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The Forum > Article Comments > Economic arguments against population growth > Comments

Economic arguments against population growth : Comments

By Cameron Murray, published 7/5/2010

While Population Minister Tony Burke may be new to the debate, the population debate itself is certainly not new to politics.

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Wonderful stuff. Clear and concise, and spot-on.

The best article I've read on OLO yet.

Well done Cameron.
Posted by Ludwig, Friday, 7 May 2010 9:19:38 AM
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Yes,I agree,excellent article.High population growth mainly serves vested interests, not the nation.
Posted by mac, Friday, 7 May 2010 10:54:24 AM
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Well said!
Of course the "utility theory" that economics is based on also leads to the conclusion that to maximise utility one must minimise company profits. (Hence "competition" is seen as Good Thing...so long as it doesn't impact company profits!)
Whilst the corporate spruikers love economics when it benefits them, they also like to ignore this little gem.
When the amount of GDP channelled into rewarding "investors" strips the ware earner's buying power, real productivity stops.
It is actually quite simple: we are in the grip of regressive economics because we have an imbalance in politics and business due to the demographic "hump". We need less rent-seeking and more wages growth. More simply: Howard, Rudd, and the entire Landlord/corporate sycophant set needs to go, and real industry needs to be boosted by supporting R&D.
Bringing in more welfare recipients is not a good approach...but it keeps the current house prices ticking over and keeps wages low. ie. Keep the regressive Ponzi economy ticking over so profiteering can continue.
Posted by Ozandy, Friday, 7 May 2010 11:29:53 AM
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I will conceed that, unlike most anti-pops, Murray is not a raving loony and knows something about the debate. However, there are various bits of the argument missing. One benefit often cited for immigration is that it makes up needed skills in the economy. Even low-skill workers have their place as they will do the jobs that native-born Australians avoid (cleaning, certain types of laboring ect).. However, most of the immigration to Australia seems to be skilled, and that greatly weakens Murray's arguments about human capital. Another country has done the investing, and we are reaping the benefits. As for arguments that this population level or that population level would place too much of a burden on the nation, most of these can be dismissed out of hand. Agriculture uses up the landscape, not people. the real question is - is our agricultural production sustainable (Yes, but the issue could do with further debate.)
Posted by Curmudgeon, Friday, 7 May 2010 11:33:22 AM
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A version of this article was first published (with all hyperlinks and images) here: http://ckmurray.blogspot.com/2010/04/economic-arguments-against-population.html

Curmudgeon, my interpretation of the skilled worker argument is theat large employers of skilled workers don't want to pay the market price for these skills, and would rather have government intervene to allow them to increase the pool of workers with those skills and pay them all a lower wage. There can be no shortage. If the value of these skills to a particular company and the economy in general is so great why aren't they paid accordingly? If particluar skills earn workers a large premium, others will go out of their way to learn those skills in a hurry.
Posted by Cam Murray, Friday, 7 May 2010 11:52:36 AM
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Cam - quite so, that's the way it should happen, of course. But bottlenecks develop in these in-demand skills and the recruitment market never works as a proper market in that expectations and status get in the way. Nurses are a good case in point. There is a shortage so why don't hospitals offer more money to attract more people to that honourable profession? Or is that women (nurses are still mainly female) are less likely to want to be nurses in the first place? In any case, higher wages should be permitted to attract skiled workers from anywhere.. and that includes through immigration.
Posted by Curmudgeon, Friday, 7 May 2010 1:58:10 PM
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Not the worst article I've read. One option is that Burke will do nothing as the media's eye roves on to other issues.

It's difficult to compare growth factors between nations, eg, China and India and Australia as the economies and historical circumstances are so different. If we're talking about growth, China is growing at 8 percent and India is about the same. They were 10 and 12 percent before the GFC. Australia is now at 3 percent and was 4.

GDP is not a reliable factor. I'd say two other criteria are much more important to Australia: the breadth and depth of the tax base and the nation's trade position. Both have to do with the generative power of people and plant.

Transport infrastructure: roads, trains, ports, etc, are funded from the tax base. If you have less people, you have less money to upgrade infrastructure. If you have 50 M people or 7 M people you'll still need a road from Alice Springs to Darwin.

Quite right about employers not wanting to pay full tote on salaries. They never have. Try working in a union.
Posted by Cheryl, Friday, 7 May 2010 2:23:16 PM
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A few comments

The argument that more people will give greater economies of scale is ridiculous. Going from 23 mn to 36 mn or even 46 mn won't do much. Germany, a nation of 80 million, still needs the economies of scale given by membership of the EU.

The only way Australia gets economies of scale is by being part of an open and liberal global trading system. Australia should be directing all its diplomatic efforts in that direction.

Cheryl,

the infrastructure argument works both ways. However many people there are, you still need a road to Alice Springs. But most of the increase in population is likely to occur in urban areas which already have an infrastructure deficit. Building additional urban infrastructure is an order of magnitude more expensive and difficult than infrastructure building in rural areas.

The defence argument is also nonsense. In a nuclear age you do not need a large population to defend an island continent that has no land borders with any other country.

