There has been much discussion in the developed world over the last decades among economists and policy makers concerning their ageing populations. Recent discussions on CBC Radio's 'The Current', as well as treatment of the issue by other news outlets as it concerns Japan are a striking demonstration of the fear of the unknown future. Analysts are watching with a keen eye, as Japan may provide a litmus test as to how well modern democracies and economies are able to weather the demands of an ageing and shrinking population.
Compared to Western nations, Japan's immigration policy is non-existent, and Japan features near the bottom of the list in 'Total Fertility Rate' or TFR, regardless of whose doing the math. Since 2005, deaths outnumber births in Japan. Projections along these rates vary, some stating that by 2055 the population will have shrunk by 30% which represents more than 30 million people. While the question of what Japanese society will look like in two or three generations as its population shrinks is fascinating, the fears stemming from this issue pertain mostly to the ageing of Japan's shrinking population, which is expected to continue.
The implications of an ageing population are well understood: Fewer working people paying less taxes to support more and more pensions and social services will certainly be the trigger for future attempts to reform pension, health and welfare systems, etc., which are already the point of heated debate in developed nations. Witness recent rioting in France over pension reforms and the raising of the retirement age from 60 to 62, or G.W. Bush's failure to enact pension reforms in 2005 amid resistance from organised labour and the AARP. Any shift in the status quo represents a shift in wealth, privilege, and the potential for both, and will be opposed doggedly by those groups seeing themselves as the losers in the trade. The real question is, how can a democratic nation cope with growing divisions along the lines of age. One may wryly consider that rollbacks in pensions and social programs will occur in democracies as soon as enough baby-boomers are dead or too senile to vote in their own interests.
Japan's is a special case however, and Western nations will take their cues from how Japan deals with its population problem at great risk. Japan's is an export-based economy, making it dependent on foreign purchasing of their goods. As their work force shrinks, so will drastically the total production and total income of their export sector, which props up household incomes, the tax base and social services, as well as the stock market and thus the private investments of its citizens. Service economies, diversified and net importers of finished goods, such as the US, Canada and Europe, will not suffer in the same way. These Western economies may suffer a lack of spending and conspicuous consumption in the retail sector, but they are not dependent on net inflows of currency in the same way that Japan is.
There is, however, reason to hope. To allow the population to shrink as it ages may not be as bad as some predict. GDP will certainly fall allong with a marked population decline, but it is less clear that per-capita-GDP would also fall. The same can be said for almost any statistic, be it productivity v. productivity-per-capita, etc. While Western nations invite immigration to counter low birth rates, their economies must grow to maintain, let alone improve, average living standards as population rises. Recent economic hardships demonstrate that this is not always possible. In a vacuum, if Japan's population were to shrink by a fifth, then the remaining four fifths would be left to split the fifth of the pie left behind, enjoying the resources which previously accommodated everyone. With proper stewardship of Japan's available resources and economy, something along those lines may be possible. While there may be less money around to buy things, there will be less demand on fixed assets such as land and real-estate, as well as on other domestic markets. Incomes may increase as Japanese firms compete in a shrinking market of Japanese educated workers, technicians and specialists.
To what degree will future Japanese generations be willing to honor the agreements and obligations of past governments? Again, the question is, will democracy in such hugely populated jurisdictions allow for enlightened and sustainable policy? The problem may not at all be the shrinking or ageing of a population, but the political structure's ability to handle the changing demography. Japanese politicians are avoiding the issue for all the wrong reasons. With so many vested interests, with so many people with so much to lose, a vocal minority may win the day, as they often do, to the detriment of sustainability, good governance, and people at large.
The truth is that there is no example in history of how a modern economy or modern democracy will react to a shrinking population. There are sure to be "shrinking" pains, as pains, strife and unrest happen during any major demographic shift. In the most pessimistic of predictions for Japan however, there is a lack of creative and inspired thinking.
Read/ listen to stories about this issue:
http://www.cbc.ca/thecurrent/episode/2010/11/16/nov-1610---pt-2-japans-population-crash/
http://in.reuters.com/article/idINIndia-49967220100708
http://www.businessweek.com/lifestyle/content/aug2010/bw20100812_825983.htm
No comments:
Post a Comment