Donald A. Collins
December 2, 2015
In his entertaining Barron’s “Up and down Wall Street” column of November 28 entitled Presidential Pretenders: Trump, Carson, Cruz, Clinton, by Jonathan Laing [Email him] briefly hammers some of the inanities offered by four leading Presidential candidates—Trump, Carson, Cruz and Clinton—before speculating about our economic future. He cites a report from Morgan Stanley entitled, “Could Demographics Reverse Three Multi-Decade Trends?” which contends
[T]hat the levelling off or decline in working-age populations in areas that count economically (read the U.S., Europe, China, and the Asian dragons, such as Korea and Taiwan) is expected to lead to slower growth, higher interest rates, and higher inflation. The demographic shifts are also likely to boost real wages and worker productivity, and diminish income and wealth inequality both within and among countries.
Note that the report contends that the decrease in the working age population in developed nations will reduce inequality in incomes and wealth—supposedly a hot issue in this campaign season, especially for my own Democratic party
But somehow, neither the Morgan Stanley report nor Laing factor in mass immigration’s challenge to this prediction. Indeed, Laing doesn’t mention population growth in the United States or global population growth, now up to nearly 8 billion, almost quadrupling since 1930.
Laing celebrates the growth of wealth created by the labor glut of the past:
Of course, the surge in labor supply, particularly from many low-wage nations, suppressed wage growth in advanced economies. Interest rates also have declined markedly since the early 1980s, reflecting ebbing inflation and the substitution of cheap labor for capital spending by many corporations, according to Goodhart and Pradhan.
Such an environment tended to be a salubrious one for financial assets. Lower interest rates were manna to the bond market. Corporate profit margins soared, helping to push stocks higher.
And indeed, the wealthy have prospered in the error of cheap labor. But now we are told there will be labor shortages, which will tend to boost wages.
Immigration is actually dismissed as not a significant factor in the Morgan Stanley report.
But the optimism of those who cheerily predict rising wages and worker productivity is simply a product of denial, as anyone who has been to the developing world can see. Laing gratuitously smears “nativists” and in the Morgan Stanley report there is a delicate reference to the lack of “administrative infrastructure” in African and Indian economies. But besides this, there seems to be no awareness of how these huge demographic shifts could impact political order in both the developed and developing world. Incredibly, Laing even says mass immigration into the developed world won’t even “move the needle” when it comes to alleviating this supposed worker shortage.
Automation is also given glib treatment. The Morgan Stanley study admits “lots of jobs in the service industry, such as health-care positions and nursing of the elderly, don’t permit the substitution of capital for labor.” But the economists mentioned in this article somehow assume labor will not lose much of its bargaining leverage because of the shrinking population of workers. How this is supposed to function when fewer workers are needed is unclear.
And again, mass immigration needs to be taken into account. Morgan Stanley’s cavalier suggestion of “outsourcing” or having people work longer hours is also not likely to improve matters.(Quote from Barron’s, emphasis added: “the authors concede that some of the labor shortages they foresee can be mitigated by, say, over-65-year-olds working longer, increased immigration into advanced economies, or shifting production and investment to areas with strong population growth, such as the Indian subcontinent or Africa.”)
Bottom line: the dangerous growth of global population and the cheap labor glut enabled in the U.S. by mass immigration is simply being wished away. But the facts can’t be ignored forever.
Barron’s affiliated Wall Street Journal is running a seven-part Page One series on demographic changes called WSJ 2050. One story chronicles the ominous figures numbers coming out of the “world’s poorest continent,” Africa, where by 2050, 40 percent of the world’s population will live. Of course, many millions of them will continue to try to migrate to Europe and the USA [Promise of Youth: For a Growing Africa, Hope Mingles With Fear of the Future, By Drew Hinshaw, November 28, 2015.]
So what is the solution to our overwhelming population and immigration problems? Enlightened government can make a huge difference in an amazingly short time. And one of the most important ways to cut global population growth is by emphasizing women’s emancipation and access to contraception [Wall Street Journal Cites South Korean Demographic Success But Ignores Emphasizing the Two Main Reasons For Why It Happened, by Donald Collins, Church and State, November 27, 2015]
Unless such policies are implemented on a global scale, there will be no way workers can regain any of their former power. Soaring population in Africa and the Third World and mass migration will create a future science fiction writers of the past would have called dystopian.
And the brute facts of demographics can’t be brushed aside by happy talk for much longer. The time to act is now.