What is the Purpose of Immigration Policy?

Though there’s scarcely been any mention of immigration policy in the 3-1/2 years since President Obama took office, all of that changed on Friday when he announced that he would halt enforcement action on illegal immigrants who were brought to this country by their parents as young children – growing up knowing no other country than the U.S.  Now the news seems to be about nothing else.  Was the president right?  What would Romney have done?  Will he reverse this decision when (not if) he takes office?  There was also talk of the need for “comprehensive immigration reform.”  Perhaps the most incisive question I heard in the wake of Obama’s decision was “How can immigration policy be made to work for us?” 

How indeed, if it can be made to work for us at all?  It begs another question:  what is the purpose of even having an immigration policy?  I think the answer is that immigration serves three purposes:

1. It fulfills our obligation as a member of the global community to reciprocate when other nations are willing to accept migrants from the United States.
2. It fulfills our obligation to accept our fair share of refugees fleeing war and persecution. 
3. Once the above two obligations have been met, additional immigration serves only one other purpose – to grow our population. 

Others may suggest some unquantifiable reasons and purposes – to enrich the diversity of our people, as an example, or to uphold our tradition as a nation built by immigrants.  All such sentiments are rooted in a deeper concern for immigrants than for what’s best for our country.  The fact is this:  that once we have met our obligations to admit as many immigrants as other countries are willing to accept from us – including refugees – the ultimate question is whether it makes sense to grow our population by admitting more.  Here are some critieria that should be applied:

1. Are we short on labor?  With 18 million Americans unemployed, does it make any sense to import more workers?
2. Do we have sufficient resources to support a larger population, including food, energy, metals, minerals and lumber and others?  For example, does it make any sense to import more oil consumers when we already must import the majority of oil that we consume?
3. Is our impact on the environment below a sustainable level, and have we met all of our obligations to reduce our impact?  For example, given that we have committed to an 80% reduction in greenhouse gas emissions by 2040, does it make sense to import more emitters? 
4. Given that, beyond a critical level, a rising population density dooms an ever-growing percentage of Americans to unemployment and poverty, does it make any sense to increase our population density with more immigrants?

If the answers to the above questions are “yes,” then by all means, let’s welcome more immigrants.  But can anyone answer yes to even one of those questions with a straight face? 

Every year, America welcomes another 1.5 million immigrants only because that’s what we’ve always done.  No one ever stops to ask whether it makes any sense whatsoever.  We just do it.  We stoke the unemployment lines with unneeded workers.  We drive up the demand for imported oil.  We worsen our impact on the environment and we make life incrementally more miserable for every American. 

Shame on President Obama, not for his action on Friday but for squandering 3-1/2 years of opportunity to inject some common sense into immigration policy.

Thoughts on President Obama’s Contraception Quagmire with the Catholic Church

http://content.usatoday.com/communities/Religion/index

I’ve started to write on this topic a couple of times in the past week or so, but have gotten hung up each time on trying to keep it brief.  It’s just not a subject that lends itself to brevity.  But, together with the fact that my book’s main theme is the need to stabilize and even reduce our population, the events of this morning have me fired up enough to just wade in with my two cents’ worth.  First, while attending mass this morning, some guy felt it his duty to interrupt the service and educate the rest of us with a rant about “Obamacare” and the contraception mandate.  Later, after returning home and switching on the TV, George Stephanopolous’s round table discussion on this topic on “This Week” on ABC pushed me over the edge. 

So the following are some random thoughts on the subject.  First of all, there certainly is a valid concern about treading on the 1st amendment’s guarantee of religious freedom by mandating things that violate a religion’s beliefs.  That said, it seems to me that there’s a lot of political opportunism here.  The president was wrong to mandate that the Catholic Church pay for the cost of insurance coverage that includes contraception.  But that concern was laid to rest when he shifted the burden to insurance companies and mandated that they offer it for free to anyone who wants it.  The Church doesn’t pay for it, and no one takes advantage of it unless they want to.  But that’s not good enough for them.  Now it seems that the Church is over-reaching and is just as eager to trample people’s rights to make their own decisions about the use of contraception as they were eager to complain about their own rights being violated.  Republicans need to be careful here.  If the Church is perceived to be worried less about religious freedom and begins turning this into a fight over contraception, that’s a battle Obama would love to have, because it’s one he can’t lose. 

