Geopolitics

Demographic Disaster? Counting The Risks Of 10 Billion People

A century from now, the global population will finally begin to decline. But before that, the world must deal with the waste created by an exploding overpopulation: How do we hold on until then?

Road to nowhere?
Daniel Fortin

PARIS â€" May the naturally anxious or chronic pessimists be reassured: everything will be a lot better in 100 years. By then, the human population will have started decreasing as a result of the declining birth rate.

Demographers estimate that we can reasonably count on a planet with 4 billion individuals by the end of the 22nd century, compared to 7 billion today. Humanity, with an accumulated two centuries of additional technical progress, will easily adapt to an Earth where the average temperature will have risen by 4 to 5 degrees Celsius.

Of course, some places will have been made uninhabitable because of Fukushima-like nuclear disasters, the mass burying of radioactive waste or the desertification linked to global warming. But others areas will appear once the ice floes have melted, for instance, or as a result of mass urbanization, of which we already know the signs.

If we accept, as Claude Lévi-Strauss did, that the quality of living together is directly correlated to the size of the population, then we have every right to feel glad about this prospect. And yet, there is at least one French economist who has his doubts â€" because even if we believe the predictions, we still need to get there.

Pierre-Noël Giraud, one of France’s most brilliant living economists, has little presence in the media, which is perhaps a good thing since it affords him more time to work and formulate questions like the one posed in his recently published book L’Homme inutile (The Useless Man): How do we handle the transition towards this promising distant future, knowing that there’s 100 years in between?

As part of his analysis, Giraud points out that before we reach the point of demographic decline, we will first have to overcome a paroxysmal period, with a planet inhabited by 10 billion people in 2050. The problem, the author argues, won’t be the depletion of resources so much as the absorption of the mass of discharged waste. The other major challenge will be the capacity of our economies to employ such a vast workforce.

In 1996, 20 years before Thomas Piketty become an economics star, Giraud wrote L’Inégalité du monde (Inequality in the world), in which he demonstrates how globalization, with its indisputable virtues, favored the emergence of low-wage countries and at the same time introduced brutal competition in the "caught up" countries, with the pauperization of our middle classes as a consequence. His new book picks up where the previous work left off.

Nomad v. Sedentary

Inequality, according to Giraud, has now reached its worst form: uselessness, as embodied by the unemployed, people working in precarious conditions or landless farmers, who are reduced to surviving with public or private welfare. That â€" together with the environment â€" is the central problem of our societies, the author argues.

Getting tighter. Photo: Julien Belli

To resolve this, we need to establish the correct diagnostic. The three major forms of globalization, digital, financial and industrial, have led to a division of the active population into two major employment categories: the nomad and the sedentary, he argues. Since globalization and the relocation of companies, the former â€" engineers, financial workers, highly qualified workers, etc. â€" have been opposed on a global level. That needs to change, according to Giraud, who says it's in the best interest of every nation to make this population grow and to keep it from moving elsewhere. Why? Because the nomads tend to have above average wealth and place orders to the sedentary, which are there to provide the former with all the necessary services.

The problem, Giraud argues, is that many countries have failed to maintain a good balance between these two groups. In developed countries, nomads are leaving. And there are too many sedentaries for a reducing market: hence the pauperization, the precariousness and the unemployment. In emerging counties, the opposite is true: nomads are arriving, but not in sufficient numbers to feed a huge mass of sedentaries. Either way, the effects are the same: increasing uselessness.

While there are certainly moral issues at play here, Giraud mostly uses an economic and political lens to form his analysis. The useless human, he argues, represents a huge financial drain on our societies, spurs migration from developing countries, and increases the threat of civil war in more developed parts of the world.

This is why we need to review our economic policies so we can get over this demographical hyper-growth point. But how? There are many, complicated solutions. First, we need a good agreement on climate, Giraud argues. We also need greatly improved financial sector regulations, and deregulation of monopolies so as to improve the lot of sedentary class. In short, we need to conceive our economic policies differently â€" and not gamble everything on a possible, but very uncertain, demographic miracle.

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Economy

Merkel's Legacy: The Rise And Stall Of The German Economy

How have 16 years of Chancellor Angela Merkel changed Germany? The Chancellor accompanied the country's rise to near economic superpower status — and then progress stalled. On technology and beyond, Germany needs real reforms under Merkel's successor.

Chancellor Angela Merkel looks at the presentation of the current 2 Euro commemorative coin ''Brandenburg''

Daniel Eckert

BERLIN — Germans are doing better than ever. By many standards, the economy broke records during the reign of outgoing Chancellor Angela Merkel: private households' financial assets have climbed to a peak; the number of jobs recorded a historic high before the pandemic hit at the beginning of 2020; the GDP — the sum of all goods and services produced in a period — also reached an all-time high.

