in wages, with consequent precariousness and reduction of their livelihood.(30*) For those workmen who continue to find fairly steady employment during the depression, however, even at reduced wages, the loss is more apparent than real; since the cheapening of goods offsets the decline in wages. Indeed, the cheapening of the means of living is apt to offset the fall in wages fully, for such workmen as have steady work. So that in the case of the workmen also, as well as in that of the business men, the distress which dull times brings is in some part a spiritual, emotional matter. To the rest of the community, those classes that are outside of business enterprise and outside of the industrial occupations proper, that is to say, those (non-industrial) classes who live on a fixed salary or similar fixed income, dull times are a thinly disguised blessing. They suffer in their affections from the reflected emotional detriment of the business community, but they gain in their ease of livelihood and in their savings by all the difference between the price scale of brisk and of dull times. To these classes an era of prosperity brings substantially nothing but detriment.(31*) 30. Work goes on during dull times, though at a slackened pace, and extensions and improvements are continually being made. The volume of output consequently increases, so that, even if there has been a setback to production at the beginning of the depression, the aggregate output presently again reaches the volume which it had when the dull times set in. It may be added that the rate of consumption is also appreciably lower during dull times, particularly in the more wasteful forms of consumption. This lowered aggregate consumption offsets the lowered intensity of production during dull times to such an extent that it is probably safe to say that the net surplus product, measured by weight and tale, is at least not appreciably smaller during depression than during prosperity. Cf. Carroll D.Wright, Testimony in Report of the Industrial Commission, vol.VII. p. 25. 31. The reduced scale of living of the working population is the chief factor that counts as an offset against the reduction of the gross production during dull times, as indicated above.
To the rest of the community, those classes that are outside of business enterprise and outside of the industrial occupations proper, that is to say, those (non-industrial) classes who live on a fixed salary or similar fixed income, dull times are a thinly disguised blessing. They suffer in their affections from the reflected emotional detriment of the business community, but they gain in their ease of livelihood and in their savings by all the difference between the price scale of brisk and of dull times. To these classes an era of prosperity brings substantially nothing but detriment.(31*)
31. The reduced scale of living of the working population is the chief factor that counts as an offset against the reduction of the gross production during dull times, as indicated above.
Consider also, that reduced population growth will make labor more expensive. Thus, you have rising wages, and increased traction for labor against capital.
The same thing is going to happen very soon in China as the labor force starts to contract due to the onset of the one child policy's effect on population levels. You already see low end production shifting to Vietnam due to the increase in Chinese wages.
Consider also the demand side of population decline. China's rapid ascent has been based on increasing demand in the United States, Japan, and Europe. To where will other states wishing to industrialize ship their goods when demand declines in these regions? And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
But with today's capital mobility investors could take their money to greener pastures if the assumed population decline is a localised phenomenon as opposed to a global one. You could have an Argentinean situation where workers need to take over productive industrial plants abandoned by their owners. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
First, because everyplace but Africa is at the point where birth rates decline. And Africa faces the scourge of AIDS that often takes people at the height of their working years.
The issue is that if pay in a producing country isn't enough to buy a product, then you have to find someone else to buy it. Who?
If demand in advanced countries declines with the population, then who buys the stuff.
FYI, I've got a copy of Veblen on my desk in front of me waiting to be read when I go eat. I just finished Freakonomics. I was not impressed. And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
Temporarily (if at all). Reduced population growth also decreases the future consumer base and thus future consumer demand for products, thus reducing future employee demand for labour. The same feedback works when there is population growth, and it works both for natural population growth and immigration. *Lunatic*, n. One whose delusions are out of fashion.
To the rest of the community, those classes that are outside of business enterprise and outside of the industrial occupations proper, that is to say, those (non-industrial) classes who live on a fixed salary or similar fixed income, dull times are a thinly disguised blessing.
I don't think Veblen ever saw recession or depression combined with inflation. In such times cash was king. That was before resource depletion. The problem was deflation. That would be preferable to me to the current situation of real decline in the purchasing power of the dollar, especially for those who have to eat and use energy. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
But stagflation is not depression - depression is what you get when you use interest-rate shock therapy to stop stagflation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
I hear your French accent even in your writing :-)
the demographic crisis was such that the ordinary man was much better off after rather than before
Is that true right into the population decline? Not after, during the new boom? I thought there was a collpase of trade and agriculture that added to the woes of city-dwellers and villagers alike. *Lunatic*, n. One whose delusions are out of fashion.
Note that the history Migeru quoted about labourers getting better wages dates from the 1370's ; pretty much the early phase of the collapse, as population continued to decrease into the fifteenth century. Un roi sans divertissement est un homme plein de misères
There is a need to maintain, not expand. How do you keep the construction industry afloat in this?
We can upgrade and expand our rail net and renewable infrastructure and improve the energy efficiency of our houses. There is no shortage of stuff to do in the foreseeable future.
Europe is a big place. Our population can drop by 40 % and we'd still be about the current size of the US, which didn't seem to have a problem maintaining its great power status for about a century and a half.
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