The federal government has no right to require religious groups to violate their beliefs.  It has every right – and a responsibility - to pass laws that dictate how business is to be conducted.  The problem arises when religious organizations branch out from attending to the spiritual needs of its members and begin operating businesses, like hospitals.  It’s not as though something like this hasn’t occurred before.  Where was all of this indignation when these businesses (like Catholic hospitals) were required to comply with equal opportunity laws that forbid discrimination on the basis of sexual orientation?  Where is the indignation about complying with living wills and other end-of-life directives regarding the termination of life-support for terminally ill patients?  Where is the indignation about religious organizations being required to provide health insurance of any kind if they have more than a certain number of employees?  (I’m thinking here of Christian Science, who doesn’t believe in health care of any kind.)

What happened to all of the indignation about the plight of people who were unable to afford health coverage of any kind prior to the passage of health care reform?  Didn’t the council of American bishops of the Catholic Church eagerly support health care reform?  Where is the indignation with American businesses who have been eagerly slashing health care coverage from their benefits?   

And isn’t it hypocritical for the world’s biggest champion of never-ending population growth to then decry the unemployment and poverty that follows in its wake – to demand that the government do something to provide care for all these people and then piss and moan about the details?  Has it instead volunteered to care for all the poor who can’t afford health coverage?  Oh, sure, they’ll toss them a few crumbs – feed them and provide shelters.  But I’m talking about expensive, life-saving medical care.  Are they willing to provide that? 

That’s why I say that there seems to be just a little opportunism going on here by those anxious to fabricate another reason (something beyond the notion of excessive government intrusion into our lives) to rally opposition against “Obamacare.”  (By the way, I’ll be writing more about the whole issue of “government intrusion into our lives” in another post.) 

Finally, I’ll simply say that the president is right in his philosophy of making contraception free to anyone who wants it.  As anyone who reads this blog knows, I haven’t been a big fan of President Obama lately, but he’s right on this one.  And the Catholic Church is wrong to try to make opposition to contraception (as distinguished from “birth control,” a term which includes abortion) a matter of doctrine.  Just as the president has waded into a quagmire with some clumsy handling of this issue, the Catholic Church just can’t seem to resist wading into every quagmire it encounters.   Deeper and deeper it goes, parsing every issue into every conceivable situation, assigning mortal or venial sin status to every conceivable outcome, until the federal tax code pales in comparison to the book of Catholic doctrine.   Never mind that Christ Himself had nothing to say on the topic of family planning and contraception (since he’d have been greeted with blank stares at a time when the birth rate barely kept pace with the death rate), the Church can always draw upon some Old Testament verse of dubious relevance.   Whatever happened to the main mission of spreading the gospel of love and salvation?

The fact is this:  the vast majority of Catholics practice contraception.  The only reason that the Church continues to oppose contraception is because it has painted itself into a corner.  To now approve the practice would be an admission that prior popes were wrong, calling into question the issue of papal infallibility. 

Looking around the church this morning, there were few young people to be seen.  No wonder.  The longer the Church continues to intrude where it doesn’t belong and drag its feet on admitting to past mistakes, the more its membership and influence will decline.  A pity.

Reuters Columnist’s Defense of Overpopulation

http://blogs.reuters.com/edward-hadas/2011/11/02/7-billion-reasons-why-malthus-was-wrong/

The above-linked editorial appeared on Reuters yesterday.  It’s one of the most twisted-logic-defenses of population growth that I’ve seen yet.  The author, Edward Hadas, begins with a denial that Malthus correctly predicted some of the effects we’re witnessing today:

 The early 19^thcentury British thinker decided (without providing any reasons) that people would always have more children than the physical world could possibly support. Population growth would always be restrained by death from want. At the time he wrote, the world’s population was about 1 billion. By the 1960s, the population had increased to about 3 billion people, and Malthus’s gloom was often cited. Some ecologists then claimed that the combination of industrial production and overpopulation would inevitably lead to environmental catastrophes – and many deaths from want.

