Frank Stilwell
A review of the interlinkages between population growth and its economic, social and environmental consequences suggest a range of advantages across all three dimensions would follow from the stabilisation of Australia’s population.
Developing a population policy is an important part of national planning and needs to be integrated with economic policy, social policy, environmental policy and regional policy. As such, it is a key element in developing balanced relationships between economy, society and ecology. Managing that balance is — or should be — the crux of public policy. The crucial issues are those of equity (at the interface between economy and society), quality of life (at the interface between society and ecology) and sustainability (at the interface between economy and ecology). Population policy has a bearing on all these concerns. Regional policy is also an integral part of population policy because it shapes the spatial outcomes, including urban-regional population distributions which impact on equity, quality of life and sustainability.
Such concerns with balance in public policy contrast with the current dominance of ‘economic rationalist’ ideas and practices. ‘Economic rationalism’ assumes that: (i) economic growth is a priority to which other social concerns are subordinate, and (ii) that such growth is best generated on a ‘level playing field’ of free markets with minimal government ‘intervention’.1
In this latter scenario, concerns with equity, quality of life, ecological sustainability and regional distribution have a distinctly subordinate character. Growth rather than balance is the priority; and markets rather than planning are the preferred mechanism. This article reflects on connections between economic performance and population policy which suggest the need for a more balanced perspective.
POPULATION GROWTH AND ECONOMIC GROWTH
To the extent that economic growth increases the opportunities for higher living standards its appeal is obvious enough. It certainly makes for a simple yardstick by which we can assess the performance of national economies and the governments who claim credit for such outcomes (while usually blaming disappointing results on ‘external’ factors). However, the limits of such indicators of economic progress are now well known. Alternative calculations which take account of environmental damages, non-marketed production, distributional effects and other ‘quality of life’ factors commonly indicate quite contrary trends — falling or stable living standards while the measured value of output (GNP) climbs ever higher.2
Where does population growth fit into such concerns? Obviously, economic growth has to be interpreted on a per capita basis. Growing population levels — whether through natural increase or through immigration — will normally be associated with higher GNP: more workers, more consumers, more output, incomes and expenditures. The key issue is whether per capita incomes rise or fall. On this matter, the evidence is remarkably inconclusive. Australian research has been undertaken on the effects of immigration on general standards of living (eg. GNP per capita) but the results depend crucially on the assumptions. Where the statistical modelling assumes the existence of scale economies, then, lo and behold, population growth boosts per capita incomes! Other crucial assumptions concern the adjustment processes in labour markets, the capital inflow associated with immigrants, whether they have a different propensity to spend on imports, whether the extra products made can be sold overseas without depressing market prices, and so forth.3
The safest conclusion, given the current state of knowledge and modelling capabilities, is that the net economic effects of population growth can go either way and are probably rather modest. The concept of an ‘economically optimal population size’, once fashionable in the discourse of economists, is not now generally regarded as useful. The idea that a particular population size would lead to the maximisation of per capita incomes, and that either higher or lower populations would produce inferior economic outcomes, lacks a coherent theoretical rationale and systematic supporting evidence. Abandoning the goal of an economic optimum in population analysis may seem like a rather unusually agnostic position for the economists. However, if nothing else, it indicates that there is considerable margin for collective choice between alternative scenarios for population growth (and immigration policy as the principal instrument for directly managing population growth) without damaging consequences for national economic performance. This is not to say that the notion of an optimum is irrelevant in population studies — clearly, it is central for environmentalists concerned with identifying ecologically sustainable population levels — but the narrow conception of an economic optimum is unhelpful.
The economic impact of changes in the total population numbers, and even the spatial distribution of population, is ultimately subordinate to how we as a society manage the use of our human resources. Currently the number one policy challenge in Australian public policy is unemployment. It is symptomatic of our current failure to develop means of achieving a balance between the demand and supply of labour. Understandably, some see unemployment as a key consideration in immigration policy — the Howard government has explicitly justified its cuts to the 1997-8 program in these terms. But unemployment reflects fundamental changes in technology, the international division of labour, labour force participation, productivity, the competitiveness of Australian industry, monetary and fiscal policy and so forth. Looked at in this light, it is evidently not a problem that is soluble by the use of restrictive immigration policy to reduce the supply of labour — or, conversely, by attempts to use immigration to stimulate faster economic growth. Rather, it requires a package of policies emphasising the redistribution of work, industry development, restoration of the public sector and restructuring for ecologically sustainable development (as argued more fully in Stilwell, 19974).
