Demographics and the Dustbin of History

Karl Zinsmeister's essay Old and In The Way presents a startling — but all too plausible — forecast of Europe's future. To the now-familiar evidence of European insularity, reflexive anti-Americanism, muddle, and geopolitical impotence, Zinsmeister adds a hard look at European demographic trends.

What Zinsmeister sees coming is not pretty. European populations are not having children at replacement levels. The population of Europe is headed for collapse, and for an age profile heavily skewed towards older people and retirees. Europe's Gross Domestic Product per capita (roughly, the amount of wealth the average person produces) is already only two-thirds of America's, and the ratio is going to fall, not rise.

Meanwhile, the U.S population continues to rise — and the U.S. economy is growing three times as fast as Europe's even though the U.S. is in the middle of a bust! Since 1970 the U.S. has been more than ten times as successful at creating new jobs. But most impportantly, the U.S.'s population is still growing even as Europe's is shrinking — which means the gap in population, productivity, and economic output is going to increase. By 2030, the U.S will have a larger population than all of Europe — and the median age in the U.S. will be 30, but the median age in Europe will be over 50.

Steven den Beste is probably correct to diagnose the steady weakening of Europe as the underlying cause of the increasing rift the U.S. and Europe's elites noted in Robert Kagan's essay Power and Weakness (also recommended reading). But Kagan (focusing on diplomacy and geopolitics), Zinsmeister (focusing on demographic and economic decline) and den Beste (focusing on the lassitude of Europe's technology sector and the resulting brain drain to the U.S.) all miss something more fundamental.

Zinsmeister comes near it when he writes "Europe's disinterest in childbearing is a crisis of confidence and optimism.". Europeans are demonstrating in their behavior that they don't believe the future will be good for children.

Back to that in a bit, but first a look on what the demographic collapse will mean for European domestic politics. Zinsmeister makes the following pertinent observations:

Percentage of GDP represented by government spending is also diverging. In the U.S. it is roughly 19% and falling. In the EU countries it is 30-40% and rising. The ratio of state clients to wealth-generating workers is also rising. By 2030, Zinsmeister notes, every single worker un the EU will have his own elderly person 65 or older to provide for through the public pension system. Chronic unemployment is at 9-10% (twice the U.S.'s) and rising. Long-term unemployment and drone status is far more common in Europe than here. In Europe, 40% of unemployed have been out of work for over a year. Un the U.S. the corresponding figure is 6%. Zinsmeister doesn't state the obvious conclusion; Euro-socialism is unsustainable. It's headed for the dustbin of history.

Forget ideological collapse; the numbers don't work. The statistics above actually understate the magnitude of the problem, because as more and more of the population become wards of the state, a larger percentage of the able will be occupied simply with running the income-redistribution system. The rules they make will depress per-capita productivity further (for a recent example see France's mandated 35-hour workweek).

Unless several of the key trends undergo a rapid and extreme reversal, rather soon (as in 20 years at the outside) there won't be enough productive people left to keep the gears of the income-redistribution machine turning. Economic strains sufficient to destroy the political system will become apparent much sooner. We may be seeing the beginnings of the destruction now as Chancellor Schröder's legitimacy evaporates in Germany, burned away by the dismal economic news.

We know what this future will probably look like, because we now know how the same dismal combination of economic/demographic collapse played out in Russia in the 1980s and 1990s. Progressively more impotent governments losing their popular legitimacy, increasing corruption, redistributionism sliding into gangsterism. Slow-motion collapse.

But there are worse possibilities that are quite plausible. The EU hase two major advantages the Soviets did not — a better tech and infrastructure base, and a functioning civil society (e.g. one in which wealth and information flow through a lot of legal grassroots connections and voluntary organizations). But they have one major disadvantage — large, angry, totally unassimilated immigrant populations that are reproducing faster than the natives. This is an especially severe problem in France, where housing developments in the ring zones around all the major cities have become places the police dare not go without heavy weapons.