And yet up to now, Malthus has been wrong

Is this guy really denying that there have been no environmental catastrophes?  A few quickly come to mind:  climate change, the BP oil spill disaster in the gulf, the Exxon Valdez oil spill disaster in Prince William Sound, nuclear disasters in Chernobyl and Fukushima.  The list goes on and on.  And there have been no “deaths from want?”  Is this guy completely blind to the fate of people in the undeveloped world, which represents a large percentage of the world’s population?

But then, after mocking Malthus for being wrong up to this point (in his eyes), he then seems to admit that Malthus may yet be proven to be right:

Still, it cannot be proven that Malthus was wrong, that the world will never run out of stuff or that humanity’s resourcefulness will always rise to environmental, economic and social challenges.

But then, once again, Hadas hears the siren call of the “don’t worry, be happy” economists, more concerned with the problems associated with an aging and declining population. 

… while grim environmental forecasts are still easy to find, demographers these days talk more about the stresses that come with ageing and declining populations.

… the practical challenges can be met easily.

Instead of worrying, economists should take the latest demographic milestone as an opportunity to stop thinking like Malthus …

Of course, it’d be easier to stop worrying if it weren’t for all the data that screams warnings at us about overpopulation.  What to do about that?  “Don’t worry, be happy!”  Ignore it!  Hadas then singles out one of the biggest red flags of all, the one I’ve featured in this blog many times – GDP per capita.

A good starting point would be to stop relying on GDP per capita when comparing the wealth of nations. In this calculation of average income, population is the denominator. If that increases, the per capita GDP will fall, unless the numerator – production – increases commensurately. In effect, this measure makes each new person an economic drag.

Yes, if GDP holds constant as the population continues to grow, then everyone is getting poorer and population growth becomes a drag.  It’s an inescapable fact.  Hadas seems to have a hard time dealing with facts, especially (I suspect) if those facts cry out for an economic change that might threaten the growth prospects for his stock portfolio.  So, at this point, Hadas simply chooses to ignore the facts and gets all sappy on us:

A new person is indeed a consumer who will need to work to avoid being a net drain on the world’s resources. But he or she is also a wonder worth celebrating. Parents know it, and economists should recognize that reproduction is a sort of production – brought forth through maternal labor and parental care. Economic activity should aim at the promotion of life, not merely at the production of stuff.

What?!?!?  If economists theories are failing us economically, then economists should ignore the data and focus instead on “the promotion of life?”  If we’re driving toward a cliff, we should just close our eyes and put the pedal to the metal?!?!? 

This conclusion caps off one of the stupidest, most illogical defenses of overpopulation that I’ve seen yet.  There are three kinds of people in this world:  (a) those who continue to believe as they do because they’ve never pondered the facts, (b) those who have taken the time to ponder reality and change their opinion accordingly, and (c) those who ponder the facts and reality but then continue to promote what they now know to be lies, to the detriment of humanity,  just because it suits their purpose.  I suspect that that last group of people will be judged harshly in the end.

7 Billion People

http://www.reuters.com/article/2011/10/25/us-population-baby-idUSTRE79O4DZ20111025

Within a matter of days, we will mark a very sad milestone.  It is estimated by the UN that October 31st will be the day that the world population will breach 7 billion people.  

The world’s population continues to grow by approximately 1.1% per year, currently adding 77 million people per year, more than the entire population of the Northeastern United States.

It took the vast majority of human history to reach 1 billion people sometime in the early 1800s.  It took only a hundred years for the population to then double to 2 billion.  In 1960 we reached 3 billion people.  Fifteen years later, in 1975, we hit 4 billion.  Twelve years later, in 1987, we hit 5 billion.  Only 11 years later, we hit 6 billion.  Eleven years later again, sometime in the next few days, we will have added yet another billion to reach 7 billion people. 

And the pace of growth isn’t slowing much, at least not yet.  The UN projects that the world population will grow to 8 billion by 2025.  But then it does begin to slow, taking until 2042 to reach 9 billion.  It will then take over 40 years to add the next billion, reaching 10 billion by 2085.  Its projections are based on assumptions about development and declining birth rates.  (Although, as of the time of this writing, the UN has not yet published the assumptions that formed the basis for its projections.)  I can assure you, though, that the role of excessive population density in driving unemployment and poverty isn’t factored into their thinking.

