Pathways for Transformative Economics and Politics

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Will Austerity and Precarity Finish Off the Human Species?

At the outset of the Covid-19 pandemic, many with an otherwise minor interest in mathematics familiarized themselves with a concept known as “R” – the R-value or reproduction rate of coronavirus infections. R is a multiplicative factor, applied to the number of cases at a given moment “t” to yield the number that will prevail at a later moment, “t+1”. If R exceeds 1, the epidemic will grow; otherwise it will decline and, eventually, it will be extinguished (Delamater et al., 2019).

The logic is identical for many processes including the fission reaction at the heart of an atomic bomb. In that example, each neutron crashing into the nucleus of an atom of uranium-235 or plutonium-239 will cause two neutrons to eject, moving along to other nuclei. Thus R=2 and after 80 generations in a tiny fraction of a second, the energy released is sufficient to blow the mass apart, with force adequate to destroy a city. Conversely, if the reaction is damped, so that R<1, it will fizzle; neutron-absorbing rods reduce the R-value and assure the shutdown of a nuclear reactor.

The concept of R originated, long ago, in demography (Adam, 2020). For human populations, what is most interesting, over a much longer timeframe, is the case where R, applied to the reproduction of the population itself, which is to say to the successful raising of children to reproductive age, is less than the critical value of 1. In that case, the total population will decline, while the average age rises. In the end, the consequences may be far more destructive than the explosion of a few bombs.

Human populations can decline for many reasons. From the time of the Bible to the days of Thomas Robert Malthus (1798) and beyond, attention focused on the Horsemen of the Apocalypse: War, Famine, Pestilence and Death. These, Malthus foresaw, would keep human populations in ultimate check, neutralizing (from time to time) the otherwise explosive tendency of humans, like any hot-blooded species, to copulate and procreate.

In Malthus’s world people were young. They were, by and large, fertile at an early age. Contraception was almost unknown, abstinence was rare, and while pregnancy was dangerous many if not most women experienced it many times, typically delivering many babies of whom only a few would make it past early childhood. Yet even so R exceeded 1, and Malthus was not wrong in his view of the ultimate checks to population. From the Black Death to the Irish famine, proofs of his proposition would appear and reappear. The Irish case was especially dramatic, as the advent of the potato had multiplied the Irish at least three-fold before the combination of crop failure and British imperial doctrines of laissez-faire reimposed the Malthusian constraints.

But then things changed. In the second half of the 19th century grain and meat from the Americas erased the scourge of famine in Europe, bringing a population boom. Similarly in the Russian empire, whose population grew from 100 to 150 million by 1914 (Keynes, 1919). These numbers were not materially diminished even by the carnage of the Great War. There followed, in the 20th century, miracles of public sanitation, personal hygiene, mosquito control, antibiotics and cheap, abundant energy, all of which lessened the wear-and-tear on the human body. In the wealthy countries Social Security and similar pension schemes, as well as health insurance, assured basic incomes and income security to the elderly. Partly in response to this most basic supply-side incentive – monthly monetary incentives to keep on living – life expectancy at birth nearly doubled. Population boomed even more. More people were born, more survived to become adults, and they lived longer and healthier and more productive lives than ever before. This was the basic background for the development of post-war economic thought.

In the years following World War II, the economics profession reacted to population growth by modeling the consequences for economic growth (Solow, 1956). The basic principle held population growth to be an “exogenous” factor – not determined within the economy – that provided a critical input to economic activity. Thus the growth of labor and the growth of capital, alongside technical change and productivity, were the central concepts underpinning the theory of economic growth.

In the late 1950s, attention began to shift to the problems of managing an “Affluent Society” – pollution, equal rights, residual poverty, and “social balance” – the mix of public and private goods and services (Galbraith, 1958). Women’s rights emerged as a salient issue, including the right to contraception and (eventually) to reproductive freedom. Meanwhile, pharmaceutical advances placed effective and reliable birth control within easy reach of most families in the middle-classes and above. The “baby boom” in the US ended around 1964, but there appears to have been little concern, in academic circles, about the long-term implications of this fact. Economics, for the most part, ignored it, taking the growth rate of the labor force, once again, as a factor determined outside of economics.