We've already gotten a foretaste of what that might mean for European domestic politics. At its most benign, we get Pim Fortuyn in Holland. But Jörg Haider in Austria is a more ominous indicator, and Jean-Marie Le Pen's startling success in the last French presidential elections was downright frightening. Far-right populism with a racialist/nativist/anti-Semitic tinge is on the rise, an inevitable consequence of the demographic collapse of native populations.

As if that isn't bad enough, al-Qaeda and other Islamist organizations are suspected on strong evidence to be recruiting heavily among the North African, Turkish, and Levantine populations that now predominate in European immigrant quarters. The legions of rootless, causeless, unemployed and angry young men among Muslim immigrants may in fact actually be on their way to reifying the worst nightmares of native-European racists.

One way or another, the cozy Euro-socialist welfare state is doomed by the demographic collapse. Best case: it will grind to a shambolic halt as the ratio of worker bees to drones goes below critical. Worst case: it will blow itself apart in a welter of sectarian, ethnic, and class violence. Watch the frequency trend curve of synagogue-trashings and anti-Jewish hate crimes; that's bound to be a leading indicator.

The only possible way for Europe to avoid one of these fates would be for it to reverse either the decline in per-capita productivity or its population decline. And reversing the per-capita productivity decline would only be a temporary fix unless it could be made to rise faster than the drone-to-worker ratio — forever.

Was this foredoomed? Can it be that all national populations lose their will to have children when they get sufficiently comfortable? Do economies inevitably grow old and sclerotic? Is Europe simply aging into the end stages of a natural civilizational senescence?

That theory would be appealing to a lot of big-picture historians, and to religious anti-materialists like al-Qaeda. And if we didn't have the U.S.'s counterexample to look at, we might be tempted to conclude that this trap is bound to claim any industrial society past a certain stage of development.

But that won't wash. The U.S. is wealthier, both in aggregate and per-capita, than Europe. A pro-market political party in Sweden recently pointed out that by American standards of purchasing power, most Swedes now live in what U.S. citizens would consider poverty. If wealth caused decline, the U.S. would be further down the tubes than the EU right now. But we're still growing.

A clue to the real problem lies in the differing degrees to which social stability depends on income transfer. In the U.S., redistributionism is on the decline; we abolished federal welfare nearly a decade ago, national health insurance was defeated, and new entitlements are an increasingly tough political sell to a population that has broadly bought into conservative arguments about them. In fact, one of the major disputes everyone knows won't be avoidable much longer is over privatizing Social Security — and opponents are on the defensive.

In Europe, on the other hand, merely failing to raise state pensions on schedule can cause nationwide riots. The dependent population there is much larger, much longer-term, and has much stronger claims on the other players in the political system. The 5%/10% difference in structural unemployment — and, even more, the 6%/40% difference in permanant unemployment — tells the story.

Essentially, Euro-socialism told the people that the State would buy as much poverty and dependency as they cared to produce. Then it made wealth creation difficult by keeping capital expensive, business formation difficult, and labor markets rigid and regulated. Finally, it taxed the bejesus out of the people who stayed off the dole and made it through the redistributionist rat-maze, and used the proceeds to buy more poverty and alienation.

Europeans responded to this set of incentives by not having children. This isn't surprising. The same thing happened in Soviet Russia, much sooner. There's a reason Stalin handed out medals to women who raised big families.

Human birth rates rise under two circumstances. One is when people think they need to have a lot of kids for any of them to survive. The other is when human beings think their children will have it better than they do. (The reasons for this pattern should be obvious; if they aren't, go read about evolutionary biology until you get it.)

Europe's experiment with redistributionism has been running for about a hundred and fifty years now (the beginnings of the modern welfare state date to Prussian state-pension schemes in the 1840s). Until recently, it was sustained by the long-term population and productivity boom that followed the Industrial Revolution. There were always more employed young people than old people and unemployed people and sick people and indigents, so subsidizing the latter was economically possible.

