economics

Knocking Docherty

I think Danny’s wrong to knock David Docherty’s ‘Cookie Monster‘ analogy. David may have been on a hiding to nothing from the beginning at Telewest, but the nub of truth in his frustration is that the conduct of Internet users is important (how could it be otherwise?). As actors in the networked economy we have obligations and our good faith will be critical to the success or otherwise of digital music, film, whatever. If a whole generation of users really has decided that it’ll never pay for music again (which is arguable), then music will inevitably be driven off the net.

As usual, I’m mister middle-of-the-road. Where David and the suits see a field of high concept ‘broadband content’ and Danny and the geeks see an untenanted void waiting for settlers to fill it – I see a bit of both. In fact, I think it’s economic lunacy to suggest that either could be sufficient unto itself. No one but no one will bring dark fibre to my curb without some value added ‘content’ to subsidise the utterly commodified pipe and users will never accept the media owners’ vision of content-driven broadband heaven unless it looks a lot like the net. As usual, the outcome is more likely to be a messy ecology than a nice, clean monoculture.

The Economist on migration

I’ve just finished reading The Economist’s blockbuster survey on migration. More very good work developing the newspaper’s line on the liberalisation of migration as a benefit to both nations (receiving and sending) and peoples (likewise). As I have said before (in August and in September), this issue is more important than we think and we allow the politicians to hijack it to meet their short-term (very short-term in this context) needs at our peril. Europe’s population is about to enter a very long decline. Even the new entrants from the East cannot slow the long term fall since their birth rates are already too low. Meanwhile, the only Western nation bucking the trend, the USA, could easily have 500 million inhabitants by mid-century. The economic implications are obvious.

While the USA and the emerging economies grow strongly, slow-growth Europe can only fall further and further behind. You don’t need to share The Economist’s free trader stance to recognise the stark stupidity of turning away willing, young workers at the border while our economies stagnate. We can only hope that the penny drops for European Governments before the current flow of eager migrants has lost interest and moved on to more attractive destinations. Reversing a nation’s (or an entire economic bloc’s) stance on immigration is not easy with the emotional stakes so high but the implications of getting it wrong – a shrinking and ever-more-irrelevant European economy – are too grim to contemplate.

The film industry is the least of our problems

I watched an interesting feature about the flakey British film industry tonight on BBC 4. As you’d expect, it was mostly whinging and hand-wringing from all sources ? hyper-interventionist culture-boosters and laissez-faire populists alike. The giant lacuna was the glaringly obvious fact that the British film industry is hopelessly held back by an economy about a sixth of the size of the mother of all markets – the USA. Outside the scope of the programme was the equally obvious conclusion that we desperately need to boost the overall size of our economy (both here in the UK and in the wider EU). Governments of all complexions have been trying this without success for decades, naturally, so this represents a great opportunity for a Government ready to try something new. Macro and micro tweaking are not working. For a hundred years, the economies of the West have grown at roughly the rate of inflation – essentially zero growth.

The American example shows us that what we need is a really serious boost to the population itself – more bums on seats, more contributors to the media economy, more warm bodies creating value. Look at Japan: twice the population on about 50% more land. A simple calculation suggests that Britain could easily handle about 100M people. Not enough to challenge the US directly but enough to lift us out of the third division and, possibly, to give us access to the kind of doubling effects that drive the US economy. Remember, recession or not, the US economy is just getting bigger and bigger and this is in large part because the inward movement of people keeps the economy growing ahead of its structural rate. Large economies grow faster than small ones and, the faster they grow, the faster they grow – if you see what I mean. All of this seems academic right now but the evidence is mounting that US population growth is accelerating while the European population is going into reverse (while already vast Asian economies mature and compete better). Old economies – like ours – will shrink faster and faster. Irrelevance beckons.

So how do you grow the population of a small country whose birth rate is already behind the replacement rate? You encourage immigration. Britain happens to be the focus of interest for migrants from a large swathe of Eastern, Central and Southern Europe. Who knows how long this popularity will last? Precedent suggests that it won’t be for long. Only fools would refuse these eager migrants entry. Only lunatics would actually deport them.

A shrinking Europe?

The Economist’s cover story this week is a blockbuster (you may need to subscribe to see the story). The message is simple: the population of Europe is – almost everywhere – falling or about to fall, while the population of America is climbing steadily. There’s a strong likelihood that by 2050 there will be half a billion Americans and fewer Europeans than there are now. The US economy could be twice the size of Europe’s, even after the addition of the new member States to the East. In the meantime, the European population will be aging fast while the US population, bolstered by higher birth-rate immigrants, will be younger and more productive. The economic and geo-political implications are obvious.

If European birth rates cannot be raised (and changing reproductive habits from above is notoriously difficult and unpopular) then immigration must be encouraged if a century or more of decline is to be averted. Now would be a good time to start – while Europe basks in its (surely temporary) popularity amongst refugees and migrants from the East. The flow must be organised and encouraged. Infrastructure must be put in place to train and support incomers.

Governments must make honest efforts to challenge public (and media) hysteria about immigration. It has been plain for decades that absolute population decline was likely in Europe but the American statistics suggest a more drastic fall relative to the US, our primary competitor. We have an opportunity right now to avert our own demographic emergency while meeting the needs of millions of needy (and economically productive) people. Fat chance.