POPULATION DISTRIBUTION AND REGIONAL IMBALANCE
Population distribution also warrants consideration in an analysis of the relationships between demographic change, economic performance and public policy. Take, for example, the issue of the urban and regional distribution of population change. To the extent that population growth (whether it be through immigration, natural increase or internal migration) is focused on the major metropolitan areas it adds to inflationary pressures in housing markets, to the costs of providing additional infrastructure and to the environmental costs of further metropolitan expansion (such as loss of agricultural land and/or wilderness areas, and the interacting problems of urban congestion and pollution). Urban growth also fuels economic inequality because inflation in urban property benefits existing wealth-holders at the expense of new entrants. It intensifies the fiscal crisis of the state because increments to the costs of infrastructure (water and sewerage systems, energy supply networks, transport and so on) tend to rise more rapidly than the capacity to fund that infrastructure provision through taxation or user charges. Urban growth also intensifies the constraints on achieving ecologically sustainable development (because the demand for transport grows as the average length and complexity of intra-urban movements increases, for example) unless accompanied by major structural-spatial change, which is more difficult to effect when cities are facing pressures to accommodate rapid population growth at the margins.
The distribution of population between the metropolitan areas and non-metropolitan areas is particularly important since the economic, social and environmental impacts of population growth can be quite different according to where it is located. In the absence of vigorous regional policies, the distribution of population tends to be characterised by processes of circular and cumulative causation. Metropolitan dominance is reinforced by the disproportionate focus of immigrants on the major cities, attracted by the access to services and employment opportunities as well as social contacts. Internal migration, with the significant exception of relocation for retirement, further fuels urban bias. Decentralisation policies, as a means of countering these tendencies, have a long history but have failed to turn the tide.5 The difficulty of implementing effective regional policy is now further accentuated by the pressures for ‘globalisation’ of the economy and the ‘free market’ orientation in public policy. The society’s collective capacity to shape distributional outcomes is more sharply constrained in these circumstances. Control over patterns of urban and regional development is a particular casualty.
The intensification of spatial competition, especially between metropolitan areas vigorously competing for shares of mobile capital investment, goes hand-in-hand with beggar-thy-neighbour policies. Local governments engaged in ‘place marketing’ commonly seek to out-bid each other in offering inducements like cheap land, reduced local tax rates, and guaranteed markets. This is a long-established phenomenon internationally.6 It is compounded in Australia by a Federal system which accentuates the tendency for cut-throat competition for investment to take priority over capturing the economic surplus for collective social purposes.7 The capacity to steer population inflows to particular localities is even more highly constrained in these circumstances, notwithstanding the tentative attempts by the Federal government to incorporate the region of initial settlement as one criterion in the points system for the concessional migrant intake. Of course, there is no systematic mechanism to lock immigrants into staying where they initially settle and, in any case, that would violate civil liberties and the socio-economic advantages of geographical mobility. Regional economic disparities, including growing imbalance between the metropolitan areas and what has come to be known as ‘regional Australia’ (as if cities are not regions!), are evidently very difficult to cope with in these circumstances.
The spatial distribution of population also interacts with socio-economic distribution of income, employment and life-chances in general. It is a quarter of a century since Gough Whitlam made his famous speech asserting that ‘increasingly a citizen’s real standard of living ... [is] determined not by his income, not by the hours he works, but by where he lives’.8 Recent evidence from Hunter and Gregory9 shows that the regional dimension of income inequality is becoming a more important component of overall inequality. Areas of low and high socio-economic status and becoming more homogeneous and the differences between them increasing. Ecological stresses are also intensifying with urban growth as there is increasingly sharp contestation over the use of and access to ‘environmental goods’. The furore over proposals for a new airport for Sydney is an obvious case in point. Export-oriented economic growth, the quest for tourist revenues, and concern with local urban residential amenities are not readily reconciled.
FROM GROWTH TO BALANCE
Evidently the pursuit of economic growth through ‘economic rationalist’ policies in a context of rapid structural change is not compatible with broader principles of economic - social - ecological balance. Is it possible to develop an alternative approach which prioritises balance rather than growth? And how would population policy be situated in that context? This article began by postulating such as alternative as the central focus of public policy. It throws down the gauntlet because it challenges the main currents of economic analysis during the last two centuries. From the classical political economy of Adam Smith and David Ricardo we learned that trade and the division of labour would foster economic growth: that the stationary economic condition in which there is not capital accumulation would be a disaster. Subsequent economic thought has continued with this presumption in favour of growth. Even Karl Marx, the radical critic of capitalism, implicitly shared with the other classical economists the belief in the dominance of humankind over nature as integral to economic and social progress. Neoclassical economists have for the most part defined such concerns out of existence by their methodological individualism and a narrow focus on equilibrium conditions in competitive markets. In the current era ‘economic rationalism’ extends these biases to extreme proportions, with its emphasis on ‘international competitiveness’ as depicted by league tables of national economic growth performance. The challenge thrown up by ecological economics and by modern political economy is precisely to rethink these basic issues about the possibility, purpose, desirability, direction and costs of growth.
The case for this alternative focus is particularly pronounced in Australia because it is in the potential to produce a distinctive balance between economic, social and environmental concerns that Australia’s international comparative advantage lies. Other countries have had more impressive economic growth performance in recent decades but in many cases they do not compare favourably in terms of broader ‘quality of life’ considerations. Japan is an excellent case in point, a highly successful national economy — and one with a more equitable distribution of income than Australia’s — but whose population does not generally enjoy the housing standards, recreational and environmental amenities that most Australians commonly regard as normal. The continuing attempt to emulate countries with impressive aggregate GDP growth statistics misunderstands, and may undermine, the comparative advantage that Australia actually enjoys.