In the 1970s, stern voices warned of a new Malthusian constraint – physical limits on the supply of critical resources and an increasing cost of extracting them from the crust of the earth (Meadows et al., 1972). To these concerns were eventually added a new or anyway emerging set of issues: the carrying capacity of the atmosphere and the implications of a climate crisis. From this point of view, a smaller or more slowly growing population is advantageous. It allows the benefits of economic activity to be spread across a smaller number of people, with higher average wages, consumption and living standards (Bricker and Ibbitsen, 2019). Alternatively, it allows for a longer run with a given resource pool and less environmental damage.

Resources and environmental constraints are harbingers of further Malthusian debacles – floods, droughts, famines, epidemics and wars. They bear, ultimately, on the whole population in proportion to their vulnerability and to their power to protect themselves. Epidemics in particular may be expected to carry off – as Covid-19 did – a larger share of the elderly, whose capacity to resist is already weakened by co-morbidities and chronic conditions such as diabetes, heart disease and cancers. However, none of this may be expected to have a major long-term impact on human populations as a whole, so long as R>1 and reproduction advances. Rather, the substitution of younger for older individuals within the population is an advantage; it increases the share of the active and reduces that of those who have already ceased to make productive contributions. Only in the most extreme cases – nuclear winter comes to mind – are the new Malthusian threats likely to be fatal to the species as a whole.

Yet the ultimate fate of a human society – ours no less than those that have already come and gone – rests on its ability and willingness to reproduce itself over the long run. On this topic, so far as I’ve become aware through only a cursory examination of the literature, the economics profession has not said very much. As noted, population dynamics are exogenous to neoclassical growth theory. Malthusian and neo-Malthusian disputes have taken up a good deal of space and time, but they affect the exogenous growth rate. As noted, there is a fair amount of work on the implications of slower population growth for economic growth (UN, 2020), for living standards, for climate, and also – a downside – for the financial viability of pension systems. Finally, it is well-established that fertility is lower in the richer countries. The decline of fertility set in during the prosperous 1960s, but accelerated in the 1970s, when the high-income world was passing through a series of crises, including inflation, unemployment, and high energy costs. Fertility declines have continued to deepen in the wake of later crises. Evidently, it is not wealth alone that suppresses fertility; other factors in rich societies are at play.

The economics of the decision to reproduce attracted the early attention of Gary Becker (Becker, 1960, 1981, 1992), and more recently several contributions from feminist economics (Tertilt et al., 2022). These economists are aware that economic conditions and incentives are important, including income level, tax policy, and the availability of child-care and health insurance. But their focus, generally speaking, is on gender equality and women’s welfare, and not so much on the larger social outcome.

In Becker’s analysis, children are a “consumer durable,” yielding “psychic income” to their parents. Writing in the Baby Boom, Becker thought that rising incomes increased fertility, but argued that wealthier women may prefer “quality” to “quantity,” and so choose to devote their increased incomes to the raising of a smaller brood of better offspring. Later writers, taking account of the fertility decline, have concentrated on easing the path, for adult women, toward reconciling child-bearing (in limited quantities) with careers, especially professional careers. A general view holds that pro-natalist policies can (and should) foster compatibility between family and career for women in high-income societies (Doepke et al., 2022).

All agree that the decision to reproduce is now firmly and irrevocably under the control of the individuals directly involved; it is no longer under the coercive control of the state, the tribe, the religious group or even the extended family, in most cases. Should we have children, or not? And if so, how many? These are private questions – even, a matter of human rights. Yet, taken together, they have a decisive impact on the conditions that later generations will face.

The main point, let me argue, concerns whether, in the aggregate, private decisions to reproduce lead to an R-value equal to or greater than 1. It concerns the consequences of micro-decisions, taken under specific social and economic conditions, for the macro-structure. On this question, three factors would appear to be highly relevant. They are (a) the ability to control reproduction; (b) the expected cost of raising children to adulthood; and (c) the expected gain or loss, for adults, associated with having or not having a child or an extra child. That gain or loss may be largely economic, but it also includes social incentives and biological instincts. The extent of the gain or loss will depend on the specific economic conditions, and stresses, facing the household. Also, since most humans are somewhat risk-averse, both costs and gains are subject to considerable uncertainties, which act as a deterrent.

