Population Decline and Economic Growth

Declining population may be a sign of economic malaise indicating a need to return to an opportunity based society. 

With all the discussion of “comprehensive immigration reform” a topic that has recurred is the purported need for immigration because America’s birth rate has declined.  Supposedly, if we want to maintain our present population we need to import the necessary people instead of replacing them with our present generation’s children.  The link between economic growth and population growth is well documented, and it is a virtual certainty that immigration played a significant role in America’s economic growth during the 20th century.  Examining economic statistics we see that aside from the Great Depression, growth was fairly continuous during the rest of the century up until the 1970’s when things began to fall apart.  But immigration has continued; particularly illegal immigration.  The question that then appears is what has caused the economic decline? 

Examining economic trends in Western Europe since 1945 you also see a continuing decline in economic viability with a concurrent increase in government intervention.  The majority of the intervention has been directed to socializing the economy, which means reducing opportunity and subsidizing non-productive behavior.  Taxes have increased and productivity has suffered, as a result.[1]  As a society becomes more government centric, as in the case of Greece, it becomes increasingly less possible to reverse course and move back to a private enterprise, opportunity oriented society with resulting economic growth.  Or, more precisely, it becomes impossible for the government to reverse course without significant consequences to the people who have become its dependents instead of being self-reliant.  The people become dependent on government jobs or subsistence payments and simply refuse to change. 

Examining socialist or semi-socialist nations, particularly those of Western Europe in more detail, we see that as they became more government dependent their birth rates declined.  It also appears that the population became less oriented on the future and less optimistic.  In contrast, the United States in the late 19th and early 20th centuries, when the free market was operating, people saw a better tomorrow and a better life for their children, population growth was not a problem.  There was no stagnation.  Socialism, because it reduces or eliminates opportunity, creates an environment of economic stagnation and thereby engenders a general attitude of pessimism, or a lack of confidence in the future.  The cause and effect relationship may not be provable, but the fact that the two generally appear together leads to a general conclusion that they are probably related. 

A similar decline has occurred in Japan since the economic boom of the 1970’s.  One might recall when Americans dreaded that Japan would buy up their entire nation.  Now, Japan is mired in “lost decades” marked by a sluggish economy, a policy of deficit spending that has not stimulated the economy and yes, declining birthrates.  Japan isn’t exactly a socialist economy, but it does have very heavy government involvement in the economy.  Despite this, problems are not being solved and so far there appears to be no intention of changing course. 

Parts of Europe had a solution to the declining birth rate.  They began importing Arab and African immigrants to do the work.  This, in turn, led to a crisis of culture, as the immigrants began demanding that Europeans abandon their heritage and adopt lifestyles practices by the newcomers.  This is a recipe for destruction of all that is English, Dutch, German, French, Italian, etc.  The natives are now getting restless over this, many demanding that their original culture be preserved.  It may, eventually, engender significant changes in immigration policy, but whether it will affect the economic policy is uncertain. 

The next step is to examine the question of why birthrates decline in these nations.  The answer is likely linked to an aura of pessimism that becomes part of the culture, replacing optimism that exists in a growing society.  When people experience a growing, positive civilization and see an infinite horizon ahead with no effective limitations on their potential they are also likely to see the same with respect to their posterity.  If a nation believes its children will inherit better society than the present one, or  one that is at least as good, there is little reason not to have children.  In fact, the possibility that people will have children in order for them to experience a better world might become a reality in the minds of some.  But what about the reverse situation? 

If you live in a stagnant or declining society with little in the way of opportunity your focus becomes inevitably directed to personal survival.  When your own survival is questionable or subject to increased difficulties you are likely to be, as a matter of necessity, required to put off having children.  If you have no job, no prospects and no resources on which to rely for the long term future, creating a generation to populate that future becomes a luxury you cannot afford.  When sufficiently widespread it becomes a social phenomenon of major impact.  All of this can be compared to the behavior of investors in a stock market who base their behavior on their expectations.  Expectations are a function of present perceptions.  If investors believe that a company has a bright future they will buy the stock.  If they see the opposite they sell.  People deciding to have children can be compared to buying stock in the national future.  It can be as simple as that. 

A second aspect may well be based on a related perception of society that has to do with social factors other than economic outlook.  Millennialist beliefs may curtail optimism when people believe that “the end of the world” is about to manifest.  Why look to the future when there is not going to be a future?  While Millennialism is generally a localized phenomenon, it has become more widespread at present.  It is, perhaps at its worst since 1945.  Many people had reduced expectations during the Cold War years, but America was still perceived as strong and capable.  Thus, optimism was not diminished to a significant degree.  Today, in contrast, we see a diminished America with poor or non-existent leadership, terrorism appears rampant, the potential for nuclear terrorism is in the wings, and signs and portents lead religious believers to conclude that biblical prophecy is about to be fulfilled.  The potential for negativism becomes even more significant. 

But a third factor may be even more important.  In today’s America we see government telling the people that they can’t succeed on their own.  We also see government putting obstacles in the way of the average person.  At the same time the rule of law becomes corrupted and politics replaces merit as the primary determining factor of success.  It creates an environment where distrust becomes generalized and survival interests become paramount.  It becomes obvious to many that despite contentions to the contrary, government is not their friend; it has passed beyond the level of negligent interference and has actually become their enemy.  When people believe that the can no longer trust in the impartiality of government pessimism is almost a certainty.  When they believe that government serves the interests of its members and not the interests of the citizenry then they have no reason to trust in the future.  They see, instead, limited opportunities parceled out to those with influence instead to those with merit.  They also see a litany of broken promises that were likely made as an act of fraud.  At such a point all that is left is a hope that government will eventually change.  When it doesn’t, people become more pessimistic, and the downward spiral becomes a social fixture. 

If America adopts the same approach as Europe did the results will be similar.  What may be worse is the potential that the system will be destroyed both economically and socially.  Government then sets about preserving itself and not the well-being of people it is charged with protecting.  The only solution is to reverse course, re-install an opportunity society with free markets and reduce government’s destructive behavior.  Unfortunately, the present government of the United States appears intent on destroying the nation it swore to preserve, perhaps in willful disregard for their oath.  Not a good sign for the future. 




[1] The major exception to this has been Germany which has adopted an economic policy favoring a free market and low debt.  Germany has become the only nation in the European Union that is experiencing significant growth at the time of this writing.  As a result, other nations are continually demanding that Germany bail out their stagnant, debt laden systems. 

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