Europe 2050: Demographic Suicide

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hat a deafening silence, in front of the demographic suicide of Europe, on the 2050 horizon! The demographic projections of the major regions of the world until the middle of the century are known and re-evaluated every two years by the United Nations and regularly by Eurostat for all the Member States of the European Union -a total of 511 million inhabitants- but it is necessary to be a database specialist to use them. In fact, nobody talks about them, especially in Brussels, where they prefer to prepare reports on technological revolutions, sustainable development or energy transition.

It is up to us to warn -it is our duty-, even though we know that in 2050 we will not be here to complain that we have not been listened to. Contrary to what will happen in North America, which will see its population increase by 75 million inhabitants -around twice less than South America- Europe could stagnate around 500 million people and lose 49 million people in working age in the 20-64 age group, 11 million of them in Germany. Spain and Italy, on the other hand, would lose between 7 and 8 million potential assets, while France could be satisfied with not reaching Germany, something that, however, the United Kingdom would do. A similar perspective cannot make us happy because neighbours are also its main markets: 87% of what is produced in France is consumed in Europe, 70% in the country itself and 17% outside its borders. That is 56% of the 30% that is exported to the world.

THE DEMOGRAPHIC TECTONICS

Other predictions of demographic tectonics through 2050 are not more encouraging: China, Japan and Russia would lose, respectively, 38 million, 20 million and 15 million inhabitants, while India would increase its population by 400 million, surpassing China at least about 300 million. This crisis will be especially significant for the age group between 20 and 64 years: 22 million less in the case of Russia, 20 million less for Japan and 195 million less for China. The United States would see its potential assets increased by almost 20 million in that period.

Europe could stagnate around 500 million people and lose 49 million people in working age in the 20-64 age group. Spain would lose between 7 and 8 million potential assets

Labour force and talent will be needed to compensate for these asset losses. What may be the possibilities? According to the same data, the population of Africa would increase 1,300 million, of which 130 million only in North Africa. That is, the migratory pressure for Europe will be stronger than ever. However, Europe neither is talking nor preparing for this demographic shock -internal explosion and external explosion- as if the demographic tsunami were less important than the wave of numbers. To put an end to this silence, we invite our partners to assume several million climate refugees from Asia or, even more, political and economic refugees from Africa and the Middle East. Let’s say that if 1% of the increase in the African population were installed in France in the next thirty-five years -which is as close to us as 1980-, this would mean 13 million more inhabitants in the Hexagon in the next thirty years and five years, that is, 20% more! If we think of the European Union shaken and weakened in 2015 by a million refugees -mostly for political reasons- it is clear that Europe should start preparing for such situation. It should be inspired by Canada, which does not hesitate to practice a quota policy based on the needs of the work market. And encourage the reactivation of fertility in the Old Continent, because the integration of cultures begins in schools. When there is a lot of sand, the cement does not curdle. In order to receive more sand, more cement is needed, that is, children who speak the language of the country, whatever their skin-colour might be. In short, to remain open to the world, we must reactivate fertility in Europe now. But who talks about family policy in a Europe that allows hotels and tourist complexes only for adults, forbidden to children and that tolerate only domestic animals?

GREY HAIR AND WEAK GROWTH

The media timidly begin to be alarmed that in 2016 for the first time, in Europe, the number of deaths exceeded the number of births. It is interesting to note that this is the case of Germany since 1971, of Italy since 1991, of Spain since 2016, of Russia since 1991, of Japan since 2006. It will be China’s turn in 2028. The phenomenon should not take place in France, or in the United States, until after 2050. The dead cannot have children. The demographic suicide of old Europe is a foretold death, but we are still on time: a good foresight is not forcefully the one that is made, but the one that leads to action to avoid that situation.

To remain open to the world, we must reactivate fertility in Europe now. But who talks about family policy in a Europe that allows hotels and tourist complexes only for adults, forbidden to children and that tolerate only domestic animals?

It is typical to attribute the strong post-war economic growth in Europe to the reconstruction and recovery of the United States. Those glorious three decades coincided with the demographic wave. However, it is not so usual to point out that in the fifties and sixties, when there were no computers and there was no talk of technological revolution, the increase in the apparent productivity of work was two or three times higher than in the eighties and following. How can we not see in this high productivity an effect of the experience curve and the decrease of production unit costs in markets in continuous expansion? Conversely, since the early eighties, economic growth and productivity have been slowing down in the United States, Europe and Japan.

Researchers wonder about the causes of this concomitant slowdown in growth and productivity precisely when the technological revolutions of information and communication -ICT-, of biotechnologies, nanotechnologies or renewable energies and reserves- are more than ever perceptible It is Solow’s famous paradox: “I see computers everywhere except in productivity statistics.” Interestingly, these same researchers do not wonder about the relationship that could exist between this slowdown in growth and the demographic aging of the old developed areas: United States, Japan, Europe.

In Europe and Japan, GDP growth was higher in the eighties than in the nineties: 2.5% compared to 2.3% in Europe, and 4.6% compared to 1.1% in Japan. Over the course of these two decades, GDP growth in the United States exceeded one percentage point to that of Europe. The explanation is in essence demographic -for more than half- given that the deviation of GDP growth per capita is only 0.2 points higher on the other side of the Atlantic than in Europe for the same periods. Indeed, population growth, of the order of 1% per year in the United States, has been two or three times higher than in Europe since the early 1960s. Another part of the explanation for this higher growth of GDP in the United States is to look for it in employment rates and a higher annual work duration. If the Americans advance more quickly, it is because they are more, and they work more.