So far as the ability to control reproduction is concerned, the battle is largely over and has been since the advent of chemical contraception in the mid-20th century. Important skirmishes continue, affecting notably access to reproductive services, but they are the rear-guard actions of the patriarchy. The effects on women directly affected are harsh, but they are unlikely to have a big impact on reproduction rates – as they once did, for instance in Romania in the 1970s (Mackinnon, 2019). The arrival of pharmaceutical solutions to unwanted pregnancies is a factor that will likely further reduce the practical consequences, in the aggregate, of legislative attacks on abortion clinics.

The other two factors are therefore decisive. And here we confront twin realities of “advanced” – or anyway wealthy – societies. The first is that children are very expensive. They must be fed, housed, clothed, educated and entertained, not to mention tolerated, during which time, in urban settings in which almost all of us live, their economic contribution to the household is nil, and their use in other capacities – washing dishes, taking out the trash – is very limited. Moreover, as the demands of education for a successful life rise – through college and graduate school – the share of the cost falling on the private budget of the parents also rises. All of this must be taken into account in advance. And there is the risk of even-more-expensive complications, such as a disability, an accident, a health crisis, or a run-in with the juvenile justice system. Offsetting economic advantages – such as bearing a musical prodigy or a movie star – may figure, but only as the most remote possibilities.

The absence of offsetting economic advantages is relatively recent. In previous times – only about a century ago – children were useful on the farm and even around the house from an early age. But not only that. Grown children were the principal support of their aging parents, who generally lived with some of their offspring or reasonably nearby. The prospect of being looked-after if one reached an age where this became necessary was a strong inducement to have children in the first place, to care for them, and also to forgo the outside earnings associated with both parents having a job. The family was the security system. In rich countries, this world of intergenerational obligation running in both directions has now largely disappeared.

It is true that this system was (and where it still prevails, still is) rife with other forms of injustice. Adults who could not have children, or did not, or who lost them, or who became estranged, or whose children proved worthless for one reason or another, lacked any such form of protection. Among the intact multigenerational households, harmony was not a universal rule. Parents who had tyrannized over their children would be tyrannized over by them in old age. No doubt both sides often longed for deliverance. No doubt funerals, if they came in the proper order, were often scenes of mixed emotion.

Social Security in the United States – along with Medicare and Medicaid 30 years later – affected a revolutionary transformation in American family life. So did the even more comprehensive and egalitarian pension, social insurance and health care systems introduced in Europe, mostly after the second world war. Similarly in Northern Asia. These systems are often described (by their opponents) as a transfer from the young to the old, while they are defended (by their supporters) as self-supporting investment schemes. Neither characterization is wholly accurate, for both fail to take account of the prior forms of family organization and how these were changed by social insurance.

What public pensions and health insurance actually do, is to spread a burden that was previously specific to the family over the community as a whole. Thus elderly adults who do not have children willing or able to support them have pension and health benefits supplied by the whole working population. And the working population, including those who do not have parents to support (or would not be willing to do so), is obliged to contribute, in the US through the payroll tax, to support their own and other people’s parents. The collectivity replaces the family in this function.

Social Security, other pensions, and health insurance thus liberate each part of the community from the other. They enable the elderly to live independently (or in communities of older persons), while freeing working families to concentrate (after paying the payroll tax) on their own needs, and the expenses of their own children. These new arrangements have proved highly popular, at least with seniors in many rich countries, at least through the early stages of elderly life. There does not appear to be much nostalgia for the previous pattern of dependency and care-taking.

Whether this continues to be the case into the end-of-life experience of nursing homes is another question. But by that time, the power of decision has generally passed to the younger generation, which has little desire to bear a burden that can be handled by professionals, reimbursed by the state.

But then, the question arises: why have children in the first place? If one already has a child, or two, why have any more? They are a long-term, costly, risky commitment. They bring no economic return when young. They give back little or nothing, specifically, in economic terms, when grown. As adults they are at best a source of pride, pleasure, and moral support; at worst they evoke a discreet silence, or even active embarrassment, depending on cases. And then we come to the economic gains from limiting family size or forgoing children altogether. These are very substantial.