The idea of Australia "going nuclear" now may seem preposterous. There is no threat that remotely justifies that so long as the US Navy remains unchallengeable on the high seas.

However if Australia were ever faced with a developing threat that needed a nuclear deterrent does anyone seriously think the Australian Government would refrain from going that route?

In the interests of transparency I am an immigrant. Had I been setting immigration policy back in 1996 I would not have accepted me. At a few weeks short of my 51st birthday I was too high risk.
Posted by stevenlmeyer, Friday, 7 May 2010 2:47:38 PM
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To continue the increase in population will only drive us more toward the lifestyle of china and india. High density housing with so many people packed into our cities that we will completely loose control of law and order, homelessness and community values.
China is still a developing community and needs such growth, eventually that will come to an end.
Our planning issues will grow with population, the current "develop to demand" is a disaster. We all suffer the lack of infrastructure and poor services. The greed of the realestate industry also won't diminish with the current population growth targets.
Curmudgeon,
The migration of minds and skills goes both ways, we export an enormous amount of skilled peoples around the world every year. A much more strict policy on immigration focusing of skills would go along way to balancing the issue.
As for agriculture, i lived in an agricultural area for 8 years. Initially i had the attitude that farmers raped the land for profit and poisoned it with chemicals, well i still find the use of chemicals a bit much, but i have to say that the farmers i knew were doing more for their land quality and the environment in general than half the lounge room greens put together. The battle against salinity is hugh and farmers work very hard to stop the growth of this problem, they are constantly developing methods to mitigate the problems of erosion and weed control is in their interest.
I have said this on this site before, but "standard of living" is not quality of life. lets keep what makes this nation great. space and freedom, remember when we had freedom not talked about defending what little is left.
Posted by nairbe, Friday, 7 May 2010 6:50:28 PM
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Regarding your 'second argument' (9th para), which I did not understand, I would instead offer, no matter if economies of scale are not as efficient because of a smaller population.

The marginally increased cost of goods is well worth the price, if it infers a better environment, quality of air and water, less road congestion etc.

Thanks for the article.
Posted by roama, Friday, 7 May 2010 9:49:08 PM
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The argument that immigrants bring in skills is a short term argument only. The current education system has not produced enough skilled workers.

So the children of immigrants are just as likely to be an average type Australian, with insufficient skills.

Eventually immigration becomes a dog chasing its tail scenario.
Posted by vanna, Saturday, 8 May 2010 10:14:43 AM
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There are such contradictions in this subject.

It is claimed that immigration brings a wealth of gains, and when some point out otherwise they are criticised for being selfish.

It is claimed that xenophobia is the basis for opposing high population growth, yet one argument for growth is to protect Australia from a foreign invasion.

It is claimed that Australia has ample water for more people, yet we are ever being educated to use less.

We are told that larger populations will bring better infrastructure and cheaper services, yet the current growth rate is bringing about an infrastructure crisis and ballooning service costs.

Growth proponents claim the moral and intellectual high ground, yet offer no more than unreasoned arguments and personal attacks against critics.

Both pro and con are arguing for a choice that each believes will benefit the lives of Australians, so there is every reason for the population debate to be open and rigorous.
Posted by Fester, Saturday, 8 May 2010 11:40:52 AM
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Excellent article and some very good comments, especially from Fester and stevenlmeyer.

If high population growth is as beneficial as Curmudgeon and Cheryl would like us to believe, then they need to explain why there is no link between a developed country's population size, density, or growth rate and its GNP per capita. (There is a link between population growth and prosperity among the poorer countries, but it is negative.)

The top 10 countries on the World Economic Forum Competitiveness Index are Switzerland,the US, Singapore, Swededn, Denmark, Finland, Japan, Germany, Canada, and the Netherlands. Note the absence of Australia. None of these countries have even half our rate of population growth. Switzerland, the leader, has a 0.276% growth rate (CIA World Factbook) compared to our 2.1%. Germany and Japan, numbers 7 and 8, are actually declining in population. These ten countries all need skilled labour as much as or more than we do. Since many of them have little immigration or population growth, they must be training their own. Why aren't they going bankrupt?

It is unreasonable to consider economies of scale but not diseconomies of scale. stevenlmeyer mentioned some. Another very important one happens when a city outgrows its natural water supply. Desalinated water is 4-6 times as expensive as dam water, as city dwellers have been progressively finding out from their water and electricity bills.

We currently export about two thirds of our agricultural production, but it is easy to imagine the combination of a doubled population and a long, severe drought leading to serious problems, even if we don't consider peak oil, peak phosphorus, permament water shortages due to climate change, etc. All of the recently reported international investments in agricultural land in Third World countries, aka "land grabs", by developed countries that are not self-sufficient in food are good evidence of lack of confidence that the world market will be able to supply enough.
Posted by Divergence, Saturday, 8 May 2010 4:10:46 PM
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hahaha you are so wrong.

The reason China is experiencing a economic boom despite strict birthing policies is because of the structure of its economy. China's labour prior to the market liberalisation reforms was largely idle or put to poorly productive use.

