Making Babies to Grow Economies Won't Work
(Bloomberg Opinion) -- In his recent state of the nation address, Russian President Vladimir Putin spent about 20 minutes on a sweeping constitutional reform proposal designed to keep him in power indefinitely — and about twice as much time on ideas meant to boost the birth rate. This is typical of Europe’s national-conservative governments, and even some relatively liberal ones, that are preoccupied with fertility policies because of declining populations.
Perhaps they’re on to something. In a just-published working paper, economist Charles Jones of Stanford University built some models to show that so-called natalist policies may be “much more important than we have appreciated” in determining whether nations, and the world as a whole, will end up with a shrinking population and no economic growth — or with both the population and the economy on a path of steady growth. The intuition behind the models is that growth is, essentially, a function of people’s ability to come up with new ideas, and if the number of people stops growing or falls, the stock of knowledge stops expanding.
“The social planner,” Jones wrote, “would like the economy to have a much higher fertility rate.” But the global trend is going in the opposite direction:
Historically, fertility rates in high-income countries have fallen from 5 children per women to 4, 3, 2, and now even fewer. From a family’s standpoint, there is nothing special about “above two” versus “below two” and the demographic transition may lead families to settle on fewer than two children. The macroeconomics of the problem, however, make this distinction one of critical importance: it is the difference between an Expanding Cosmos of exponential growth in both population and living standards and an Empty Planet, in which incomes stagnate and the population vanishes.
United Nations population data show birth rates going down steeply even in those parts of the world where it seemed just recently they’d never go down below the replacement rate of 2 births per woman. In Asia, for example, that’s projected to happen between 2055 and 2060. More educated populations and more women in the workforce mean fewer kids, and these are factors that aren’t going away in the foreseeable future.
In Europe, of course, the population growth rate already is negative. In the wealthier countries the decline is still offset by immigration from places that produce too many people for their countries of origin to sustain. That’s the case in Germany and France. But in post-Communist Eastern Europe, natalist policies are the only obvious way to slow down a population decline enhanced by emigration, which the European Union’s free-movement policy has stimulated. Besides, natalism goes hand in hand with nativism, and in a number of Eastern European countries, voters, and subsequently governments, are wary of trying to increase immigration.
In any case, counting on immigration isn’t really a long-term solution. If the global population as a whole stops growing, this source of replenishing the labor forces and the stock of idea-generating researchers and entrepreneurs will run out.
Poland last year expanded its generous 500 Plus program, initially intended as a kind of unconditional basic income for families with at least two children, to those with just one child. The program, introduced in April 2016, pays families about 12% of the country’s average gross wage per child, and while some criticize it for the absence of means-testing, others welcome it as a form of recognizing the labor that goes into caring for children.
Putin’s Russia is one of the world’s natalism champions. Though, unlike its former Eastern European satellites, it attracts a relatively large number of immigrants from former Soviet countries, the open-door policy is unpopular and, as Putin well knows, unsustainable because fewer people throughout the former Soviet Union are learning Russian or dreaming of moving to Russia.
So the government has been offering “maternity capital” to new mothers — a lump subsidy currently worth $7,600 that can go toward housing, education and other costs. Briefly, the policy appeared to work: In 2013, 2014 and 2015, the number of births in Russia exceeded the number of deaths. But then an economic downturn reversed the trend. In January through February of 2019, Russia’s natural population decrease, 236,900 people, was bigger than for the whole of 2018.
Putin is ready to fight tooth and nail for a return to growth. Starting this year, low-income families are receiving, on average, $180 per child per month until the children reach age 3; in the state of the nation address, Putin proposed continuing to pay half that amount until age 7. He has also ordered the maternity-capital subsidy boosted to $10,000 for the second child. In addition, the government will offer hot meals to all primary-school students.
The problem with the measures taken by Eastern European governments is that they don’t really work as advertised. In a 2014 paper, the Brandeis University economist Elizabeth Brainerd wrote that natalist policies in post-Communist Europe have been “only modestly effective in countering the impacts of widespread social changes, including new work opportunities for women and stronger incentives to invest in education.”
In Russia, meanwhile, the brief baby boom largely took place in areas with the least economic opportunity — those where the maternity capital went the furthest. Some of these areas are in the North Caucasus, a region with a high proportion of Muslims who traditionally have high birth rates. Big-city residents are more responsive to the general economic situation and to intangibles such as the level of freedom and a sense that the children will have a better future. So far, Putin’s policies haven’t produced much hope on any of those fronts — and even if they did, there’d be no guarantee that Russia wouldn’t follow the Western European low fertility trend.
Even though, in theory, pro-fertility policies appear desirable as global population growth slows, in practice there are no such policies proved to have a surefire effect. As Canadian political scientist Richard Togman wrote in “Nationalizing Sex: Fertility, Fear and Power,” his recent history of natalism: “Thus far, efforts to increase fertility have primarily led to a change in the timing of births but not in the overall number of babies born. Regimes as violent and totalitarian as Nazi Germany and Communist Romania have failed to increase long-term birth rates, as have a multitude of more moderate approaches of many other states.”
In Togman’s view, the problem with natalist politics is that they’re based on the manipulation of broad national statistics rather than on finding out why the birth rate is low in a specific nation or region. “Governments almost never make studied inquiries of various demographic groups regarding what it would actually take to convince them to have another child,” he wrote:
Only through a detailed study of local context and with input from those whom the programs are deemed to serve can natalist policy be truly effective. By its nature, natalist policy relies on the buy-in of millions of people, and truly consensual efforts to change reproductive practices might yield great benefit to individuals, their communities, and the state.
Because of this need for smart design and universal buy-in, illiberal governments such as Putin’s or Orban’s aren’t likely to come up with the best solutions. Ultimately, that means humanity may come up with other ways of ensuring an expanding store of knowledge and continued growth before it cracks the secret of increasing fertility. Jones mentioned a couple of possibilities in his paper: Producing more ideas with the help of automation, or simply discovering a way to make people immortal.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Leonid Bershidsky is Bloomberg Opinion's Europe columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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