This is not just a matter of personal preferences: it is also good international economics. Developing industries geared to Australia’s social and environmental comparative advantages is a potentially powerful basis for more successful export performance to other nations in the Asia-Pacific region. Solar energy technologies and modular housing designs are cases in point, as are ‘exports’ of services in the fields of education, health, culture and recreation.
Size itself is not a crucial variable in economic success. Many industries today use technologies that are not dependent on massive production runs to achieve cost effectiveness. Reprogrammable machinery and ‘flexible specialisation’ — what some analysts call ‘post-Fordism’ to distinguish it from Fordist mass-production10 — permit industries to be efficient at relatively small scales. So a stable population need not impede the achievement of competitiveness. In any case, there is no possibility of competing with our regional neighbours — China in particular — in terms of the absolute scale of labour force and the wage costs of economic production.
Developing a strategy to promote balanced development requires attention to the interaction between market, state and community as interacting elements in economic and social organisation. The ‘interface’ issues here include state regulation of markets (‘setting the rules of the game’), the delicate balance between state and community (as complementary means of ensuring social cohesion), and the tense relationship between the community provision of services and the push for greater market provision (‘commercialisation’ and ‘commodification’). None of these tensions are easily resolved; they involve complex choices about our future as a society. The key point in the context of the current discussion is that they are political choices more easily confronted in the context of relative economic and social stability.
Herein lies the essential contrast with the prevailing ‘economic rationalist’ ideas and practices. The case for giving priority to stabilisation policies rests on these concerns about economic, social and ecological balance. It also rests on blending the roles of state, market and community as interacting elements of ‘social order’, rather than continuing to rely on ‘market signals’ to shape all else. At the present time, with dramatic transformations taking place in technology and throughout our economic, social and cultural institutions, there need be little fear of stagnation through the absence of stimuli for change. But a greater emphasis on aggregate population stability need not be uneconomic. Among other things, it would permit a reorientation of public policy to distributional issues, including spatial distribution of population.
Refocusing public policy, including economic and population policies, from growth to stability and balance need not be threatening to the living standards of Australian people, taking account of the diverse array of economic, social and environmental influences on our well-being. Australia has an outstanding opportunity to be an international exemplar in showing that balance (economic, social, ecological and regional) can replace growth as the central concept guiding the future of the nation.
References
1 See S. Rees, G. Rodley and F. Stilwell (Eds), Beyond the Market: Alternatives to Economic Rationalism, Pluto Press, Sydney, 1993
2 See, for example, M. Breslow, ‘Is the U.S. making progress?’, Dollars and Cents, vol. 204, March/April 1996, pp. 16-21; S. Beder, The Nature of Sustainable Development, Scribe, Newham, Vic, 1993, pp. 36-40; M. Wooden, ‘The Economic Impact of Immigration’, in M. Wooden et al. (Eds), Australian Immigration: a Survey of the Issues, Australian Government Publishing (AGPS), Canberra, 1990. 3 See N. R. Norman and K. F. Meikle, The Economic Effects of Immigration in Australia, Committee for Economic Development of Australia (CEDA), Sydney, 1985; F. Stilwell ‘Immigration: sound foundations for policy?’, Journal of Australian Political Economy, no. 21, May, 1987; J. H. Collins Migrant Hands in a Distant Land: Australia’s Post-War Immigration, Pluto Press, Sydney, 1988; M. Peter, ‘Some economic consequences of changes in the size and composition of the Australian population: immigration, ageing and scale economies’ in Population Issues and Australia’s Future, National Population Council, AGPS, Canberra, 1992.
4 F. Stilwell, ‘How to cure unemployment’, Just Policy, forthcoming,1997
5 See P. Self, ‘Alternative urban policies: the case for regional development,’ in P. Troy (Ed.), Australian Cities, Cambridge University Press, Cambridge, 1995; F. Stilwell, Reshaping Australia: Urban Problems and Policies, Pluto Press, Sydney, 1993, Ch. 10.
6 R. Goodman, The Last Entrepreneurs, Simon and Schuster, New York, 1979
7 F. Stilwell, Globalisation and Cities: an Australian Political-Economic Perspective, Urban Research Program Working Paper No. 59, Australian National University, Canberra, 1997 8 Quoted in M. I. Logan et al., Urban and Regional Australia: Analysis and Policy Issues, Sorrett Social Sciences, Malvern,1975, p.106.
9 B. Hunter and R. Gregory, ‘An exploration of the relationship between changing inequality of individual, household and regional inequality in Australian cities’, Urban Policy and Research, vol. 14, no. 3, 1996
10 B. Probert, ‘Restructuring and globalisation: what do they mean?’, Arena Magazine, vol. 3, April-May 1993
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