Standing room only soon?
Samuel Brittan
AGEQUAKE by Paul Wallace Nicholas Brealey, £18, pp. 276 THE IMAGINARY TIME BOMB by Phil Mullan IB Taurus, £24.50, pp. 239 W, .• e have had spates of books about the humanity, demographic prospects facing h,,-litnanitY, starting from Thomas Malthus -ye centuries ago. In the 1970s World Bank President Robert McNamara compared the ntinuing increase in the world's population to the threat of nuclear war. More recently te have had studies bewailing the opposite Feats of ageing and population decline. Paul Wallace's book emphasises the chan- ges that can be brought about by ageing and falling populations. Phil Mullan's is an att- ack on alarmism on this very issue. It is somewhat marred by his defensive posture of seeing the whole subject as a disguised ideological attack on the welfare state.
Of the two, Wallace's book is the more level-headed and better introduction to the subject, although you would not think so from the sub-titles 'Riding the Demographic Rollercoaster, Shaking Business, Finance and Our World': or the publisher's blurb `Your work, your money, even your love life are all subject to the shock waves of the most elemental force ever to affect your life.'
Demographic forecasts have one advan- tage over other kinds of economic forces. Most of the females likely to come of child bearing age in the next 20 years or so are already with us. If in addition the decline in death rates among older generations is a gradual trend, we already have some idea of the shape of the population for nearly a generation to come.
What we cannot predict are future chan- ges in the number of children the average female is likely to have over her child- bearing life. This is what has brought so many population projections to grief. A notable example is that of the scare in the 1930s about the British population dying out, which even influenced John Maynard Keynes. In the end population forecasts like other forecasts are best regarded as one way of stating the implications of what has already happened.
Of the alternative sources of alarm, grow- ing populations and falling populations, I am sure the first would, if justified, be the more serious. To see this one does not have to believe in the original Malthusian scare about world population outrunning world food production. The most basic disadvan- tage, which was explained by the Cambridge economist, Joan Robinson, several decades ago, was that investment which could other- wise be used to increase the living standards of a stable population has to be devoted instead simply to equipping growing num- bers. In other words the fruits of economic growth have to be spread more thinly. Rapid rates of population growth also give rise to congestion in overcrowded cities and vanishing rural amenities. Eventually there would be standing room only. So it is some relief that McNamara seems to have been as wrong about world population as he had earlier been over the Vietnam war when he was US Secretary of Defence.
The latest UN central projection is that `Thanks, but we don't eat.' world population will continue to rise from 6 billion in the year 2000 to nearly 9 billion in 2050 and eventually stabilise at the end of the century at around 10 billion. As Wal- lace points out the average age of Ameri- cans in 1850 was just 19. The average age in Italy is now 40 and is expected to exceed 50 one third of the way through the present century. According to the UN Italy's popu- lation will decline by over a quarter in the first half of this century and Germany's by 10 per cent. Wallace has an interesting map showing that fertility rates are now below replacement level, not only in the industrial West but also in Russia and China, and could soon fall below it even in India.
The two sources of ageing populations need to be sharply separated. Increased longevity need not be damaging if we can manage our affairs with a modicum of rationality. It is not a problem if people live longer and also stay healthy for longer, which seems to be the case. The bogey of ageing has been hyped up in relation to the looming pensions burden, above all in con- tinental Europe where governments will have to raise contributions or taxes sharply if they are to fulfil the obligations of their state schemes. It is here that Europhobes become most hysterical about the supposed threat to the Euro and even the European Union itself; and the army of left-wing polemicists become enraged about the sup- posed threat to the welfare state.
Both sets of polemicists could be sent packing by a simple reform. This would be to index the pension age to life expectancy or better still to life expectancy at, say, age 55. End of problem. Of course it would also help if it became easier for older workers to work shorter hours, if they so wished; and if they could negotiate to stay at work for lower pay in occupations where their pro- ductivity might be expected to fall with age.
Writers like Mullan do score, however, when they attack the exaggerated and self- interested propaganda for funded pension schemes. The main argument for them is that it is better to have a legal right to a reasonable pension than to be dependent on governments fulfilling their promises. But at the end of the day the resources real resources, not paper money — to sup- port people regarded as too old or too young to work have to come from the product of the working population.
Funded pensions can help only to the extent that they increase the saving ratio and that these extra savings are reflected in productive investment. We have to face the eminently respectable and orthodox argu- ment that higher investment will run into diminishing returns, the effect, on output becoming smaller with each increasing dose.
For a time, the kind of ageing which results from low birth rates can even be mildly helpful. While the dependency ratio is pulled up by the increase in the number of old, it is pulled down by the fall in the number of young dependents. Of course if fertility fell below the replacement rate everywhere for long enough, instead of there being standing room only there would be no one left in the world. But somehow I suspect that the self-regulating mechanisms which alarmist writers always ignore would come into operation long before we reached that point.
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