THE DEMOGRAPHIC TSUNAMI THAT IS HIDDEN

In the European Commission, but also in most international and national instances, the relationship between demography and growth is rarely evoked. Reports on technology, innovation and competitiveness abound. However, man is only approached as human capital and from the perspective of training, considered understandably as an investment and a factor of long-term growth. Demography is treated only from the perspective of aging “above” and the problems that derive from it for the balance of pension systems, spending on health and taking charge of dependency, but almost never with regard to the consequences of aging “below” on growth and on the situation of Europe in the world.

In the year 2000, the ambitious Lisbon strategy for growth and employment was essentially interested on information technologies and the growth economy to ensure the future and the strength of the European Union on the international scene, in the horizon of 2010. Almost halfway through the period, the Wim Kok Report (2004) maintained its focus on the knowledge society and sustainable development for an enlarged European Union, and devoted -and that was a novelty- a small page to the aging of Europe. This could reduce the Union’s growth potential by one point -around 1% instead of 2%- until 2040. But nothing was said about the comparisons of demographic developments in Europe and the United States, a more remarkable forgetfulness even if we consider that these comparisons are systematic for the effort of research, innovation and the measurement of productivity.

THE MULTIPLIER EFFECTS OF DEMOGRAPHY

As Alfred Sauvy said, economists “refuse to see” the relationship between economic growth and demographic dynamics, so they do not seek to verify it. However, the golden age of capitalism and the baby-boom went hand in hand, and the take-off of the United States undoubtedly is also explained by better demographic health. For three decades, its fertility rate has remained at an average of almost 2.1 children per woman, while in Europe it is at 1.5 and the population, in fact also due to the important migratory flows, continues to increase strongly. The comparison of the growth rates between Europe and the United States generally uses the technique to explain long-term differences. We can ask ourselves if there is not also an effect of “demographic multiplier”.

This hypothesis allows to understand better the reasons of the growth and, above all, why the productivity gains of the fifties and sixties have been on average twice as high as in the eighties and nineties, even if marked by technical revolutions, theoretical sources of productivity gains. With the new economy, the question seemed resolved, the United States knowing a period of strong economic growth with gains in productivity -apparent from working- far superior to those in Europe. Was it not the proof that Europe was technologically declining with respect to the United States? We can doubt this explanation now that we know the statistics validated for the past. In the 1980s GDP growth per asset was comparable in the two areas -around 1.5%- with a slight advantage for Europe in that decade. However, since the 1990s, Europe seems to have declined with respect to the United States, whose apparent activity -GDP / active assets- increased more than 2% annually in the 1990s and 1.5% annually until 2007, 1% after the crisis. In the same period, the increase in productivity in Europe went from 1.7% in the nineties to 1% per year between 2000 and 2007, to fall to 0.3% from 2008. The question is obvious: do we have to attribute this gap to the technological gap or the demographic gap? We advance the hypothesis that this last factor plays a determining role, given that the demographic gap is expanding more and more.

DEMOGRAPHIC DYNAMICS AND APPARENT PRODUCTIVITY

The entire population is not active, but the number of hours worked essentially explains the difference in the level of apparent productivity of work per active employee, since Americans work 46% more than the French each year. If they work, it is because there is a demand to satisfy, perhaps also more sustained than in other places due to the demographic expansion. If we renounce the hypothesis of independence between the two variables “GDP per inhabitant” and “population growth”, we can advance a new hypothesis, that of a demographic multiplier that would be at the origin of an important part of the highest productivity gains in United States than in Europe. In general, economists -referring to the famous Cobb-Douglas production functio – explain growth by three factors: capital, work, and technical progress. Let’s go back to the sources: productivity is the residue of supplementary growth, which is not explained by the increase in the factors of production (capital and work). In the absence of something better, we attribute this increase in GDP growth by assets to technical progress (in this case, the expansion of information technologies), which is a positive way of pointing out the unexplainable waste.

The question is obvious: do we have to attribute this gap to the technological gap or the demographic gap? We advance the hypothesis that this last factor plays a determining role, given that the demographic gap is expanding more and more.

GDP growth depends on two factors: GDP per active occupied and the number of active people. The increase in GDP per active asset is in fact much higher in the United States than in Europe since the mid-nineties. In fact, the variation of GDP per asset (apparent work productivity) is more significant than the number of active workers, and employment opportunities increase in an expanding population. Technical progress, learning and economies of scale combine their effects to reduce unit costs, improve quality, in short, increase added value, that is, GDP per asset. The multiplier of demographic dynamics continues to play in favour of the United States -certainly less than in the 1960s- but not anymore for an aging Europe. Economists do not find this demographic multiplier because they do not look for it. However, this hypothesis would shed more light on the decline in GDP growth per asset, observed between the early 2000s between the United States and Europe, than the delay in information and communication technologies. The long-term growth of developed countries is condemned by demography: without human capital, growth is limited by lack of oxygen.

THE TREES AND THE FOREST

With a conjunctural indicator of fertility close to 1.5, Europe will have tomorrow generations of active young people a third less numerous than the current ones. A fall in the number of births for a country is equivalent to what a reduction in investment means for a company: it allows you to benefit, for a time, from a more comfortable treasury, at the price of serious subsequent problems. It follows that the policy Family culture that supports population growth is a long-term investment. Some might argue that the birth deficit in Europe and its negative impact on future economic growth and rising living standards could be rewarded by increasingly large migratory flows. They get excited, as shown by recent events such as the departure of the United Kingdom from the European Union, and also show the reactions of the populations of almost all European countries to the flows of migrants from Africa and the Middle East.

European countries are like forests whose trees, at full capacity for forty years, have reached maturity without foreseeing their replacement by young shoots. Now, to invest and consume, we must have confidence in the future and we need to equip ourselves, characteristics that, unfortunately, fall back with age. The springs of dynamism are the same in the economic and demographic fields: the pleasure of living is expressed both by the economic initiative and by having children. The enterprise spirit is a cousin of the family spirit!