Nobel Prize laureate: World Economy a population “pyramid scheme”

By Leith van Onselen

Nobel laureate, Steven Chu, has warned that the global economy is on an unsustainable footing, reliant on an ever-increasing population which he described as a population “pyramid” or “ponzi” scheme. From Forbes:

“The world needs a new model of how to generate a rising standard of living that’s not dependent on a pyramid scheme,” Chu said at the University of Chicago…

“Increased economic prosperity and all economic models supported by governments and global competitors are based on having more young people, workers, than older people,” Chu said. “Two schemes come to mind. One is the pyramid scheme. The other is the Ponzi scheme. I’m not going to explain them both to you, you can look it up. But it’s based on growth, in various forms.”

For example, healthy young workers pay the health care costs for aging workers and retirees, the former energy secretary said, a scheme that requires increasing numbers of young workers. And economic growth requires more and more people to buy more and more stuff, with dire environmental consequences…

“The economists know this, but they don’t really talk about it in the open, and there’s no real discussion in government,” Chu said. “Every government says you have to have an increase in population, whether you do it through immigrants or the home population. So, this is a problem”…

Chu, the man who solved the Gulf Oil spill with a doodle on a napkin, then offered two painless solutions to population growth:

“Education of women and wealth creation. Across all cultures. You go negative. You go negative birth.

“In many countries around the world, developed countries, Japan, Spain Italy, we’re talking about 1.3 (children per couple), 1.2 going below 1, where 2 is steady state.”

Too right. Countries like Australia and Canada have chosen to massively increase their immigration intakes to counter the fake problem of population ageing. This is ‘ponzi demography’ writ large, since such a policy merely ‘kicks the ageing can down the road’ because migrants also age. It also creates more problems than it is trying to solve, including via chronic infrastructure bottlenecks, forcing people to live in smaller and more expensive housing, spreading the fixed mineral endowment among more people, environmental damage, etc.

Indeed, one of the main reasons why Australia has an ageing population today is because it imported so many migrants in the post-war period:

These migrants (which include my parents) have now grown old, thus contributing to Australia’s current ageing ‘problem’. Therefore, importing more migrants to solve ageing is the equivalent of ‘can-kick economics’, because today’s migrants will also grow old, thus creating further ageing problems in 40 year’s time in addition to a much bigger population.

The ‘solution’ to population ageing is to let it run its course and to stabilise the population. Concerns around falling workforce participation can largely be remedied via policies that improve participation among older Australians and those currently locked-out of the labour market. Indeed, this is already occurring with the labour force participation rate of over-65s more than doubling since the mid-2000s:

In any event, greater labour force scarcity would give a much needed lift to wages, as well as encourage firms to invest more in labour saving technology, thereby boosting productivity (as will decongesting cities).

Population stabilisation should be the goal of policy makers and governments across the world, not endless unsustainable growth.

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Leith van Onselen

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