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Generational selfishness

By Greg Barns - posted Thursday, 19 August 2010

The outsourcing of public policy to the western suburbs of Sydney and southeast Queensland has many undesirable consequences, and one of these is the fact that our politicians feel compelled to uttering platitudes about reducing population growth.

Many people who live in those areas selfishly and ignorantly assume that if Australia were to keep people out then their lives would improve. They blame clogged roads on migration and population growth when in fact the real culprits are their own NIMBYism and the failure of state governments to lead in facilitating decent urban growth strategies.

Let’s make it clear to those who think reducing Australia’s population, or at least slowing its growth, will somehow make the nation more comfortable in some way - it will not. It will instead turn Australia into Japan - a nation in decline because it is suffering from declining population, an ageing society, and a xenophobic attitude to migration.


Furthermore, Australia cannot afford, on economic growth grounds, to implement strategies that will result in close to zero population growth.

The Treasury’s 2010 Intergenerational Report Overview notes; “Countries with low population growth face more extreme ageing challenges, with greater demands for publicly funded social services and a reduced ability to meet these challenges. Japan's low rate of population growth is projected to result in a doubling of the number of people aged 65 or older relative to those of working age.”

Japan is an affluent nation - 20 years ago there were pop economists and others writing books about how Japan Inc was going to take over the world. No one would suggest that today, and one of the major reasons why is because that country refuses to embrace population growth. Beware Australia!

As a report in leading Japanese news service Asahi Shimbun observed on Monday this week: “The portion of Japan's GDP in the global economy declined from 14.3 per cent in 1990 to 8.9 per cent in 2008. In the annual rankings of national economic competitiveness of the Switzerland-based think tank IMD, Japan also fell from first in 1990 to 27th this year.” One of the major factors in this story of decline is zero or negative population growth.

But the neo-Malthusians out there will tell you Australia is not Japan and we can avoid a similar fate. What are they smoking? It is a simple fact of life that when people age they cost the community more in terms of their increased access to the health system, and because they exit the workforce - and the next generation will pick up much of the tab for this cost. If the numbers of working age individuals in Australia are declining then the tax burden on those who are in that category increases accordingly.

There is also a strong broader economic case to be made for strong population growth in Australia. A society which decides to put up barriers of entry to migrants reduces its capacity for innovation, new business opportunities and therefore wealth creation. As celebrated Nobel Prize winning economist Gary Becker has said, “larger populations stimulate greater investments in knowledge that tend to raise per capita welfare”.


Becker illustrates his point this way. “For example in the case of new drugs, manufacturers have greater incentive to invest in discovering treatments for common rather than rare diseases since by definition common diseases have larger markets. More generally, expenditures on innovations tend to be more profitable as population and the total demand for new products rises since it is then more possible to recoup the often very large initial costs of developing the products. Drug producers and other innovators charge much more than the cost of producing each unit in order to recoup these development costs.”

It is also noteworthy that Becker in his 2005 musings on population growth touches on another advantage that answers those who argue that Australia, as the driest continent in the world, must reduce the number of people using its resources. As Becker rightly observes in the context of pollution, “It is well documented that local pollution eventually begins to fall rapidly as countries develop and their populations increase because of new discoveries that reduce pollution, and also because more of the incomes of richer countries is spent on controlling the output of pollutants”.

The more Australia encourages the migration of innovative people and the higher its GDP rises, the greater the opportunity for devising technologies and means by which we can expand our population in spite of the fragility of our physical environment.

A debate about limiting population growth is not only laced with and underpinned by generational selfishness but will ensure we bequeath a Japan-like future to generations to come, and will deprive the nation of the spirit of innovation and wealth creation.

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About the Author

Greg Barns is National President of the Australian Lawyers Alliance.

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