Europe’s coming demographic collapse could spell financial ruin
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In his address last week to the European Parliament, Pope Francis provoked something of an uproar in twice describing Europe in unflattering terms: “Europe seems to give the impression of being somewhat elderly and haggard,” the “impression of weariness and aging, of a Europe which is now a ‘grandmother,’ no longer fertile and vibrant.”
Commentators took umbrage, but few took a look under the hood of Europe’s economic engine.
And one British columnist announced that she was no longer a "fan" of Francis, having been deeply offended specifically by the “grandmother” analogy. In hindsight, perhaps it may have been wiser to use a gender-neutral term. Grandmothers can and do make unique and vital contributions to their families, communities, church and society. Two grandmothers – Margaret Thatcher and Angela Merkel (ok, a step-gram) – are arguably Europe’s most formidable and consequential leaders of the post-Cold War era.
But if adjectives like elderly, haggard, weary, “no longer … vibrant” don’t apply to today’s grandmas, the terms very accurately describe the modern European Union (EU).
Yes, it’s arguably the world’s "biggest economy," according to the International Monetary Fund (IMF): the EU’s gross domestic product (GDP) is $16.77 trillion, ahead of the U.S. GDP of $16.768 trillion. But, sadly, the size of the European economy is due not to a strong and growing private sector, but to increased government spending, financed by borrowing that is already necessary to support Western Europe’s generous public retirement systems.
Writing last week in the “Financial Times,” Franz Schellhorn explained that Austria – the EU’s “Wunder economy” with its second highest income per capita and second-lowest unemployment rate – is not actually very wunderbar after all. Unemployment is low because older people who’d like to continue working are sent into retirement at the average age of 58.5 years. Austria’s annual deficit from the public retirement system alone is 10 billion Euros.
Austrian workers – even those earning low wages – already must fork over half their salaries in taxes to the government to help fund social welfare benefits and the growing interest burden on Austria’s debt. Productivity is dropping and the current trajectory – the increasing number of retirees relative to working-age people and the increasing public deficits and debt – will sooner or later spell disaster for Austria. Similar stories have played, or will play, out throughout the EU in the coming decades.
Austerity measures can only postpone the inevitable economic collapse that occurs when a nation’s productivity falls too low (due to fewer people in the workforce, for example) to support increasing numbers of people dependent on government benefits. This situation occurs when (1) people live longer due to improved nutrition, hygiene and healthcare, and (2) fewer children are born due to the widespread use of contraception, the availability of abortion, later marriages and the devaluation of children.
Although Schellhorn failed to raise the crucial issue of Austria’s abysmal Total Fertility Rate (TFR) – 1.44 lifetime children per woman in 2012 (down from 2.69 in 1960) – “Forbes” contributor Joel Kotkin did so, in his article on the declining economic fortunes of “Mediterranean” EU countries: “It’s the Birth Rates, Stupid!”
Committing demographic suicide
Kotkin quotes the author of "Spain’s Demographic Suicide," Alejandro McCarrón Larumbe, about the dropping fertility rates. McCarrón states that "today’s decline is almost all about a decline in values":
And demography is destiny, as they say.
Nor can Spain rely on immigration to make up the shortfall in births:
Although 450,000 people, largely from Muslim countries, still arrive annually, over 580,000 Spaniards are heading elsewhere – many of them to northern Europe and some to traditional places of immigration such as Latin America. Germany, which needs 200,000 immigrants a year to keep its factories humming, has emerged as a preferred destination.
A massive number of immigrants (skilled, educated ones at that) would be needed to slow Europe’s demographic and economic descent. Unlike the robots that are making up for the shortfall in young workers in Japan, human immigrants will one day grow old, retire and collect benefits themselves.
Earlier this year, an article on the "Islamization of Europe" referred to an observation by the late great economist Milton Friedman:
What do the EU numbers tell us?
Fertility statistics compiled by the European Commission show that in 1960, only three of the curent EU28 Member States had TFRs below “replacement level” of 2.1 lifetime births per woman. But by 2012, every EU Member State had seen their TFR fall below replacement level.
Six EU countries (Portugal, Spain, Greece, Hungary, Poland and Slovakia) had fallen into the “lowest low” range, approximately 1.3 lifetime births per woman, from which it is basically impossible to ever again achieve population stability.