Consider this:  as the world grows ever more overpopulated, per capita consumption is in a state of decline.  If per capita consumption held steady, then each person added to the population would find work at about the same rate as everyone up to that point.  A one percent rise in population would result in a one percent increase in jobs and unemployment would remain a constant. 

While that’s what economists believe, that’s not what’s happening.  Each one percent gain in population is actually driving down per capita consumption and driving up unemployment.  To make matters worse, productivity continues to rise at an even faster pace than our population growth rate.  What all of this means is that every person added to our population is headed straight to the unemployment line.  If we add another billion people by 2025 (about half of whom would be considered part of the labor force), as the UN projects, then the ranks of the unemployed, globally, will grow by 500 million.  And the U.S. isn’t immune.  As we add 3 million people to our population every year, or about 1.5 million new laborers, every one of them is doomed to the unemployment line. 

None of this is factored into the UN projections.  For that reason, I’d be willing to bet the farm that the world population will never exceed 10 billion.  In fact, it’s highly unlikely that we’ll hit 9 billion.  And I’d give you even odds that we’ll never even reach 8 billion.  Does that sound like wild-eyed optimism from a staunch advocate of stabilizing our population?  Hardly.  Grim pessimism is a better description because the conditions that will drive such a sudden halt to population growth is exactly what I’ve hoped we could avoid if only economists would pull their heads from the sand and begin advocating an orderly process of stabilization and contraction.  Just imagine the conditions that we are about to witness as the U.S. adds 1.5 million people and as the world adds nearly 40 million people to the unemployment line every year.  Societies are going to unravel quickly.  Nature is very unforgiving of species that don’t adapt to a changing environment.  And when that species’ ability to adapt depends on its intellect, as in the case of humanity, nature will be brutally unforgiving of self-inflicted ignorance perpetrated by its leaders. 

Look at this slideshow:  http://www.reuters.com/news/pictures/slideshow?articleId=USRTR2T6A3#a=1.  As you do, I want you to ask yourself, “what is the per capita consumption of the people I see in this picture?”  How much do they consume compared to how much they could produce if put to work in a modern factory?  If all consume so little but are capable of producing so much, how can all of them – or even a significant fraction of them – find gainful employment? 

Our economists and leaders need to wake up very quickly and stop pretending that mankind can overcome any obstacle to growth and grow ourselves into further prosperity.  Economies built on economists’ lies can’t endure and nature couldn’t care less what we believe.  This world is going to become a very ugly place very quickly, far more quickly than even I imagined when I published Five Short Blasts four years ago.

Population Density a Factor in State-by-State Unemployment

http://finance.yahoo.com/blogs/daniel-gross/north-dakota-spurred-energy-ag-boom-3-2-122815061.html

The above-linked article reports that the lowest unemployment in the nation is found in the state of North Dakota.  The article cites a number of factors but, of course, makes no linkage to population density.  With a population density of only nine people per square mile, North Dakota is the fourth most sparsely populated state in the nation, beaten only by Montana (6 people/square mile), Wyoming (5 people per square mile) and Alaska (1 person per square mile).  A coincidence?  I think not. 

However, if I were to simply make a linkage between North Dakota’s low population density and their low unemployment rate, one could easily refute my argument by pointing to other states with low population density and high rates of unemployment.  Nevada, for example, with a population density of only 22 people per square mile has an unemployment rate of more than 12%, the highest in the nation. 

The only way to settle the argument is to do a scatter chart of the unemployment rate for all 50 states and see whether a pattern emerges.  This is something I’ve not done before, since a cursory examination of the data shows a lot of scatter, and since free trade between the 50 states tends to level out unemployment across the nation, exporting jobs from low density states to high density states and exporting unemployment in the other direction, exactly in the same way that it works between nations on a global scale. 

But this single data point for North Dakota compelled me to finally compile the data and see whether any relationship is evident at all, or if the data produces a shotgun scatter with zero correlation.  The following is the result:

Unemployment vs Pop Density

In spite of the unemployment-leveling effects of free trade between the states, a relationship does indeed emerge.  Yes, there’s a lot of scatter, but the relationship becomes evident when the trend line (that line that begins near zero and slowly rises along the bottom of the graph) is inserted and the “coefficient of determination” is calculated.  If no relationship existed, the trend line would be flat and the coefficient of determination would be zero.  A perfect relationship would have all of the data points fall in line (either a straight line or a curved line) and the coefficient of determination would be “1″. 