The introduction of capitalism allowed for a more efficient allocation of capital among the Chinese labour force and thus lead to China's recent economic growth. The main point is that prior to the liberalisation reform China had many terribly inefficient workers because of the capital deficiency.

Australia's economy faces exactly the opposite situation to China's. Australia over the past decade has suffered declining returns from capital investment because of tight labour constraints. Purchasing a new industrial washing machine is not so great if you cannot find a person to operate it.

Australia introducing an exceptionally liberal immigration programme and appropriate workplace relations laws would provide an economic nirvana for producers. Australia has a wonderfully stable and efficient governmental sector and a deep respect for property rights. If our capital to labour imbalance could be solved through increased immigration flows our GDP per a capita would increase substantially.

This analysis is supported by the government's Intergenerational Report, which found through sensitivity analysis that the higher immigration path (300,000) allowed for increased GPD (Per a capita) and decreased public spending as a proportion of GDP across all major areas. Thus it can be concluded you are completely wrong!
Posted by DLC, Saturday, 8 May 2010 8:04:10 PM
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Divergence raises a good analytical problem. Population is only one variable when looking at a countries economic performance.

A critical factor is there historical development. One could make a compelling case for America's rise due to three factors in the 1800s - technological development, manifest destiny and floods of people from Europe. Winning the Civil War against the basically agrarian south helped too.

Population is only one aspect. Capital accumulation, access to markets, governance, minimal corruption, geopolitical proximity, etc, are all important factors to national performance. The Scandanavian economies are a curio but here, the vital link is access to oil for heating and nuclear power.

Japan is in serious trouble, but not due (as yet) to its declining population. In some of its key manufacturing sectors, espc cars, others markets have beaten them - the Koreans and the Chinese are two. They have failed to be competitive. There have also been financial scandals, the GFC, etc.

I'm mindful that if we sum the populations of all those nations mentioned, you'd get about half a billion people. Not an inconsiderable amount of muscle, trading and purchasing power. But it's probably not a key or leading indicator of performance.
Posted by Cheryl, Sunday, 9 May 2010 9:02:04 AM
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Responding to DLC

What an unintelligent response. Instead of solving the existing problem through the use of productivity and participation. You solve the problem with an exceptionally liberal immigration programme, and regressive workplace relations laws. These tentative solutions are implemented without any consideration being given to the consquent set of societial problems that will emerge as a result. Therefore reducing everybody quality, and increasing everybody's quantity of problems.
Posted by tet, Sunday, 9 May 2010 4:09:48 PM
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DLC,

No one disputes that population growth and mass migration are good for the folk at the top. They benefit from bigger markets and more sales, easy profits from real estate speculation, and a cheap, compliant work force, with a large proportion of their skilled workers already fully trained at someone else's expense. Furthermore, the additional social inequality and diversity undermine support for the welfare state, reducing their tax burden.

This quote from the 2006 Australian Productivity Commission Report on Immigration makes it clear that mass migration makes ordinary people worse off, without even considering negative effects on the environment or amenity. Note that the estimated growth in average hours worked per capita is greater than the increase in GNP per capita.

"The effect of a 50 per cent increase in the level of skilled migration on productivity
and living standards has been simulated. Compared with the base case:
– population is higher by 3.3 per cent by 2024-25
– the size of the economy (GDP) is 4.6 per cent larger by 2024-25
– national income (GNP) increases by 4.0 per cent by 2024-25
– income per capita is higher by about 0.71 per cent or $383 by 2024-25
– average hours worked per capita are higher by 1.18 per cent by 2024-25.
• The distribution of these benefits varies across the population, with gains mostly
accrued to the skilled migrants and capital owners. The incomes of existing resident
workers grows more slowly than would otherwise be the case."

This is consistent with a number of studies from around the world, such as the 2008 House of Lords Report in the UK. As Robert Rowthorn, Professor Emeritus of Economics (Cambridge) puts it (column in [UK] Sunday Telegraph 2/7/2006):

"As an academic economist, I have examined many serious studies that have analysed the economic effects of immigration.

There is no evidence from any of them that large-scale immigration generates large-scale economic benefits for the existing population as a whole. On the contrary, all the research suggests that the benefits are either close to zero, or negative."
Posted by Divergence, Sunday, 9 May 2010 5:16:05 PM
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DLC

You claim immigration to carry a benefit, but how much and for whom? Is the benefit for the immigrants or the existing residents? You must also offset the benefit by costs such as increased rents and house prices, increased service and infrastructure costs, environmental costs such as the destruction of koala habitats for new housing estates, and lifestyle costs like traffic congestion.

Against this you might compare the benefit to be had by training the existing population. How would the economics of this approach compare? Obviously there isn't the opportunity to destroy farmland and bushland and erect shoddy housing. Nor is there the opportunity to toll roads and provide public infrastructure at at least six fold the cost of government. Nor is there the opportunity to build desalination plants. So some wouldn't benefit, but would the average outcome be a better one with this approach? Many growth advocates think that the sky would fall with this approach: Would it fall?
Posted by Fester, Sunday, 9 May 2010 7:18:41 PM
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