THE ECONOMIC EFFECTS of a DECLINING POPULATION by FRANCOIS LAFITTE Itstroduction I5-64) Will Grow Older
Total Page:16
File Type:pdf, Size:1020Kb
THE ECONOMIC EFFECTS OF A DECLINING POPULATION By FRANCOIS LAFITTE Itstroduction I5-64) will grow older. Between I89I and AWELL-CONCEIVED population I937 its average age rose by 24 years, from policy cannot be elaborated unless 34-3 to 36-9 years. In the coming forty the most careful and objective assess- years Glass's projections suggest a further ment of the consequences of present popula- ageing of between 3j and 6 years. Wil this. tion trends is first attempted. If we wish to affect the productivity of the worker ad- modify the British demographic situation versely ? We do not know, but, since the' we have to know why it needs modifying, whole trend of industrial technique is away and in what direction it should be guided. from types of work involving great physical The consequences of differential fertility strength, I doubt whether any possible and mortality are the main concern of deterioration of productivity due to ageing eugenists, and less attention has been of the working population could not be made devoted to the possible effects of changes in up for by improvements in health and work- age composition and total numbers. The ing conditions. In any case, productivity present article is limited to a discussion of per operative employed in Britain rose by the latter in relation to Britain's economic 7 per cent in I924-30 and by at least 20 per future, and is written in lieu of a review of cent in I930-35, whilst in the U.S.A. physical W. B. Reddaway's The Economics of a output per man-hour in industry rose by 27 Declining Population (I939)*, the first sys- per cent in I929-35. The advances in tematic study technique which made possible such stupen- of the subject in England. dous progress in productivity are far more important than any adverse effects which Human Needs and Resources might result from the ageing of the working If we ignore the existing economic arid population. social system, population trends down to The objective needs-resources situation is, I980 give no cause at all for alarm. Smaller therefore, reassuring. Why worry about numbers mean more material resources per population trends at all ? Because between head, the ratio of active workers to depen- human needs and their satisfaction by use of dants does not deteriorate, and there is no the available human and material resources danger of increasing average age affecting there stands a complex system of economic the productivity of labour. The new pro- and social relations which must be taken into jections into the future of population trends account. Thus, in I93I there were 23-l in England and Wales made by Glass (1940) men aged 2I-54 per I00 of the population, suggest that the ratio of men aged 20-54 to but I2 per cent of the men in these age the total population to be maintained is groups were available for work but could hardly likely to vary at all in the four de- find no one to employ them. While the effect, cades that lie ahead of us. If the war kills of population trends upon the primary off a proportion of this labour force, it is relationships between our society and our equally likely to bring about a corresponding material resources may be insignificant in reduction of dependants, young and old one or two generations, their effects upon alike. the superimposed economic and social rela- But the working population (age groups tionships within our society may be of great * Allen & Unwin, 8s. 6d. importance. 121 122 THE EUGENICS REVIEW It is, therefore, necessary, as Reddaway Reddaway, requires the intervention of a argues, (a) to make an analysis of the third factor, " something which will create economic system, and (b) to assess the im- extra incomes and so extra demand, without portance of population trends as one of providing a simultaneous increase in the many factors which influence the working volume of goods to be bought." Expansion of the economic system, on the assumption of the production of producers' goods fulfils that the system will continue more or less this function. as at present. This assumption is necessary, But capital outlay is not undertaken by although we may be certain that the system business men unless they expect an adequate will change, because we cannot predict such level of profits. Economic recovery, in our changes, and because only thus can we see the present economic system, thus depends upon general shape of coming problems and the the foresight, imagination and " confidence " sort of changes we ought to welcome and of a numerically small but economically all- work for. important group of people known as entre- preneurs. Their " confidence " is a fragile The Economic System thing, (a) because no one can forecast (I) Capital Outlay and Economic Progress business conditions more than a year or Following Reddaway and Keynes, I take two ahead, (b) because they depend for their the view that capital outlay (the " propensity capital on banks, and on the " investing to invest ") plays a key role in the economic public" who may be even more influenced system. Economic depression may be re- by short-term considerations than the busi- garded typically as a state of affairs in which ness men. Unfortunately for the mass of the level of consumers' demand anticipated ordinary folk, the " confidence " of entre- by entrepreneurs appears too low to inspire preneurs is exposed to a constant tendency in them confidence in the profitability of new for the " marginal efficiency" of capital- net capital outlay, which, if undertaken, i.e. the profitability of investment-to would, by the mechanism of the " multi- decline. The accumulation of capital itself plier," expand production approximately tends ultimately to diminish the " marginal to conditions of full employment. Instead, efficiency" of capital. The more plentiful capital and labour remain unemployed capital becomes, the lower tends to be the because entrepreneurs do not anticipate any net yield which the next capital goods pro- profit from expanding production. Although duced will give to the entrepreneur, unless there are many methods of effecting the counteracting forces simultaneously create a economic expansion necessary for recovery, new and proportionate demand for net addi- the surest, indeed, the classical method (as tional capital outlay. " Capital has to be kept Reddaway points out) has been a direct scarce enough in the long period," says expansion of the production of capital goods, Keynes (I936), " to have a marginal effi- producing an additional flow of wages and ciency" sufficient to induce entrepreneurs a rise in demand for consumers' goods to to continue producing new capital goods. which the consumption goods' industries then He points out that respond. Expansion of the consumers' goods industries depends on the level of consumers' " of two equal communities, having the demand, which can, of course, be raised by same technique but different stocks of an expansion of the consumers' goods in- capital, the community with the smaller dustries themselves. But recovery on these stock of capital may be able for the time lines would be slow and uncertain, since some to enjoy a higher standard of living than of the additional purchasing power would be the community with the larger stock; saved and the expansion in expenditure though when the poorer community has would be less than the expansion in produc- caught up the richer . then both alike tion of consumption goods which generated will suffer the fate of Midas." it. A really convincing advance, argues Thus, although from the objective needs- THE ECONOMIC EFFECTS OF A DECLINING POPULATION I23 resources point of view, a greater quantity of " In circumstances of such rapid techni- socially useful capital is invariably prefer- cal progress accompanied by a demand able to a smaller quantity, man-made which is no greater than can be met by an obstacles to consumption may convert this unchanged value of plant, it is probable, accumulation of material wealth into a cause both here and in America, that the deprecia- of poverty. tion allowances currently set aside by Hitherto there have been counteracting manufacturers are sufficient to pay for all, forces which succeeded in keeping capital or nearly all, of the cost ofnew plant without scarce enough in the long run-by expanding requiring to be supplemented out of current the demand for it-to maintain its " mar- net savings. This factor is a further aggra- ginal efficiency." These forces were (a) vation of the contemporary problem of technical advance (i.e. new knowledge em- finding a volume of profitable new net bodied in inventions, improved organization investment sufficient to maintain equili- of production and in a labour force trained brium with the readiness to save.... It to apply new methods) ; (b) steady and rapid is certain that in the last quarter of a growth of the home population (i.e. ex- century such a state of affairs has never pansion of the internal consumers' market); existed, apart from very brief periods in (c) expansion of foreign trade (i.e. expansion abnormal conditions, in any industrial of the number of overseas consumers em- country in the world, except perhaps in braced in the British economic system as the United States in i928." customers or as borrowers) ; and (d) the rise Similarly Cohn Clark (I937) has shown in the standard of living (i.e. rise in the level that " of the remarkable gains in productivity of consuming power per head. This factor which have been made since I9I3, nearly the was largely a function of the first three). whole has been lost" [in the form of increased Prolonged stagnation of any one of these unemployment].