And still, while the economic balance sheet of Merkel's 16 years is outstanding if taken at face value, on closer inspection one thing catches the eye: against the backdrop of globalization, Europe's largest economy no longer has the clout it had at the beginning of the century. Germany has fallen behind in key sectors that will shape the future of the world, and even the competitiveness of its manufacturing industries shows unmistakable signs of fatigue.

In 2004, a year before Merkel was first elected Chancellor, the British magazine The Economist branded Germany the "sick man of Europe." Ironically, the previous government, a coalition of center-left and green parties, had already laid the foundations for recovery with some reforms. Facing the threat of high unemployment, unions had held back on wage demands.

"Up until the Covid-19 crisis, Germany had achieved strong economic growth with both high and low unemployment," says Michael Holstein, chief economist at DZ Bank. However, it never made important decisions for its future.

Another economist, Jens Südekum of Heinrich Heine University in Düsseldorf, offers a different perspective: "Angela Merkel profited greatly from the preparatory work of her predecessor. This is particularly true regarding the extreme wage restraint practiced in Germany in the early 2000s."

Above all, Germany was helped in the first half of the Merkel era by global economic upheaval. Between the turn of the millennium and the 2011-2012 debt crisis, emerging countries, led by China, experienced unprecedented growth. With many German companies specializing in manufacturing industrial machines and systems, the rise of rapidly industrializing countries was a boon for the country's economy.

Germany dismissed Google as an over-hyped tech company.

Digital competitiveness, on the other hand, was not a big problem in 2005 when Merkel became chancellor. Google went public the year before, but was dismissed as an over-hyped tech company in Germany. Apple's iPhone was not due to hit the market until 2007, then quickly achieved cult status and ushered in a new phase of the global economy.

Germany struggled with the digital economy, partly because of the slow expansion of internet infrastructure in the country. Regulation, lengthy start-up processes and in some cases high taxation contributed to how the former economic wonderland became marginalized in some of the most innovative sectors of the 21st century.

Volkswagen's press plant in Zwickau, Germany — Photo: Jan Woitas/dpa/ZUMA

"When it comes to digitization today, Germany has a lot of catching up to do with the relevant infrastructure, such as the expansion of fiber optics, but also with digital administration," says Stefan Kooths, Director of the Economic and Growth Research Center at the Kiel Institute for the World Economy (IfW Kiel).

For a long time now, the country has made no adjustments to its pension system to ward off the imminent demographic problems caused by an increasingly aging population. "The social security system is not future-proof," says Kooths. The most recent changes have come at the expense of future generations and taxpayers, the economist says.

Low euro exchange rates favored German exports

Nevertheless, things seemed to go well for the German economy at the start of the Merkel era. In part, this can be explained by the economic downturn caused by the euro debt crisis of 2011-2012. Unlike in the previous decade, the low euro exchange rate favored German exports and made money flow into German coffers. And since then-European Central Bank president Mario Draghi's decision to save the euro "whatever it takes" in 2012, this money has become cheaper and cheaper.

In the long run, these factors inflated the prices of real estate and other sectors but failed to contribute to the future viability of the country. "With the financial crisis and the national debt crisis that followed, economic policy got into crisis mode, and it never emerged from it again," says DZ chief economist Holstein. Policy, he explains, was geared towards countering crises and maintaining the status quo. "The goal of remaining competitive fell to the background, as did issues concerning the future."

In the traditional field of manufacturing, the situation deteriorated significantly. The Institut der Deutschen Wirtschaft (IW), which regularly measures and compares the competitiveness of industries in different countries, recently concluded that German companies have lost many of the advantages they had gained. The high level of productivity, which used to be one of the country's strengths, faltered in the years before the pandemic.

Kooths, of IfW Kiel, points out that private investment in the German economy has declined in recent years, while the "government quota" in the economy, which describes the amount of government expenditure against the GDP, grew significantly during Merkel's tenure, from 43.5% in 2005 to 46.5% in 2019. Kooths concludes that: "Overall, the state's influence on economic activity has increased significantly."

Another very crucial aspect of competitiveness, at least from the point of view of skilled workers and companies, has been neglected by German politics for years: taxes and social contributions. The country has among the highest taxes on income in Europe, and corporate taxes are also hardly as high as in Germany anywhere in the industrialized world. "In the long run, high tax rates always come at the expense of economic dynamism and can even prevent new companies from being set up," warns Kooths.

Startups can renew an economy and lay the foundation for future prosperity. Between the year 2000 and the Covid-19 crisis, fewer and fewer new companies were created every year. Economists from left to right are unanimous: Angela Merkel is leaving behind a country with considerable need for reform.

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