July 17, 2003
THE END OF EUROPEAN HISTORY
Europe's population implosion (Economist, 7/17/2003)Fertility rates across Europe are now so low that the continent's population is likely to drop markedly over the next 50 years. The UN ... predicts that ... by 2050 ... the population of the 27 countries that should be members of the EU by 2007 ... [will] fall by 6%, from 482m to 454m. For countries with particularly low fertility rates, the decline is dramatic.... Germany, which currently has a population of around 80m, could find itself with just 25m inhabitants by the end of this century, according to recent projections by Deutsche Bank ...
Combine a shrinking population with rising life expectancy, and the economic and political consequences are alarming. In Europe there are currently 35 people of pensionable age for every 100 people of working age. By 2050, on present demographic trends, there will be 75 pensioners for every 100 workers; in Spain and Italy the ratio of pensioners to workers is projected to be one-to-one. Since pensions in Germany, France and Italy are paid out of current tax revenue, the obvious implication is that taxes will have to soar to fund the pretty generous pensions that Europeans have got used to. The cost is already stretching government finances. Deutsche Bank calculates that average earners in Germany are already paying around 29% of their wages into the state pension pot, while the figure in Italy is close to 33%....
A recent report from the French Institute of International Relations ... gloomily concludes [that the EU] faces a "slow but inexorable 'exit from history'."
The nightmare scenario for Europe's social welfare experiment is becoming clear:
- Demographic problems won't be addressed by immigration, because the people who want to immigrate to Europe (in preference to, say, the U.S.) are attracted by the notion of living off welfare and have proven to be crime-prone, which has generated an anti-immigrant response.
- Europeans won't voluntarily have more children.
- Older voters won't allow pensions to be cut.
The upshot is that taxes will rise from already high levels. Then there is the wild card: in what year will younger Europeans look to emigrate to the U.S. for better economic opportunities? Emigration would generate a vicious feedback loop -- loss of economic base forcing higher taxes and spiraling government debt leading to greater emigration of taxpayers -- that could cause a stunningly quick collapse of European societies, toward something similar to Russia circa 1994.It is a good sign that the Economist is calling attention to the problem; perhaps that will encourage Europeans to the liberalization that Europe so desperately needs. Much depends on the character of today's Europeans. If they are motivated by personal selfishness, they will maintain the welfare state and leave future generations to fend for themselves through social collapse. If they love the future countrymen, on the other hand, they will sacrifice now to avoid the nightmare scenario in 2050.
At BrothersJudd, we have often argued that Judeo-Christian morals are essential to the lasting survival of free nations. While economists have shown that selfish individuals, in the absence of transaction costs, will negotiate a socially optimal solution, economists also recognize that in the presence of transaction costs, Judeo-Christian moral norms, such as a willingness to sacrifice for others and a willingness to forgive others for wrongs and affronts, grease the way toward a satisfactory agreement. A selfish society, on the other hand, is prone to failure in the presence of transaction costs. Society-wide bargaining through the political process is subject to the greatest possible transaction costs, and therefore is most likely to fail to reach a successful bargain.
Without a widespread willingness to sacrifice for others, Europe is unlikely to find a political solution to its demographic crisis. It is not at all clear that Europeans are willing to sacrifice for future others. The abandonment of Christianity and its ideal of self-sacrifice on the Cross may prove to be Europe's final, and fatal, error.