In this case, there is a definite upward trend which follows a “power” equation, and the coefficient of determination is .14 – weak, but a definite correlation.  Getting back to Nevada, the state one would use to refute my argument, it must be remembered that within my theory that relates population density to per capita consumption (and thus to unemployment), what’s important is not actual population density but “effective” population density; that is, the population divided not by the total area but by the inhabitable area.  And a major fraction of Nevada is indeed uninhabitable, thanks to vast deserts and moutainous regions.  The “effective” population density of Nevada is actually quite high.  If just that one data point out of 50 is removed from the data set, the coefficient of determination rises to .18. 

Looking at the data another way, let’s divide the states evenly around the median population density of 95 people per square mile.  Among the more densely populated 25 states, only 8 have unemployment rates of less than 8%.  Among the less densley populated 25 states, there are 15 such states.  Only one state in the more densley populated half of states has an unemployment rate of less than 6% – New Hampshire.  There are five such states in the less densely populated half of states – North Dakota, South Dakota, Nebraska, Oklahoma and Vermont. 

The moral of this story?  If you’re unemployed, think about moving to one of these less densely populated states.  (Of course, if everyone did that, those states would soon no longer be sparsely populated, nor would they have low rates of unemployment.)  Secondly, contrary to what most people would say, a growing population in your state is not good for its economy.  Get involved in promoting legislation that discourages illegal immigration and encourage your federal legislators to oppose high rates of immigration in general – both legal and illegal.  Finally, consider what happens when less densely populated nations like the U.S. trade freely with those far more populated.  If you do, you’ll also want to encourage your legislators to demand changes to U.S. trade policy. 

If you like unemployment, then just keep quiet about trade and immigration policy.  It’ll get worse.  If you don’t like it, then find out what really lies at the core of the problem and start demanding changes.

FAIR Media Director Links Overpopulation and Surplus of Labor

http://www.steinreport.com/archives/overpopulation_devaluing_unskilled_labor.html

I came across the above-linked op-ed piece yesterday, which appeared in “The Dan Stein Report.”  Dan Stein is president of FAIR, the Federation for American Immigration Reform, of which I’m a member.  Ira Mehlman, author of this piece, is their media director. 

I bring this to your attention because it’s a rare example of someone making a direct connection between overpopulation and a growing surplus of labor.  His focus is on unskilled labor, but the fact that any such linkage is made by anyone is remarkable, since it flies in the face of economic dogma.  The world may not wait for economists to come up with the solutions.  The field of economics had better start looking into the economic relationships that are increasingly evident to the layman, or they risk becoming completely irrelevant.

Business and The Common Good

http://blogs.reuters.com/chrystia-freeland/

The above-linked opinion piece by Chrystia Freeland, writer for Reuters, asks whether businesses add to the common good.  It’s an opportunity for me to write about one of the most profound implications of the new economic theory I presented in Five Short Blasts – the divergence between the  interests of business and the interest of the common good as increasing population density begins to erode per capita consumption. 

The quandary is best illustrated by the example I presented in the book – the difference between Japan and the United States in the per capita consumption of dwelling space.  In Japan, a nation ten times as densely populated as the U.S. (and nearly as wealthy, thus eliminating low income as an explanation for the disparity), the Japanese people live in homes that are only 30% the size of American homes (on average).  The reason is clear.  Japan is so crowded that space limitations don’t allow for anything larger. 

The Japanese people would give anything to live in a home like the average American.  Their tiny dwellings, often derisively referred to as “rabbit hutches,” are a national embarrassment.  In terms of dwelling space (and in many other ways as well), the Japanese have effectively crowded themselves out of a better quality of life.  This clearly isn’t in the best interest of the common good. 

But look at it from the perspective of businesses engaged in building, furnishing and maintaining Japanese homes, not to mention those engaged in manufacturing the products used by those businesses.  Although the average Japanese dwelling is more than three times smaller than the average American’s, the sum total of dwelling space is more than three times larger than it would have been if Japan’s population had leveled off at the same population density as the U.S.  Thus, sales volumes and profits for these companies are more than three times greater, thanks to population growth and stuffing more and more people into the same limited space. 

