Why Islam is in as much trouble as the West
Monday, 24 October 2011
David P. Goldman, who blogs at the Asia Times as Spengler, has written an insightful book challenging the truisms of the commentariat on both the rise of Islam and the decline of the West: How Civilizations Die: (and why Islam is dying too)
History buffs will recognize that the pen name Spengler honours Oswald Spengler (1880-1936), author of Decline of the West. Goldmans initial observations about the decline are most helpful but not unprecedented. From a much less religion-friendly perspective, American demographer Phillip Longman has been saying the same thing, and so has Canadian demographer David Foot.
It is what Goldman says about Islam that will surprise many readers: Islam is dying too because the Muslim birth rate - according to reliable statistics - has crashed. How badly?
Across the entire Muslim world, university-educated Muslim women bear children at the same rate as their infecund European counterparts.
Whatever they believe about Islam, they have one or two children, but rarely three or four. Not enough to deliver their societies from demographic collapse, given the size of the families they came from. For example,
The average young Tunisian woman - like her Iranian or Turkish counterpart - grew up in a family of seven children, but will bear only one or two herself.
Education for women doesnt in itself cause birth dearth, but abandonment of the land does. Muslims are not immune from the urbanization that turns children who were once a source of wealth into a major cost centre. Increasing numbers of people, there as here, hope that others will undertake the trouble.
But surely some Muslims have large families? Those who do live in areas that are considered backward, and they cannot indefinitely prop up an unsustainably low urban birth rate. But because demographic decline happened so quickly in Muslim societies, the Western problem of too few young people supporting too many seniors will be much more severe, especially in countries with few natural resources, like Turkey.
One might ask, why cant Islamism reverse the decline by demanding that urban women do their duty? A look at Iran, Goldman says, reveals a related crisis of effective faith. For example, according to a suppressed report, more than 90 percent of Tehran prostitutes are said to have passed the university entrance exam, and 30 percent of them are studying. Their career choice is, they say, voluntary. Drug abuse among students is rampant, fuelled by cheap opium from neighbouring Afghanistan. The Islamist could exemplarily punish a few prostitutes or drug addicts - but thousands?
More generally, when modernization comes quickly, without warning, and from elsewhere, a declining birth rate can be accompanied by worse, not better, conditions for modern women. In Turkey, for example, only 22 percent of women sought employment outside the home in 2009, down from 34 percent in 1988 - despite their intervening fertility crash. About this, Goldman observes, If we are surprised by Muslim demographics, it is because we have not listened carefully enough to what Muslims themselves have been trying to tell us. Islamism is more of a last stand for many than a resurgent force, hence the glamour of suicide. If all this is correct, demographic collapse will increase rather than decrease the risk of terrorism, because there is no such thing as rational self-interest for people who believe they have nothing to lose.
Those inclined to dismiss Goldmans contrarian analysis might point out that if there are few young people for the Islamist to recruit, there will be few suicide terrorists. Not necessarily; a cultures suicidal resistance often increases at precisely the point where a huge conflict is irretrievably lost. This was true of the South in the closing days of the Civil War, and of Germany and Japan in World War II, for example. Many wont be trying to win, only to inflict damage on the victor.
Compounding the problem is that Islam is - at present - much less well-adapted to political systems that produce stability in a modern environment. The rule of life among Islamists is authoritarianism in every facet of life. Authoritarianism results in either accepted oppression or revolt, but not the consensual stability that a modern society needs. And imams provide little guidance as to how to get there, because many see the very behaviours that hamper progress as ordained by Allah. For these reasons, Goldman thinks, the threat to the West from Islamism is generally overrated; internal demographic collapse is a much more serious threat. No civilization has ever survived a situation in which a small number of young adults must support a large number of retirees as well as raise children to support them.
Interestingly, he think that the United States has a much better chance of surviving the collapse than Europe or the Muslim world, for reasons we will explore in Part II next week.
Denyse O'Leary is co-author of The Spiritual Brain.
