The Economics of Enough_ How to Run the Economy as if the Future Matters - Diane Coyle [53]
International migration has been an emotive topic, generating political controversy. Paradoxically, perhaps the greatest tensions have arisen in countries whose demographic need for larger numbers of younger people is the greatest—Italy is one example, where there is great hostility to the influx of young workers from the southern shores of the Mediterranean. A number of Western governments have felt obliged to try to slow the inflows of immigrants, especially those from much poorer countries.
Although there are without doubt costs involved in large-scale immigration—in terms of pressure on housing and transport in some areas, for example, and in terms of cultural adjustment—I have no doubt that the flows should and moreover will continue. It doesn’t take much awareness of the desperate attempts of some would-be migrants to reach Europe and the United States—the leaking boats and airless trucks, the frightened scurry across the border or panicky wait in line at the airport—to realize the strength of the demographic and environmental pressure behind the massive movement of people. The number of international migrants in the world increased from 155 million in 1990 to 191 million in 2005. Developed countries absorbed most of the increase in the number of these migrants during this period, or 33 million out of 36 million, and there is now an increasing concentration of international migrants in the developed world, specifically North America and Europe. The proportion of migrants living in North America increased from 18 percent in 1990 to 23 percent in 2005 and the share of Europe rose from 32 percent to 34 percent during that period.21 We are still in the midst of one of the great eras of migration that occur from time to time in human history. One of its by-products will be a small improvement in the demographic structure of the population in the rich economies, a slowdown in the rate at which their populations are aging.
An alternative is an increase in the birthrate of the native born in aging societies. Baby booms do occur, and the reasons for demographic waves of this kind are not well understood. However, they do seem to be linked to the prospects potential parents see in the world around them—there was a postwar baby boom but a Depression era baby bust. So it seems unlikely that a period of major economic adjustment of the kind we are in for would encourage a higher birthrate.
Figure 6. The desperation of migrants.
Default
The final option is that governments will not honor the debt they have accumulated. This is unlikely to be explicit. A formal default makes it impossible to borrow again for a long period in the future, casts a shadow over private sector borrowers by raising the interest rates they have to pay, makes it harder to engage in international trade, and causes recession and economic turmoil. However, quiet default by allowing inflation to rise so the real value of the debt is eroded is extremely likely. It was the way governments tackled an earlier build up of debt in the 1970s.
This might sound like an easy way out, but high inflation is socially corrosive. It harms people on low incomes, which never keep up with price rises, and small savers, whose interest rates turn negative in real, inflation-adjusted terms. The well-off and big investors find ways to protect themselves. Extreme cases illustrate dramatically the social impact—the hyperinflations of the 1930s, or of Zimbabwe now, for example. Inflation of 20 percent or 25 percent is certainly not comparable, but shouldn’t be dismissed as minor either. We experienced that in the United Kingdom in the late