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Must our population grow to ensure prosperity? No!

Larry Kummer, Editor

Summary: Economists are often criticized for excessive focus on monetary measures for a nation’s prosperity, and too narrow and backwards-looking vision of trends in society. Today we look at example of both: recommendations that Japan increase immigration. These matters affect not just Japan, but much of the world.

Now everything’s a little upside down, as a matter of fact the wheels have stopped.
What’s good is bad, what’s bad is good, you’ll find out when you reach the top
You’re on the bottom

— From Bob Dylan’s “Idiot Wind” (1974)

Contents:

  1. Japan leads us to the future
  2. Japan faces the robot revolution
  3. Why recommend more immigration?
  4. For More Information

(1)  Japan leads us to the future

Fewer people is good news for Japan! (source)

Many economists look at this data and conclude that Japan needs more immigration, otherwise their national income (GDP) will fall along with their population.

Economists prescriptions for Japan show the limits of economics as a guide to public policy. GDP is not the only measure of a nation’s well-being, or even the best. Worse, economists sometimes see only linear trends of the past, blind to future developments visible even today.

(2)  A crowded Japan faces the robot revolution

Japan has been crowded for over a century. Japan’s government has worried about its overpopulation since the Meiji Restoration (population ~3 million) in 1868 (their attempted solution was encouraging emigration to Korea). They had 50 million in 1910; 100 million in 1967, and 127 million today.

Excerpt during periods of great productivity improvement (e.g., during an industrial revolution), growth in total GDP requires a growing population. More housing, more public infrastructure, more consumption. A shrinking population not only requires less of these things, but also a rising dependency ratio (i.e., the labor force falls as a share of the population). All bad things. Hence economists’ advice to maintain or even grow Japan’s population.

 

Best example of smart population policy

Missing from this picture is the new industrial revolution arriving right now. First, we can see the next wave of automation, as computers replace workers in service industries (repeating the waves of automation in farming and manufacturing). Second, automation hits high-skill professions (e.g., law, medicine, finance, journalism). Third, there are new manufacturing technologies to further reduce employment in goods manufacturing and distribution (e.g., 3-D printing).  Fourth, there are hints of even greater new tools in our future — such as AI and robots.

We can only guess at the effect on productivity of all this new technology, but “massive” might be an understatement. Ditto the effect on employment. During past industrial revolutions employment increased (with, however, long periods of disruption). But the evolution of technology shows us that the future often differs from the past. The pace and scale of progress might make this revolution different than the last (shown in this picture; source: Fed):

If the next wave of automation reduces employment, Japan’s shrinking labor force will be a blessing. If the National Institute of Population forecast proves accurate, in 2100 Japan will have 64 million people — the same as in 1930. They can upgrade their labor force to match the new jobs, without a large number of socially disruptive unemployed people. Rising per capita GDP from productivity gains might offset the pain of falling total GDP from fewer people.  Even if it does not, their descendents might prefer a slightly poorer but less-crowded Japan to that of today’s.

Not just less crowded. Fewer people plus less-polluting technology could radically reduce the burden on Japan’s environment. It could become a high-tech garden.

Getting there without disruption will require successfully surmounting many challenges. Their government already looks overwhelmed with debt, growing rapidly. Financing retirement care for an increasingly large aged population looks to be an epic struggle more severe than most wars. Allowing in socially disruptive immigrants will loom as a quick easy fix, disastrous if their jobs then disappear.

Now one of the weakest of the developed nations, Japan might become a leader showing us the best path to a green prosperous future.

(3)  Why recommend more immigration?

A constant through modern history: business owners want immigrants as cheap labor. Usually with little concern with the wider effects: social disruption, social service costs, rising inequality, lower wages for natives. Of course they see that it’s sold on humanitarian grounds (e.g., this NYT op-ed by economics professor Tyler Cowen).

(4)  For More Information

(a)  Articles about Japan’s crisis:

(b)  Posts about Japan:

  1. We are following Japan’s path of decline. The real test comes later this year., 23 June 2009
  2. As Japan sails into the shadows, let’s wish them well and wave good-by, 14 July 2009
  3. Japan can again become the land of the rising sun. We should watch and learn from them., 1 November 2012
  4. Are we following Japan into an era of slow growth, even stagnation?, 18 November 2013

(c)  Posts about demography:

  1. Another front in the geopolitical struggles shaping our world, 3 June 2008
  2. “The Return of Patriarchy“ – a classic article about demography, 5 June 2008
  3. More news about Russia’s demographic collapse, 6 June 2008
  4. From the 3rd century BC, Polybius warns us about demographic collapse, 11 June 2008
  5. The War Nerd discovers van Creveld’s “power of weakness”, and demography, 18 July 2008
  6. Demographic note for today…, 20 December 2008
  7. Reading recommendations – about demography, 28 April 2009
  8. “The Russian Economy and Russian Power” by George Friedman of Stratfor, 2 August 2009
  9. Update about China: a new center of the world, 13 December 2009
  10. Updates on the trends shaping our age, 2 July 2012

 

 

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