And so it is with virtually every business, regardless of the product or service they provide.  Their best interests are served by advocating for public policy aimed at growing and exploiting the population, in spite of the fact that such policies are not in the best interest of the common good.  And who wields the most power in terms of campaign financing and advertising to shape public opinion?  Businesses and corporations, and not individual citizens.  It’s the corrputing influence of corporate money. 

It’s the very reason that our nation’s leaders turn a blind eye to illegal immigration and process as many legally as the sytem can handle.  It’s the very reason that our trade policy has been hijacked by “free trade” advocates – not because they give a rat’s behind about free trade, but because it provides them access to more and bigger populations, the more densely populated the better, regardless of what it does to the trade deficit or the nation’s economy.  It’s the very reason that public and private grant money has snuffed out any independent thinking by our business and academic economists, who must toe the line of corporations and the Federal Reserve if they want to keep the money flowing. 

In 1952, Eisenhower’s Secretary of Defense, Charles E. Wilson, former CEO of General Motors, famously proclaimed, ” What is good for the country is good for General Motors, and what’s good for General Motors is good for the country.”  A year later, Al Capp created a new character for his L’il Abner comic strip – General Bullmoose – whose motto was, “What’s good for General Bullmoose is good for everybody!”  It’s exactly this attitude that permeates public policy and economic theory to this day.

While it may have been true in 1952, and throughout history up to that point, when the world population was less than half what it is today, that the best interests of both business and the common good were the same, it isn’t today.  That relationship broke down when population density reached a critical level, beyond which people were forced to begin crowding together, eroding per capita consumption and driving up unemployment. 

There’s nothing wrong with business wanting to make a buck.  It’s what drives them to produce products and services that we need, and to do it efficiently.  But it also drives them in a direction that, at some point, is no longer in our best interest.  Boundaries need to be established to assure that business continues to function as our servant and not our master.  That’s why I’ve advocated a major overhaul of the U.S. constitution, adding amendments that preclude business from using population growth and bad trade policy to stoke profit growth.  It’s why the first amendment needs clarification of the now-ambiguous speech of our founding fathers who never imagined that “the people” could be interpreted to include global corporations, or that money would be equated with “speech.”  This ambiguity and these interpretations have effectively silenced “the people,” drowning out their “speech” in a tidal wave of corporate money used to influence policy in a direction contrary to the common good.

Bloomberg: Open the Immigration Floodgates

 In case you missed NBC’s “Meet The Press” with David Gregory on Sunday morning, here’s a link:  http://www.msnbc.msn.com/id/3032608/  It was one of those programs that got me fired up.  New York mayor Michael Bloomberg was one of the panel guests, along with David Axelrod and Virginia governor Bob McDonnell.

It was Bloomberg’s soliloquy about how to fix the economy in general and Detroit’s economy in particular that raised my hackles, soon followed by Gregory’s use of the  The Economist magazine’s feature article titled “What’s Wrong with America’s Economy?” to prompt a discussion about the state of the U.S. economy.

The following is the comment I posted on the “Meet the Press” website:

As a remedy for Detroit’s economic woes, Bloomberg suggests filling it with immigrants.  No doubt, that would reverse the decline in Detroit’s population.  But the people who already live in Detroit (including many immigrants) are experiencing the highest unemployment in the country.  What exactly would Mr. Bloomberg have all these new immigrants do for a living?  How would loading up Detroit with more labor capacity fix the problem that has driven people out of the city in the first place – the lack of sufficient work to employ them? 

Mr. Bloomberg also repeated a frequently made and patently false statement when he said that “this country was built by immigrants.”  While it’s true that the U.S., like every other nation on earth (with the possible exception of Iraq, where the garden of Eden is believed to have been located between the Tigris and Euphrates Rivers) is populated by the descendants of immigrants, the vast majority of labor that went into the building of everything you see in the U.S. was provided by native-born Americans.  Sure, immigrants contributed, but to say that the U.S. was built by immigrants is ridiculous. 