Why will this recession be different, and likely much worse, than all the other recessions of the past?
Imagine a Paleolithic village which has no children. When all the adults grow too old to work, everyone dies. Now imagine a country with a well-funded national pension system, also without children. Everyone retires on the same day, and the pension fund instantly goes bankrupt.
These hypotheticals overstate the predicament of the industrial nations, who have too few children and too few old people, but it does not overstate it by much. The present economic crisis will not respond to the usual treatment because it arises from a deeper cause, namely the hollowing out of the population of the West. This is not a business cycle, but the grim harvest of a demographic winter.
Financial markets are only a veil for the cycle of human life. Young families borrow, older people lend to them, and retirees spend their savings. Whether the young people of the tribe share their food with the old folks, or retirees earn interest from mortgage-backed bonds issued to finance homes for young families, the result is the same. What makes this crisis intractable is not the financial system, but the social relationships that underlie it.
Taken as a whole, the developed world resembles a village without children. Its slightly more complicated, of course. The industrial world is aging too fast. There are too many people over 400 million in their peak savings years, that is 40 to 64, and the number is growing. And there are too few young earners in the 19-to-40 bracket, and their number is shrinking. There arent enough young people in the village to support the old ones.
Figure 1: Population of Developed Countries by Age Bracket
Source: United Nations Population Prospects, Median Variant
Thats the whole developed world. Contrast this picture to a healthier profile, that of the United States of America (Figure 2). Note that there are more young workers (borrowers of savings) than older workers (savers), in contrast to the developed world as a whole. The situation is better than that of the overall developed world, skewed toward the aged by Japan and Europe, but still is headed in the wrong direction, with the number of savers (older workers) growing much faster than the number of prospective borrowers (younger workers).
Figure 2: Population of the United States of America by Age Bracket
Source: United Nations
There are only two countries in the industrial world with a positive rate of population increase, the United States and Israel. That is probably because they are the two developed countries with the highest proportion of people of faith, as I argued before.
Countries arent Paleolithic villages, to be sure. If savers in Japan cant find enough young people to lend to, they can lend to the young people of other countries. The rest of the world lent the US up to $1 trillion a year in 2007. The rest of the world thrust its savings upon the United States, leading to cheaper lending rates and a bubble in home prices. Americans in turn came to expect that appreciation of capital assets made savings unnecessary. Americas savings rate collapsed as the current account deficit (or capital account surplus) expanded.
Demographics isnt quite destiny. By calling attention to underlying causes, I do not mean to excuse the cupidity and fraud that attended the sale of $2 trillion of bonds backed by sub-prime mortgages with fanciful credit ratings, and similar incompetence. The fact that there wasnt enough wheat to go around does not excuse the baker for surreptitiously putting sawdust in the bread. But in this case there werent enough returns to satisfy all prospective investors, because there werent enough young people to earn those returns. The shrinking contingent of young people of our metaphorical Paleolithic village came back from the harvest without enough grain to feed the old people, so they added sawdust. The effects of the sawdust show up some time later in the form of malnutrition, at which point the tribe engages a shaman (a financial expert, that is), to shake rattles and cast bones. That makes everyone feel a bit better, for a short while.
America has roughly 120 million adults in the 19-to-44 age bracket, that is, people in their prime borrowing years. That is not a large number against the 420 million prospective savers in the aging developed world as a whole. There simply arent enough young Americans to absorb the savings of the rest of the world. In fact, there arent enough young Americans to absorb the savings that America should generate internally. American demographics are healthier than those of the other developed countries, but not by a reassuring margin.
Here is the demographic dilemma underlying Americas financial problems:
1) Americans counted on capital gains in homes and to a lesser extent in equities to fund the largest wave of retirements in American history, and these gains have vanished. Many Americans will thus not be able to retire.
2) Americans need to rebuild their finances, that is, to save, just when their incomes are falling and unemployment is rising.