The typical household unit in a rich country, once established, receives a high income by world standards, but faces an array of long-term fixed costs. There is rent or a mortgage. There are utility bills. There are taxes, including property taxes that are invariant to income. There is health insurance, property insurance, life insurance. There are commuting costs. There are basic groceries. And then there are the costs of having children. Thus even the fairly well-off operate on a thin margin of “free resources.” This margin can be eroded by increases in the fixed costs: energy, utilities, interest rates. It is eroded by an increase in the precarity of employment. It is eroded by the politics of austerity.

The problem of thin margins is aggravated by rising income inequality in the society at large. The rich set standards for consumption and security to which the middle and lower classes aspire. This increases the hours that working people are willing to spend at work. Easy access to credit makes it possible to live in a bigger house, own better vehicles, and enjoy a higher living standard in the short run. However, the debt burdens tend to accumulate, adding to the squeeze on incomes. If interest rates rise, a manageable debt burden can become difficult, or even unmanageable, in short order.

Without children, both partners in a household can pursue independent, gainful careers and enjoy the full benefit of their own and each others’ incomes. They are not tied to the schedule of schools and play dates or the expenses of higher education for an offspring who will be leaving soon. Women need not interrupt their jobs or delay their careers. The arrival since the 1980s of a precarious employment market, providing services jobs at mediocre wages, places a strong premium on having multiple adult earners in each household. Two incomes are often necessary to maintain a middle-class living standard, and they also provide a bit of insurance against job loss by one partner or another.

A decision to forgo children may have a dramatic effect on the ability to meet other fixed costs, and on the availability of free resources for the enjoyment of life. It is obvious that this effect is more powerful when resource costs – affecting unavoidable expenses such as heat, light and gasoline – rise, than when resources are cheap. It is more powerful when military budgets are bloated while public goods and infrastructure starve. It is more powerful when the prospect for future income growth is weak or uncertain. It is more powerful when income inequality is rising, sharpening the urge to seek a higher income but reducing the means to achieve it. And these, beyond reasonable argument, are major reasons why fertility rates fell in the wealthy countries during the economic crises of the 1970s and again in the US after the great financial crisis of 2008 (Macrotrends, 2023). Many young adults in wealthy countries have realized that children are at best a mixed blessing – and at worst, a bad deal.

Of course, the above is exaggerated. People have children for many non-economic reasons, including religious belief, habit, hopes that may or may not be realistic for the company of progeny in later life, biological instincts, love, and – also – by mistake. Economic reasons may not predominate. But they are a factor. And the key point is that they appear to be unambiguous in the direction of their effect. In rich countries, they militate against child-bearing. They may be large enough to drive R below 1. They do not militate so strongly in poor and agrarian countries, lacking large-scale social insurance and other fixed costs. If one wishes to understand why fertility has already fallen below replacement in all but the world’s poorest and “least-advanced” regions, this is almost surely the elephant-in-the-room reason.

In low-income countries, the population is younger than in wealthy lands. In such countries, even if fertility rates are falling the population will rise for a while. The demographic composition of the world will therefore necessarily shift toward the low income, agrarian regions. These are notably in South Asia and Sub-saharan Africa, where populations are young and birth cohorts are large. Yet in India, fertility passed below replacement rates around 2017; in Bangladesh, around 2013. In Pakistan and Nigeria, it remains higher, though has been declining in both since around 1970. (World Bank, 2023)

For the wealthy regions, migration is a mitigating factor. By how much? To be sure, a large differential in available incomes will bring people in. But the availability of that differential is an amalgam of factors, including the difficulty of crossing the border, the probability of obtaining paid employment, the purchasing power of the rich-country wage when transmitted as remittances to the poor country, the risk of deportation, and so forth. So long as the differentials remain reasonably large, all things considered, migration will continue. When they diminish, then net immigration will slow or stop.

After allowing for immigration, a society whose R for population remains below 1 will experience a general aging. This has three predictable consequences. First, it raises the share of non-working and dependent elderly, many with expensive support needs, who must somehow be cared for. Assuming that the incomes of and resources available to the elderly are maintained, this provides employment and incomes for part of the next generation. But it also places a greater tax burden on the larger population. And the social costs compete with the provision of infrastructure for the young: nursing homes compete with kindergartens, hospices with parks and playgrounds. Unless strong measures are taken to maintain services for the young, at additional social cost, the quality of child-rearing tends to fall.