David Gregory then went on to prompt a discussion of the economy with the cover of “The Economist” magazine, which asks the question, “What’s Wrong With America’s Economy?”  How ironic.  What’s wrong with America’s economy is that its economic policy is guided by the field of economics which, thanks to its refusal to ever again consider the full ramifications of the biggest factor at work eroding our economy today – population growth – its theories, most notably those regarding trade, are fatally flawed. 

If economists ever get over the beat-down their field took in response to the seeming failure of Malthus’ theory about overpopulation and food shortages, and once again consider the full implications of unending population growth – not just strains on resources and stress on the environment – but other implications as well, they might discover the relationship between population density and per capita consumption.  They might come to understand how extreme population densities erode per capita consumption, driving up unemployment and making overpopulated nations utterly dependent on manufacturing for export in order to gainfully employ their bloated labor forces.  And they might come to understand that this is the driving force behind the trade imbalances that nearly collapsed the global economy. 

But, no, economists continue to foolishly rely upon population growth as an engine for macroeconomic growth and as a way to stoke sales and corporate profits, never giving a thought to the relationship between per capita consumption and employment.  Until economists emerge from the fetal position they adopted in response to cries of “Malthusians!” and open their eyes to the full ramifications of population growth, America’s economy and, indeed, the global economy as a whole will continue to deteriorate. 

Pete Murphy

Author, “Five Short Blasts”

Is the U.S. economy on the verge of sinking back into recession?

The Bureau of Economic Analysis (BEA) released its preliminary estimate of Gross Domestic Product (GDP) this morning.  The news isn’t good.  Real (adjusted for inflation) GDP, the broadest measure of how the economy is doing, fell from an annual growth rate of 3.1% in the fourth quarter of last year to only 1.8% in the first quarter of 2011.  (Here’s a link to the report.)  Actually, inexplicably (perhaps hoping that no one would notice, since the news is bad enough), the BEA committed a rounding error in its report.  If you do the math, the growth rate was actually 1.748% and thus should have been reported as 1.7%. 

But, if you’ve been following this blog, you know that the news is worse than that because of population growth.  What matters is not the size of the pie, but the size of the slice that everyone gets when more and more people show up at the table.  The U.S. population is growing at a rate of about 1% per year.  Therefore, the growth rate in real per capita GDP was only 0.7% in the first quarter.

But wait, the news is even worse.  Although the government stimulus program has fallen off everyone’s radar since it’s nearly over, it’s not over yet.  Stimulus spending added $43.2 billion to the economy in the first quarter.  Take away that spending (because it will soon dry up), and real per capita GDP growth falls to only 0.3%.  That’s perilously close to the resumption of the recession, the 2nd “dip” of the “double dip” I’ve been predicting. 

And, if you’ve been watching the economic data releases in April, you know that the economy has slowed noticeably from the 1st quarter.  Unemployment claims are rising again.  The housing market is slumping further.  And gas prices present a major challenge to consumer spending. 

And the trade deficit gets a lot of the blame for the slump in GDP.  Here’s a quote from the BEA’s summary:

The deceleration in real GDP in the first quarter primarily reflected a sharp upturn in imports, a deceleration in PCE, a larger decrease in federal government spending, and decelerations in nonresidential fixed investment and in exports that were partly offset by a sharp upturn in private inventory investment.

“A sharp upturn in imports” and “decelerations in … exports.”  In spite of trillions of being pumped into the economy in the past couple of years by the federal government and by the Federal Reserve, this economy is hanging by its fingernails.  Our idiotic trade policy, which the president promised to address during his campaign but so far hasn’t, gets much of the blame.  There’s simply no hope for this economy until something is done to restore a balance of trade and bring our manufacturing jobs back home.

Another Lame Defense of The Dismal Science

http://www.hillsdale.edu/news/imprimis/archive/issue.asp?year=2011&month=03

Thanks to reader Clyde for forwarding the above-linked article to me, the text of a speech by William McGurn, writer for the Wall Street Journal,  delivered at Hillsdale College last month.  McGurn’s speech was a defense of The Dismal Science, otherwise erroneously known as the field of “economics.”  It seems that McGurn felt the need to come to its defense.  That alone tells you that the attack on the subject of economics is significant and credible. 