In 2012, the European Commission published a report titled “The 2012 Ageing Report: Economic and Budgetary Projections for the EU27 Members States (2010-2060)” (hereinafter "Ageing Report"). A key passage is found on page 27:
This change means that while, in 2010, four employees could share the cost of supporting each retiree through their taxes, by 2060, there will be only two employees to shoulder the burden of supporting each retiree (who, by the way, is living longer and longer).
But it gets even worse when one adds in non-working dependents under 15. In this case, “the increase in the total age-dependency ratio … is projected to [rise] … from 49.3% in 2010 to 77.9% in 2060.” Does that look sustainable?
Another measure of the declining fortunes of the EU is the percentage of the world’s population that resides in EU27 Members States: in 1950, the percentage was 15; by 2050, it will be only 5. (Ageing Report, Graph 1:18)
A 2005 "Green Paper" by the European Commission ("Confronting Demographic Change: A New Solidarity Between the Generations") is replete with evidence of demographic "change" (read "decline") but lacks evidence of a "new solidarity."
Graph 4 of the Green Paper compares the population distribution of age categories between 1950 and 2050, showing even more stark declines in the "24 and under" age group and even steeper growth in the population of those 65 and older. Between 1950 and 2050, the number of people age 24 and younger will decline from over 40 percent of the population to only 23 percent. In the same time period, those 65 and older will grow in number from just over 9 percent in 1950 to 30.3 percent in 2050.
Graph 6 of the Green Paper shows the expected increase in the average age in EU-25 between 1950 and 2050 from 33.5 years to almost 48 years.
Graph 7 may be the most shocking of all. The working age population of all but six EU-25 Member States had already begun declining by 2012. The exceptions are Catholic Ireland and Malta and predominantly Muslim Cyprus and Turkey, along with Sweden and Luxembourg, which have encouraged births (although still below replacement level) through numerous generous family benefits.
Already, 14 EU countries have a zero or negative natural population growth (i.e., an equal or greater number of deaths compared to births): Italy, Germany, Austria, Poland, Greece, Bulgaria, Latvia, Lithuania, Hungary, Romania, Estonia, Czech Republic, Slovakia and Slovenia.
Why aren’t European couples having enough babies for society to prosper?
Longer time spent in gaining an education and the new norm of engaging in sexual activity outside of marriage (made possible by low-cost contraception and legal abortion) have led to later marriages and later childbearing, which in turn reduces total births per woman. A difficult economic climate, unemployment, the decline in religious belief, fear of the future and selfish individuaIism ("I would not be able to do all the things I used to do") are among the main factors cited by respondents in the 34,000-interview, 14-country "Dialog Study," coordinated by Germany’s Federal Institute for Population Research.
These researchers maintain that pro-family policies in Sweden and France – "a combination of tax regimens, childrcare facilities, flexible working hours, education and housing policies – could boost the birthrate" slightly and slow the fertility decline. But none dare speak of a reversal.
Many sources (including the Rand Corporation) concur with the view that intensive government action to encourage childbearing can make a small difference, and also agree that "increased immigration will not reverse population ageing."
And immigration without assimilation can produce a host of new problems as well. Details are spelled out in "Islamization of Europe: The Numbers Don’t Lie," by Bruce Bawer, FRONTPAGE Magazine (April 27, 2014).
Lest any Yankees indulge in Schadenfreude (feeling joy at another’s misfortune) over Europe’s plight, we need only recall that (1) the U.S. TFR hovers below replacement (the 2014 estimate is 2.01) and could start dipping as Latino immigrants, who have been propping it up age, and (2) the policy of the federal government over the past six years has been to mimic Europe’s flawed response to a sluggish economy by borrowing our way to prosperity (as if) and massively increasing the federal debt.
The U.S. social security system was devised on the assumption that on average, women would give birth to 3.7 children, guaranteeing a steady flow of new workers to pay into the system. Before long, the piper will ask to be paid on this side of the Atlantic as well. According to a Heritage Foundaiton report (December 1, 2014), social security "will be broke in 10 years." And, of course, that is only one dish in the smörgåsbord of government handouts. Will we act before we reach the point of no return?
Susan E. Willsis a senior writer with Aletia.org.
