The Economist on Demographics

Not too long ago Edward had a go at the Economist over at the AFOE regarding a piece in the magazine on how the reports of Europe's demographic demise were somewhat exaggerated. At the time Edward's critique as well as the Economist piece in itself were excellenty exercised in an eloquent essay by Ape Man who also implicitly (or was it explicitly?) noted how Edward perhaps had been too kind on the Economist. However, Edward were to get another chance to take a swing at the Economist. This time around the topic was the situation in the CEE economies (which BTW has been under extensive review as of late here and over at DM) and whether a large array of these economies are heading for a crash. The Economist's article on the CEE economies was as such at the heart of Edward's second go at the Economist at AFOE in which Edward nudged up the tone against the English magazine. This time it even turned in to a friendly skirmish as Edward, presumably through the wide reach of AFOE, managed to invoke a retort from the Economist's blog covering Europe under the seal of 'Certain Ideas of Europe.' 

So, where are we now?

Well, the main thrust of Edward's and to a wide extent my own niggles about the Economist relates to the absence of demographics as an explanatory variable in macroeconomic analysis and coverage. However, another more subtle point in all of this is indeed related to the claim of the discourse on the importance of population change and dynamics. As such, the focus on demographics often boils down to onesided doom and gloom predictions and also, as it were, racist undercurrents. Clearly, neither the Economist nor, I honestly think, myself and my colleagues over at DM can be accused of such a myopic interpretation of the importance of demographics but we still need to think about where we are positioned in the overall debate. On that note, I want to emphasize the recent print edition of the Economist which features both a leader and a longer brief on demographics and how societies can cope with the monumental change. Consequently, here are some snippets from two informative articles, especially the last one which gives an enticing overview of the situation in the world's oldest society Japan.

From the leader ...

If the world's population does not look like rising or shrinking to unmanageable levels, surely governments can watch its progress with equanimity? Not quite. Adjusting to decline poses problems, which three areas of the world—central and eastern Europe, from Germany to Russia; the northern Mediterranean; and parts of East Asia, including Japan and South Korea—are already facing.

Think of twentysomethings as a single workforce, the best educated there is. In Japan (see article), that workforce will shrink by a fifth in the next decade—a considerable loss of knowledge and skills. At the other end of the age spectrum, state pensions systems face difficulties now, when there are four people of working age to each retired person. By 2030, Japan and Italy will have only two per retiree; by 2050, the ratio will be three to two. An ageing, shrinking population poses problems in other, surprising ways. The Russian army has had to tighten up conscription because there are not enough young men around. In Japan, rural areas have borne the brunt of population decline, which is so bad that one village wants to give up and turn itself into an industrial-waste dump.

... and from the brief (specifically on Japan);

FOR intriguing evidence of the way Japan's 127m people are greying faster than any others on earth, look at the boom in pokkuri dera. Pokkuri is an onomatopoeic word for a sudden bursting, while a tera or dera is a Buddhist temple. Pokkuri dera, then, are shrines where many of Japan's older people go to pray not only for the long life that they are increasingly coming to expect, but also for a quick and painless death at the end of it. Their visits have revived the fortunes of old-established temples, notably in the ancient capitals of Kyoto and Nara, while temples elsewhere have reinvented themselves as pokkuri dera with the financial blessings in mind.

More dramatic evidence of the ageing effect may come with nationwide elections on July 29th. Japan's older voters have the ability, for probably the first time in democratic history, to humiliate and even bring down a government, that of Shinzo Abe, prime minister since September 2006. The elections are for half the seats in the upper house of the Diet (parliament), and are ordinarily something of a political sideshow: after all, it is the lower house that chooses the prime minister. A general election in 2005 gave the ruling coalition led by the Liberal Democratic Party (LDP) an easy majority. Yet these elections, in which the coalition may lose its upper-house majority in the lower house, have become a vote of confidence in Mr Abe, whose poll ratings have slithered since almost the moment he came to office.