Simon Leitch*

Brisbane, February 16, 2016 (Alochonaa):Japan remains stuck in recession. If you have been monitoring the Japanese economy for the past quarter century, you may have noticed that ‘recession’ is now one of the three default settings of the Japanese economy – the other two are ‘stagnant’ and ‘anaemic.’ A series of prime ministers have attempted to restore Japan to growth by introducing some limited domestic reforms, yet all have failed. Japan’s central bank has attempted to create growth by manipulating monetary policy, without much success. It now appears set to pay people to borrow money as it pushes interest rates into negative territory.

Shinzo Abe, the father of ‘Abenomics,’ would appear to be latest leader to crash into the harsh realities of capitalism. His signature economic policies are yielding nothing but occasional ripples across the stock market and cheap finance for bankers. The initial slide of Japan’s economy in the early 1990s may have been the result of several factors but it is now hitting up against one of the great certainties of economics – sustainable economic growth can only be achieved with growing workforces and growing markets. Japan’s population will fall over the coming decades and its economy will fall with it. It is a mathematical certainty with implications that policymakers around the world are finding hard to accept or overcome.

Throughout world history, no country has ever achieved long-lasting economic growth without continuous population growth. The two variables are inseparable because there must always be more people working than retiring, and more consumers must always be in the pipeline to ensure rising returns on investment. By manipulating exchange rates, interest rates, business regulations and domestic industries, states can and do affect growth rates. Nevertheless, no major state has ever overridden the problems associated with the decline in their workforce caused by the aging, then shrinking, of their population. Japan will not return to high or moderate growth rates any time soon.

Japan is not the only country in East Asia facing the economic consequences of a demographic crisis. South Korea’s population has also stagnated and China has gradually been tearing down its decades-old ‘one child’ policy to counteract its demographic decline. Some European countries, most notably Italy and Russia, are also staring down the barrel of the geriatric bomb, and many other countries in the West are presently only maintaining population growth through immigration. The choices facing these states are obvious – grow the population or see the economy shrink and the expenses in health and aged care rise disproportionately. This is the conventional wisdom handed down by economists, at least, and it is unambiguously free market capitalism combined with longer human lifespans that causes this dilemma.

Stunningly, almost no mainstream economists, policymakers or bureaucratic officials seem to want to talk about the obvious need to alter those two choices and plot out a third way (one that doesn’t involved simply denying government money to the elderly to balance the budget). If the choice facing national economies under modern capitalism ultimately comes down to either embracing unending population growth or allowing lengthy economic recessions, the choice cannot be the former. Unending population growth is impossible in a finite world with finite space. The point at which maximum sustainable population will be reached is as debatable as it is irrelevant – the certainty of the outcome is all that matters for the purposes of how we organise society to cope with it.

Yet even as we watch countries like China and Japan grapple with the economic and social consequences of the interplay of demographics and capitalism, most people remain either ignorant to the dangers or in denial of the problem. Recently, Japanese policymakers admitted that they need more workers if they are going to revitalise the economy, hence, for the first time, Japan is seriously considering allowing the entry of significant numbers of immigrants. After all, what harm could there possibly be to just having more people? And, presumably, when the immigrants get old there will just be more, always more, or perhaps by then Japan’s domestic growth rate will have returned. More, always more, problem solved.

China, being a lot poorer than Japan, may have had fewer choices but their decision to battle their demographic challenges through removing the one child limit shows an equal lack of imagination. At some stage that policy will either return, due to resource constraints, or China will stagnate like Japan. In Australia, the ageing population causes some politicians and business lobbyists to continually champion the idea of higher immigration levels leading to what has become known as the ‘big Australia’ concept. If Australia doesn’t come close to doubling its population by mid-century, we’ll have to confront the ageing population and join Japan in the demographic recession. As no one wants to do that, we’ll probably just double the population via immigration. If that doesn’t sound like a good idea you might not want to think about the logical extension of the principle to the next half-century, or the one after that.

The issue of population control is controversial, and rightly so. If we are talking about managing our populations, not just our interest rates or tax systems, then we are talking about an elementary shift in governance which will creep into many aspects of our lives and affect us in ways we will not like. Still, the fact that we will not like it does not make it any less necessary. We live in a finite world and the end to growth is, therefore, inevitable. We need to learn how to manage a steady state economy with the minimum of harm, whilst there is still time, resources, and flexibility in the system to utilise.

And yet, as salient this issue is, and as historically and logically obvious as the economic and demographic problems are, I doubt we will see any fundamental reformation of our economic system in my lifetime. We will limp through and leave the heavy lifting to future generations, when it will be more difficult for them to adapt. This may seem like pure cynicism but it is based on my observations of how the vast majority of politicians and business groups view, or rather, fail to view, the relationship between economics and population control. For an example, observe this ‘debate.’

In the video above, the debate is ostensibly about Australia’s population in the future and discussion turns to whether or not immigration should be a key to Australia’s future growth. Dick Smith, a proponent of environmental sustainability, argued that Australia shouldn’t have more immigrants because we needed to learn to live in a finite country. Battlelines drawn, you would probably expect the other guests to tackle this point, yet they systematically failed to do so. One guest, in response to Dick Smith, argued that Australia should have more immigrants because Australia is an immigrant country (sustainability was not mentioned). Another guest argued that Australia should let more immigrants in because Australia is a good place for immigrants (sustainability was not mentioned). Amanda Vanstone, the former Minister of Immigration, argued that Australia should accept immigrants because we were good at settling them (sustainability was not mentioned). No one tackled Dick Smith’s point – their arguments, as is normal, were irrelevant tangents that collectively compose a lexicon of denial.

Eventually, after Dick Smith again pressed the point about the obvious problem of infinite growth in a finite world, and was treated as though his argument was both wrong and little bizarre, Amanda Vanstone, a very smart lady, did come up with a counter-argument. She said that Australia would just deal with the population problems in the future – that was her solution, imbued with that wonderful 20^th century spirit of pass the buck. A debate about population and economic growth, the greatest structural dilemma of modern capitalism and future government, was resolved by ignoring it, as usual.

Humans have a remarkable capacity for self-denial when it is convenient, and even very smart people are able to delude themselves that never ending growth is possible if the free market could just do its work, or that some future technology will save us because it simply must – after all, if it doesn’t that would be bad, so it must and, therefore, it will. When Sir David Attenborough proclaimed that anyone who believed in the possibilities of infinite growth in a finite world was either mad or an economist, his words fell conspicuously flat on anyone tasked with managing actual economies.

The one positive in the case of Australia is that countries like Japan and China, with their higher resource constraints and more immediate problems, will eventually provide many policy lessons. These countries will be some of the first models of success or failure to find a new economic formula. Whether or not we recognise those lessons in time to minimise the consequences is, however, another question entirely.

*Dr. Simon Leitch is the Editor in Chief,  Foreign Policy and International Affairs, Alochonaa. He taught International Relations and Security Studies at Griffith University.  His research interests are in foreign policy and strategy with a particular interest in the interaction of the great powers.

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