3) Home prices are not likely to recover in the foreseeable future because demographics are against them. Empty nesters are increasing as a proportion of the population, which is why one academic study forecasts a 40% oversupply of large-lot single family homes by 2025.
If Americans save rather than spend, consumption and output will fall further, according to the conventional economic wisdom. That is why both the Bush administration and the incoming Obama administration offer fiscal stimulus, that is, throwing money out of helicopters to encourage consumer spending. It isnt going to work.
On Dec. 5, the Bureau of Labor Statistics reported the sharpest fall in employment since 1974. In fact, the three-month average of employment change is the worst on record. What Americans have discovered is that an economy based on opening boxes from China and selling the contents at Wal-Mart, and selling homes back and forth, is highly vulnerable. America does not need as many people to sell homes or to open Chinese boxes, and businesses are laying such people off. Service jobs are vanishing just at the point that tens of millions of prospective retirees will be looking for just the sort of jobs that older people seek when they cannot fund their retirement selling houses, or manning a department-store counter. Wages will fall as older workers seek employment of any kind rather than retire. This effect will be far greater than the impact of immigration on American wages.
American households will cut their consumption further, voluntarily, or because financial institutions cut their credit-card limits. Falling mortgage rates may slow the decline somewhat, but not stop it. Service employment will fall further, particularly as state and local governments find that the collapsing real-estate tax rolls do not justify the generous staffing of past year, and that will lead to further consumption cuts. Businesses will not borrow when investment-grade companies pay 9% for long-term money and speculative-grade companies pay 20%and that is a real interest rate, for no-one can raise prices in this environment.
Meanwhile the U.S. Treasury will borrow at a $1 trillion annual rate during the fourth quarter of 2008, and at a considerably higher rate next year, depending on how much the new Administration chooses to spend. With $8.5 trillion of federal support already in place through loans, investments, securities purchases and guarantees, the contingent liabilities of the Federal government are enormous, and no doubt will grow further. Treasury borrowing will vacuum up the worlds diminishing fund of available capital keep economic activity depressed.
Americas economy may remain depressed for years. There arent enough young people in the developed worldthe consequence of the collapse of religious faith, in my view. In the example of the aging village, things dont get better, ever, at all, unless more young people can be found. John Maynard Keynes thought that the animal spirits of entrepreneurs were the source of economic growth. Even animals, though, require the presence of prospective prey, and the necessary (if not sufficient) condition for the revival of animal spirits is the presence of sufficient young people.
The only major source of young people is the Third World. Some years ago Cardinal Baffi of Bologna suggested that Europe seek Catholic immigrants from Latin America. In a small way, something like this is happening. Half the working population of Ecuador has left the country, mostly for Spain. From the American vantage point, it may seem odd for the Europeans to wish themselves inundated by Latin American immigrants, but the alternative for Europe is to get immigrants from Africa and the Middle East. All told, Latin American Catholics are a better fit. Most of Europe has reached a demographic point of no return where nothing but immigration will avail it.
The origin of the crisis is demographic, and its solution is demographic. To break the vicious circle, America needs to find productive young people to whom to lend. There are two ways this might be accomplished: immigration or exports. East Asia has almost 500 million people in the 19-to-40-year-old bracket, half again as many as the entire industrial world. The prospect of raising the productivity of Chinese, Indians, and other Asians opens up an entirely different horizon for the American economy. Since the Asian financial crisis of 1997, Asians have invested their savings in the United States. In theory, the opportunities for investment in Asia are limitless, but political trust, capital markets, regulatory institutions, and other preconditions for such investment have been inadequate.
The arithmetic shows that the demographic imbalances cannot be addressed within the confines of one countrys economic policy. How and whether the capital of aging Americans (and citizens of other industrial countries) will engage the labor of young Asians is difficult to envisage. If America fails to do so, its economic misery will persist for a very long time. America will have to engage China, India, and other Asian countries in a very different way than in the past and understand its economic policy in a far more global fashion than ever before.
Spengler is the pen name of an essayist for the Asia Times Online. His archive can be found here.