Energy and Environment

Cheer up! We’ve never had it so good – at least until population decline sets in

We are frequently given quite pessimistic assessments of the environment and of the world economy through Vatican documents, lectures and homilies. Sometimes these are designed to make us think or they contain figures of speech that are designed to spur us to action such as Pope Francis’ claim that “[the income] of the majority is crumbling”. But, what does the world look like through the prism of a realist? Things look pretty good.

In 1990, over one-third of the world’s population lived in absolute poverty whereas today fewer than one-fifth do. The last 30 years have seen the most rapid reduction in poverty in the history of the planet. Global inequality has declined dramatically. Deaths from natural disasters are declining and deaths from famine have fallen off a cliff in the last few decades. A wide range of environmental indicators are improving and, even in China, CO2 emissions have stalled.

We are so used to hearing bad news about inequality, the position of the poor in the world and the environment that we have forgotten how much progress has been made. This is a problem because, if we start with the wrong facts, or do not put the facts in context, we could reach catastrophically misguided policy decisions.

People who talk good news are normally met with a battery of statistics about countries in which people are desperately poor and are accused of complacency. However, to be realistic is not to be complacent. By examining why some countries have not prospered whilst others have grown richer we can learn how economies prosper. If we pretend that all is doom and gloom we will not learn.

For the average development charity a comparison of countries that have prospered with those that have not produces uncomfortable results because the successes tend to be amongst those countries that have embraced openness, better governance and globalisation and which have not received government development aid. We find the same ingredients of success when we look at middle-income countries. Comparing Chile with Mexico (or virtually anywhere else in South and Central America) we can see that openness, liberalisation and good governance are the keys to reducing poverty. The success of countries such as Chile had little to do with redistribution but much to do with the development of a market economy which is more inclusive and less prone to be corrupted by vested interests and rent seekers.

Economic development tends to lead to better environmental indicators including fewer deaths from catastrophes, better water and air quality and less deforestation. Earthquakes kill far fewer people in richer countries than in poorer countries. This does lead to a dilemma when it comes to the climate change debate – as in all areas of economics, there are trade-offs. Perhaps theologians who deal in absolute truths are not very good at thinking about trade-offs and opportunity costs; and this might explain why Pope Francis’ encyclical letter on the environment, to be published in June, is likely to avoid such discussions.

Increased economic development may lead to higher carbon emissions and this might lead to a greater number of serious climate-related events. But, for most of the world’s poorest people, lack of access to clean water and to electricity are the most pressing problems. On the one hand, faster development is likely to lead to an increased ability to deal with extreme weather, an escape from grinding poverty and better environmental conditions in many respects. However, if the majority of climate scientists are correct, faster development and higher carbon emissions may lead to more extreme weather events. Such trade-offs need to be recognised and discussed.

The general climate of good news over the last few decades does not mean that there are not huge challenges. Perhaps the major challenge facing the developed world is that of population implosion. EU projections suggest that, without migration to help out, the population of Bulgaria and Italy will fall by over one-third and that of Portugal and Germany by 40 per cent before 2080. This is not just a European phenomenon, Russia, Japan and South Korea, together with China because of its one-child policy, are facing equally dramatic declines. The UK and France might escape because of high birth rates amongst second generation migrant populations.

Not only are many countries in the West facing substantial reductions in the working age population relative to the elderly population, they are doing so in the context of pension and healthcare systems that rely on the younger generation paying taxes to finance the benefits paid to the elderly. Family provision and saving have been shunted aside as a method of providing for old age in place of finance from working age taxpayers. In the coming decades, there will simply be too few people of working age to support these systems.

I am a relative optimist in the climate change debate, but I accept that there is plenty of room for argument. When it comes to population decline, however, it is difficult to see room for optimism over the next 100 years.

But that is for the future. The improvement in living standards amongst the world’s poorest people over the last 25 years is probably the most remarkable fact of our generation. Certainly, this is what we must have been hoping for when Populorum progessio was published in 1967 at a time when living standards in most poor countries were stagnant. This still leaves open the question of why there are so many expressions of pessimism in an era during which things have done so well. It pervades everything. During the confirmation Mass of one of my children, my former Bishop told the children what a bad job their parents’ generation had done in feeding the world. In fact, we have done a rather better job – not that we should take any credit personally – than any other previous generation the world has known.

Philosopher Steven Pinker argues that this tendency is at least partly to do with the “psychology of moralisation”. People compete for moral authority and critics of the present who argue that things should be much better are seen as morally engaged and their opponents are seen as apathetic. Perhaps Christians are particularly prone to this. Perhaps the virtue of prudence is being subjugated to our desire to improve things for the poor – and (less nobly) to be seen that we care about the poor.

Certainly, when I talk about the huge improvements in living standards I am told – probably by somebody quite well off – that I clearly don’t understand what it is like to be poor. Maybe so, but, in order to make prudent judgements about policy, we have to be both sympathetic to the poor and to make judgements based on facts. If we pretend that things are worse than they really are, we will be less well disposed towards policies that make things better. This really does matter. For many people in the world, good economic policy is a matter of life and death.

This article was first published in the Catholic Universe.

Academic and Research Director, IEA

Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.

1 thought on “Cheer up! We’ve never had it so good – at least until population decline sets in”

  1. Posted 16/04/2015 at 15:04 | Permalink

    Yes, those of us who advocate laissez-faire are often accused of being apathetic. But we care about people’s well-being too: we just think government interference is likely to make things worse not better.

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