Until fairly recently, Euro-socialist governments couldn't suck wealth out of the productive economy and into the redistribution network fast enough to counter the effects of the long boom. Peoples' estimate of the prospects for their children kept improving and they kept breeding. In France they now call the late end of that period les trentes glorieuses, the thirty glorious years from 1945 to 1975. But as the productivity gains from industrialization tailed off, the demographic collapse began, not just in France but Europe-wide.

Meanwhile, the U.S. was not only rejecting socialism, but domestic politics actually moved away from redistributionism and economic intervention after Nixon's wage/price control experiment failed in 1971. The U.S, famously had its period of "malaise" in the 1970s after the oil-price shock ended our trentes glorieuses— but while in Europe the socialists consolidated their grip on public thinking during those years, our "democratic socialists" didn't — and never recovered from Ronald Reagan's two-term presidency after 1980.

The fall of the Soviet Union happened fifteen years after the critical branch point. Until then, Westerners had no way to know that the Soviets, too, had been in demographic decline for some time. Communist myth successfully portrayed the Soviet Union as an industrial and military powerhouse, but the reality was a hollow shell with a failing population — a third-world pesthole with a space program. Had that been clearer thirty years sooner, perhaps Europe might have avoided the trap.

Now the millennium has turned and it looks like the experiment will finally have to end. It won't be philosophy or rhetoric or the march of armies that kills it, but rather the accumulated poisons of redistributionism necrotizing not just the economy but the demographics of Europe. Euro-socialism, in a quite Marxian turn of events, will have been destroyed by its own internal contradictions.

You are exactly correct linking Japan's deflation to its demographic decline. Young people are the productive and consumptive motor of modern economies. They work, produce, and also need to purchase all of the basics to set up houses and raise families. Japan is one of the oldest societies on earth, and they simply no longer have enough people in the economically dynamic part of their lives to support the demand necessary have a functioning economy.

"take away immigration, and we're europe or japan"

While I agree with this on its face, it ignores a deeper point. Namely, that it assumes that there will always be places somewhere with a growing, surplus population to provide immigrants. The west has adopted a "McCulture" which encourages hedonism and socialism, which discourage having large families.

Immigration is merely a poor band-aid. First of all, there are problems with assimilation. Pouring vast numbers of immigrants into a society may provide lots of bodies, but its not necessarily true that paradise will result. There could be a rise in communal conflict that will cancel out the economic benefits of population growth.

Also, what happens when the third world adopts "McCulture"? What happens when Latin America and India adopt western culture, and start having 1 child per family? Will the world be condemned to a global deflation?

The real answer to this problem is not immigration (which is a temporary, dangerous answer). The real answer is for europe and america to alter our culture in ways that bring back an ethos of 2-4 kids per woman. Then, we get the benefits of a growing population base without the social upheaval of mass immigration.

"The Europeans are like the monkey with their fists in the socialist jar."

Couldn't be said any better than that!

"He said he couldn't wait until European girls were doing him for the price of a Big Mac."

If it's Tuesday it must be the Belgian bimbo! ;-)

"Healthy "tribal" cultures place a variety of carrots and sticks in front of their members to procreate so as to ensure the survival of the tribe."

Part of our TV indoctrinated culture is that teenagers need to act out in defiance against their parents in order to reach the next stage of maturity. Sometimes this leads to things being done and said that aren't patched up for decades. And there's no need to do the patching since the parents are taken care of by Soc Sec and the kids are reinventing the wheel as they start their new careers without "meddling" parents.

Rabid individualism without regards to supporting one's "tribe" is a recipe for social collapse.

"The real answer is for europe and america to alter our culture in ways that bring back an ethos of 2-4 kids per woman."

