November 19, 2011

ITALY: Population Decline Catalyst For Economic Decline

LOS ANGELES, California / Investors' Business Daily / Editorials / November 18, 2011


Italy has an absolute decline in the size of  workforce

Italy's problems have revealed the extent of the euro zone crisis.
Following the collapses in Portugal, Ireland and Greece, and with Italy teetering, the dream of a stable European monetary system is now over. And central to Italy's implosion is its negative population growth — an important lesson for a continent whose citizens are aging at an ever faster rate.
Population growth doomsayers from Thomas Malthus onward — who have claimed that population increases will lead to resource scarcity and disaster — have widely missed the mark, though such predictions continue. And few issues today are as highly ideological and politicized as family planning.
In Europe, population decline — not population growth — has proven a strong catalyst for economic decline.
Italy — along with most of Europe, as some commentators have noted — now faces a perfect storm. Growth is hindered by an ever-increasing debt burden, by a decrease in creative and energetic young workers and by an increasingly older population that has a great stake in preserving entitlement spending. Furthermore, GDP is unlikely to grow significantly while the work force shrinks.
With all of these scenarios in play, sustainable growth in Italy — and Europe — seems unrealistic in the foreseeable future.
With Europe's demographic issues, it is worth revisiting the work of economist Julian Simon. Decades ago, he made the case that people were "the ultimate resource," writing in his book by that name: "The standard of living has risen along with the size of the world's population since the beginning of recorded time." He added: "There is no convincing economic reason why these trends toward a better life should not continue indefinitely."
In the political world, Simon's contemporary, Ronald Reagan, also took a balanced view of population growth.
In 1984, James Buckley, Reagan's representative to the Conference on Population in Mexico City said: "First, and foremost, population growth is, of itself, neither good nor bad. It becomes an asset or a problem in conjunction with other factors, such as economic policy, social constraints and the ability to put additional men and women to useful work. People, after all, are producers as well as consumers."
Population decline is a different matter.
To have producers or consumers, a country must have people — and they are increasingly in short supply in Europe. Italy's birthrate is now estimated at 1.39, and a 2007 National Institute on Aging study noted that Italy — along with France, Germany, Greece, Russia and the Ukraine — has already "seen an absolute decline in the size of their workforce."
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