Second, as average age rises, more women pass beyond the age of child-bearing, having borne a smaller cohort of women-to-follow. The smaller number of women being raised, with unchanged fertility, necessarily entails a further fall in future births. Even if this tendency is offset by a powerful pro-natalist policy, a limited cohort limits the effect on overall population growth. A striking example of this phenomenon is Russia, where the demographic bust of the 1990s yields an echo in a small birth cohort in the 2020s even though fertility rates have somewhat recovered (Shcherbakova, 2022). This is mitigated (for now) by large-scale immigration from Ukraine – and also from other post-Soviet states in even worse predicaments. But there is a limit to migration, even in such extreme situations.

Third, as the overall population ages, the chance of a Malthusian culling increases, since the elderly are more vulnerable to disease, to heat and cold, and to the shock of sudden pauperization. These forces, however, do little to reduce the burden of caring for the elderly, since fixed investments in the infrastructure of care must, generally, be maintained. So the per-person cost of caring for those who continue to survive goes up.

The broad implication is that once the population replacement rate R dips below 1, corresponding to a per-woman fertility rate of less than about 2.1 in a balanced age structure, then, apart from immigration which is inherently a temporary fix, the economic cost/benefit of having children becomes inexorably worse over time. To the extent that a rich society actually needs citizens with specialized and expensive educations – and perhaps it doesn’t – it is hard to see any path to reversing this unfavorable balance. A dramatic reduction in resource costs might do it, or a miracle of technology, or successful wars of conquest – but none of these seem very probable.

The UN forecast for the United States is that the present fertility rate just below 1.8 will continue indefinitely (Macrotrends, 2023). If there were no immigration and a balanced age structure, this would correspond to an R value of about 0.9, disregarding the fact that even in rich countries some children do not reach adulthood. At this rate, it would take about ten generations to reduce the US population by about two-thirds. But there does not seem to be any firm basis for such (relative) optimism. Similarly, some long-term demographic projections hold that even after a serious depopulation over many years, the world’s population may stabilize (Wilmoth et al., 2023). As Spears (2023) points out, there is no clear basis for this either. No society with fertility below replacement level has yet recovered.

What appears more likely, is a situation in which the burden of caring for the elderly, with austerity, inequality and rising resource costs that place household budgets under increasing pressure, continues to degrade the fertility of the young. Attempts to extend control over resources, by force or fraud, to make the burden easier to bear, are likely to be rebuffed by the robust, younger populations of the remaining resource-rich regions. High income inequality and big defense budgets add to the squeeze. Even as the elderly pass on, the systems established for their maintenance, including advanced and specialized health care, will continue to demand and absorb resources. As basic resources continue to deplete, their unit cost will continue to rise. Downsizing, scrapping and abandonment of unneeded facilities, along with shrinking the predatory financial and military sectors, are prerequisites for renewal. But these are not easily or painlessly achieved.

In short, the development of a large structure of fixed costs and social insurance – the greatest achievement of the 20th century welfare state – combined more recently with mandatory defined-contribution pension contributions, tax-sheltered long-term savings schemes, rising resource and health costs, policy-induced austerity, militarism, and a top-heavy structure of incomes – has forced the great mass of young people in the wealthier countries to make economies where they can. The greatest economy open to them, under the circumstances, is in the private domain of human reproduction. Many have taken the path that was left open. No one can blame them – they did not make the decisions that set the terms of this choice.

But a society – or a species – in this situation would appear to be on a path toward self-extinction. Not immediately, to be sure, but over a few centuries, with the possibility of a severe crisis once the situation passes beyond the circumstances we can presently imagine. This shoe would appear to fit practically all of the rich and near-rich societies in the modern world, especially Japan, Europe, China, Brazil and Russia, alongside the United States.

And when the poor countries finally “develop,” what is to keep them from going down the same road?



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James K. Galbraith is Lloyd M. Bentsen, jr. Chair in Government/Business Relations at the Lyndon B. Johnson School of Public Affairs, The University of Texas at Austin. He holds a PhD in Economics from Yale. He thanks Deepshikha Arora for research assistance on this article.