As far as such a culture goes, what do you think about this idea:

1) Encourage one-earner families. So as not to be painted as a sexist, the one earner could be the husband or wife.
2) Reduce taxes significantly. Most specifically by phasing out the public education system and privatizing retirement programs.
3) The at-home parent is expected to rear and teach the children while managing the families savings and investments. This would be an interesting and challenging enough job to appeal to a lot of people.
4) Kids get quantity time with at least one parent, and quality time with both. The single working parent has more take home pay due to decreased taxes. The kids are smarter because they are home-schooled in coalition with whatever neighboring families they choose. They can even create sports teams!

More time. More money. More kids. How about it?

Study after study has shown that young people tend to SPEND at a higher rate and have a lower rate of saving than the "middle agers," who must expend money for all the costs that children bring. Any marketing professional will tell you this.
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Underpopulation is just as bad, or worse, than overpopulation. The fact that white people have been dumb enough to buy into the latter is sickening.

An admirable position but a tough sell given abortion on demand, cheap and universally available birth control, an anti-child, anti-marriage, anti-family culture, and sky-high marginal tax rates. I think the latter is the biggest factor. When I was a kid (I'm 54) we lived in a Chicago suburb with a predominately Catholic population. A minority of families still had large families. A colleague of my father's had 10 kids. No more than one housewife in four worked.(Divorce was as rare in those days as gay parents are today. At least 90% of the kids in my elementary school class had two married parents living together.) Granted, people accepted a lower standard of living materially, but the typical head of household making $7,500-$10,000 a year was in the 10% federal tax bracket with a $600 annual deduction per child ($8-10K in 2002 dollars), perhaps $10 annually in FICA tax paid on the first $2K of income, no state income tax, a 4% sales tax (which rose to 5% when I was 10 or 11). A typical new home cost $15,000-$20,000 -- 1.5:2 times the average annual income. Then as recently, you could get a mortgage for 5-6%. A typical monthly mortgage payment was $40-50. When my sister or I got sick, our general practitioner treated us at home for a $5 fee when I was small, later rising to $10. An antibiotic might cost $1-2. Most college students were men who attended without charge on the GI bill, because they were World War II or Korean War veterans. GIs got a $200-225 per month stipend to attend college, worth at least $15,000 a year today in pre-tax dollars. On that stipend, you could pay the entire cost of a college education at a public school, support yourself and a wife, and keep a used car running and insured. Is it any wonder fewer people marry today, that parents have children later, and have fewer children?

Study after study has shown that young people tend to SPEND at a higher rate

Correct, Clemenza. Recall what "rate" stands for.

and have a lower rate of saving than the "middle agers," Correct.

Any marketing professional will tell you this.

Yes, but we must understand what "rate" means. And remember that it is not rates but the magnitude that matters for the economy.

Spain has a shot to pull out of this quicksand trap. They are deporting illegals faster than they come in, they are slowly eliminating socialist programs, and have a young, popular, and conservative leader whose name presently escapes me (Aznar?).

Italy's Berlusconi(sp?) is great but I think socialism/communism/fascism/statism runs too deep there.

I foregot to add that marketers is a wrong source to seek information on such issues altogether: except for a very macroeconomic variables, such as discretional spending and inflation, marketers don't care about the economy. For most of them it is a strugle with a consumer in their category and with the competitors in their industry. Most marketers have no clue about macroeconomics to the point of never having taken a course on the subject. It is a bad reference thus.

"Curiouser and curiouser," said Alice.

Two reasons are stated: One is when people think they need to have a lot of kids for any of them to survive. "Them" is children, not parents.
The other is when human beings think their children will have it better than they do. Again, this is about children, not parent.

Which is why I mentioned childbearing as self-protection on the part of the parents. The focus here is on the parents' survival and welfare. Wouldn't you say that this point is independent of the two? Not to belabor the issie, of course.

Which is why I mentioned childbearing as self-protection on the part of the parents. The focus here is on the parents' survival and welfare. Wouldn't you say that this point is independent of the two?

No. The reason for parents to have enough children to guarantee that a few survive, in an environment where mortality is high, is to provide themselves with old-age insurance. That's why your "third" point is simply a restatement of the original first point.

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