Wednesday, January 04, 2017

It is not mating, but the result that is lacking.

In a parody of Donald Trump's campaign slogan, 'Make America Great Again', Professor Stephen Mihm writes that the US economy may grow if they could "Make America Mate Again". The US population grew by 0.7% this year, the lowest since the Great Depression years of 1936 and 1937. This is below the replacement level of birth, at which the population neither grows not contracts. After World War I there was a steep decline in fertility in all western countries. More women went out to work. There were "sharp declines in the formation of new households, as younger people put off marriage and childbearing. This led to dramatic decline in residential construction starting around 1926". This coincided with a precipitous drop in immigration, which fell from 706,000 in 1924 to 23,000 in 1933. There was a baby boom just after World War II which coincided with boom in economic growth. The boomer generation had the best quality of life, not replicated by following generations. The number of young people still living with parents is at the same level as in 1940, which means that consumption driven growth will not happen because of a fall in the number of new households. Donald Trump has promised to reduce immigration. However, birthrates dropped dramatically during the industrial revolution, but growth was dramatic as well. It is wrong to link economic growth to population growth without considering other factors. Supporters of the one-child policy in China claim that it prevented 400 million new births, which resulted in double digit economic growth, as millions of women joined the workforce, bringing labor costs down, so that China became the manufacturing center of the world. The contrast with India, where politicians encourage fertility by providing handouts, could not be starker. An epidemic of plague that wiped out millions of Britons resulted in earnings growing by 250% between the years 1300 and 1450. Perhaps, it is not falling fertility rates in the US which is responsible for low growth. The rapid growth in populations in emerging economies provide cheap labor for manufacturing which cannot be matched by developed economies. The textile industry in Bangladesh is an example of an industry thriving on cheap labor, with poor safety record, but able to pull millions out of starvation. This rapid rise of population is causing rapid global warming, reduction of forests and pushing many species to the brink of extinction. Lastly, is it possible that social support, in the form of benefits, is discouraging people from working and pushing up wages by putting a floor under earnings, like MGNREGA seems to have done in India? With automation and artificial intelligence we definitely need fewer people on earth, which maybe the best solution to America's problems. Hope it happens.

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