At the weekend, Tony Barber reviewed a new batch of books on Europe – Walter Laqueur’s After The Fall, The Future of Europe by Jean-Claude Piris, and Brussels, the Gentle Monster: Or the Disenfranchisement of Europe, by Hans Magnus Enzenberger. After all, there is a lot to say about the subject at the moment.
However, I was most struck by the apparent emphasis on demography in the first of these. According to the review:
‘Laqueur foresees a potential clash of generations as young Europeans, increasingly outnumbered by the old, are condemned to more expensive education, more precarious jobs and less generous pensions. “Depriving citizens of services that were taken for granted could lead sooner or later to a political earthquake, and even a lethargic Europe could witness violence,” he forecasts grimly.’
This is a theme of a recent book by David Willetts, The Pinch, and I also touch on exactly this last point in the quotation in my book The Economics of Enough. What I’m now wondering is whether an economy with an ageing population – and shrinking too as many European ones will have before long – can achieve real economic growth? China has managed so far but is enjoying catch-up growth to the world productivity frontier. And apart from the absence of counter-examples, endogenous growth theory also predicts that a higher population contributes to higher per capita growth (because knowledge is embodied in people, and with a positive feedback loop – Michael Kremer did a nice paper about this.)
Besides, I’ve always found it odd that nobody quite understands why the birth rate fell so much in some European countries, and why it has the north-west/south-east gradient it does. The only demographer I’ve discovered who addressed this at all was Emmanuel Todd, although no doubt there are others.
So a final question – is it demography, and not history or geography, that is destiny? If so, it casts an even gloomier light on the Greek and Italian debt traps.