Friday, July 26th, 2013
My latest post is online at New Geography and is called “Will Europe Hit a Demographic Tipping Point?.” It’s always risky to get into the doom business, as I noted earlier in the week regarding Detroit, so this should be seen more as a possibility than a prediction. But there are a number of factors converging on European demographics: low birth rates and resulting aging populations, debt, the poor economy, austerity, and a general lack of opportunity for many of the young. Crazy at it seems, we are starting to see the start of a flow back from European countries towards former colonies perceived to have more opportunity. We will see how this plays out. Here’s an excerpt:
Not only are Europe’s young facing short term pain from economic crisis, they also face the long term prospect of being a small population cohort that has to spend their entire working lives (when they eventually find jobs) paying for previous generations’ lavish retirement benefits never properly funded. Along with this, they are the ones who will likely bear the brunt of reduced pension payouts for themselves while the current and nearly retired are fully protected from cuts. This is on top of the massive official public sector debts that have been accrued, along with many years of pain from IMF and EU mandated austerity in a number of countries. Contracting demographics is like a “force multiplier” for unfunded liabilities, and this generation may never achieve the affluence – and buying power – of their parents.
Immigration has been heralded as a solution to demographic issues, but this seems unlikely to bail Europe out. Unlike the US or Canada, European nation-states are built primarily on ethnic identities that make integration difficult no matter how progressive the policies. Sclerotic economies and regulations that reward incumbents and large “national champion” firms while punishing entrepreneurs – immigrants are disproportionately entrepreneurial – don’t help. With Europe having a large percentage of unassimilated and unemployed immigrants along with high native born unemployment rates, there has been social unrest all around. Immigrants have rioted, even in unlikely locales like Stockholm, while there has been an alarming rise in far right extremist groups among the native born. Unlike immigrant-friendly North America, immigration has been as much problem as solution in Europe.