As with all such defenses of The Dismal Science, McGurn’s is mired in 19th century writings and events and a complete failure of logic.  He begins his defense with an explanation of the origin of the term “dismal science.”  Thomas Carlyle used the term in the mid-1800s to deride economists who opposed slavery.  But earlier, and more famously, he used the term to mock the theories of Malthus, who predicted that the human population would be held in check by food shortages. 

McGurn then goes on to link concerns about overpopulation with the Nazi extermination of Jews and with draconian population management practices, including infanticide, employed in China and India, as though such practices are somehow the only logical outcome of concern about overpopulation.  So, once McGurn has made the implication that those who deride the field of economics and worry about overpopulation are racists and murderers, his task of defending the field of economics on purely economical grounds has been made much easier. 

Good thing, because his defense of economics from that point on is completely illogical and is summarized in the following excerpt:

In the two centuries since Malthus first predicted the apocalypse, the world population has risen sixfold—from one billion to more than six billion. Over the same time, average life expectancy has more than doubled—and average real income has risen ninefold.

In the four decades since Paul Ehrlich declared the battle to feed humanity over, a Chinese people who saw millions of their fellow citizens perish from famine as recently as the early 1960s are now better fed than ever in memory.

And in the years since Mr. McNamara predicted we could not sustain existing population levels, we have seen the greatest economic takeoff in East Asia—among nations with almost no natural resources and some of the largest and most crowded populations in the world.

McGurn makes a classic blunder of logic, drawing a cause and effect relationship between two unrelated events.  Yes, the world’s population has grown a lot in the last two centuries and life expectancy and real income are up.  But the same could be said about the preceding centuries as well, when mankind rose from the dark ages through the period of the renaissance.  The growth in life expectancy and income were no less impressive, yet the growth in the population was a tiny fraction of that in the last two centuries and the field of economics didn’t yet even exist!  That such progress continued for another two centuries can in no way be attributed to population growth or the field of economics.  Rather, a more likely explanation is human nature’s drive to prolong and enhance the quality of our own lives.  That drive is so strong that it’s likely the progress McGurn speaks of came in spite of the field of economics and population growth, not because of it.

And, yes, Asia has experienced explosive growth in the past four decades.  But virtually any thinking person would conclude that that growth came in spite of the challenges of population growth, not because of it.  And did the field of economics play a role?  In a perverse way, it did.  It was our faith in the flawed economic theories about free trade that produced such growth in the undeveloped and developing world, primarily in Asia, but at the expense of the developed world, primarily the United States.  America’s wealth has been completely depleted by that development in Asia and Americans now find their incomes and net worth in serious decline.  An illusion of prosperity has been sustained only by a succession of bubbles and economic gimmicks for the past two decades.

The real question is not where we’ve been – what’s happened in the last two centuries or in the last four decades.  The real question is why global unemployment has escalated into a global epidemic.  The real question is why a process of globalization inspired by economic theories resulted in huge imbalances that led to a catastrophic collapse of the global economy.  And, most of all, the real question is where do we go from here. 

Increasingly, the field of economics seems out-of-step.   Its reassurances about bright prospects and our ability to overcome obstacles to further growth seem more like unfounded, wild-eyed optimism than an achievable outcome.  Virtually no one denies that the end of the supply of oil that has fueled the growth of the last two centuries is in sight.  And Malthus’ prediction of food shortages now seems more plausible than at any time since he formulated his theory, given the demand-driven and supply-constrained rise in food prices and the fact that much of the increase in food productivity made possible by oil-based fertilizers and pesticides is now threatened by escalating oil prices.  And economists’ recent abandonment of growth models in favor of “happiness” models, in which we all consume less in order to make room for more people, smacks of rationalization and desperation, further eroding their credibility.

But what makes the field of economics “dismal” today is not an early 19th century theory about the potential for food shortages, but its cowardly, bull-headed, steadfast refusal to behave like a real science and question the full ramifications of population growth – by far the parameter that most dominates our economy today.  Economics isn’t “dismal” today because Malthus may have been a couple of centuries early with his prediction, but because some of its other theories – most notably on free trade – are so horribly flawed by economists’ failure to take the effects of population density into account.  A science that lacks the courage to consider the full ramifications of the most basic, powerful parameter at work in our economy today isn’t just “dismal,” it isn’t even a “science” at all.