The economics of 8 billion people

What are the economic challenges of an ageing population, and who's responsibility is the environment?...
06 December 2022

Interview with 

David Willetts, Resolution Foundation

AGEING

An ageing woman

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David Willetts is president of the Advisory Council at the Resolution Foundation think tank that looks at ways to improve the living standards of those on low-to-middle incomes. Before that he was the UK’s minister for science and universities.

David - I think that we've had some fantastic analysis already from your earlier contributors, but I thought one point they didn't quite bring out was the sheer drama and challenge of this demographic transition that every society goes through eventually, where you've, as they say, 'first you stop dying like flies, and then you stop breeding like rabbits.' So first of all, people observe that there's many more babies surviving and then they lower their birth rates. But in the meanwhile, you have this surge in the number of young people and it makes or breaks a society. It's the biggest single event in the history of any society. And that transition can mean that you have lots of productive workers and can take your economy up to real prosperity. But if you can't absorb them and you have large numbers of unhappy, unemployed young people, you have revolution and civil war. And it's a massive challenge to absorb these young people. If you do it successfully, then this bulge works its way through the population. And then the great image is, it's like a python swallowing a pig. This monster generation of young people who've all, all survived, means that you end up with a lot of old people and they have a new set of challenges. So my view is that for each society and economy, riding that set of changes is in many ways more important than the exact number of people we have in the world. The question is, if we can manage that transition well and we have economic advantage, then we should be able to tread more likely in the world than we do at the moment. And we've obviously got to produce far less carbon dioxide. But if societies make a mess of that transition, then they're unstable and often poor countries that will find responding to the challenge of climate change very difficult indeed.

Chris - I thought among poor countries we could include the UK <laugh>. Because we are sort of the beneficiaries of that big baby bump. We call them the boomers, don't we? Big population expansion after the war. That has led to a huge level of economic productivity because people are most economically productive when they're north of 20 and south of 70 in age. And then as you say, you've got to deal with what happens next because people in their retirement are net consumers. So we've had the benefit, we've had that bump, but we don't seem to be managing it very well. We've now got about three or four people in work for every retired person that we're trying to pay tax to support.

David - Well, indeed, one of the reasons for the underlying pressures on public spending, leading in term to the increases in taxes, is quite simply that we have increased numbers of pensioners and also, as the boomer's age, and look I'm a boomer myself born in the boom between 45 and 60, there's also increasing pressures on the NHS. So that process of the change in the age composition of your population means at first you go through a sweet spot, all this surge in the population, when the pig is in the middle of the python. Then you've got lots of workers, not many pensioners ahead of them, not many kids behind them. Then when that big generation grows older, the pressures change. And then you add in climate change. In my book about this, The Pinch, I actually provide the figures for, the other fact about it is we, baby boomers in Europe are likely to have produced 700 tons of carbon dioxide each during our lives. 1500 tons of carbon dioxide for each American boomer, by the way. But our kids and then our grandchildren eventually are clearly going to have to make a massive adjustment of producing far less carbon dioxide. They can still, let's hope, enjoy prosperity, but they're gonna be treading much more lightly through the world, doing far less damage and producing far less carbon dioxide than we've done.

Chris - The point that Will Tingle put to Kathleen Mogelgaard was, lots of people living in poorer countries don't have anything like that carbon footprint that you were just sighting. So for us to say to them, you've gotta rein it in, is unreasonable to some people's minds. But the point is, well, won't they then embrace the kind of lifestyle that generates that kind of carbon footprint with industrialization of those countries? And that's presumably what we've got to safeguard against.

David - Yeah, and look, we do have a historic responsibility. In fact, because Britain had the industrial revolution. We were where it started, we do have a unique historical position. It was our inventors and our market economy that led industrialization. On the other hand, behind each British citizen, there is more historic production of carbon dioxide from our country than any other citizen in the world. And we have to accept that. And of course that does change the balance with places like India where production of carbon dioxide per person is low. However, if India and China industrialize and modernize the way we did, then they really will destroy the world's climate. So we all have to work together on this. Looking to the future, of course. One of the reasons why we in the West have to contribute is because of our historic role.

Chris - Are they receptive, these economies, to that argument though? Do they understand that they basically are the knife edge upon which climate is balancing with the scale of population? They have a billion plus people in India, a billion people in China. Do they appreciate that that's where we are and that they have a stake to play? Or are they waiting for the rest of the world to do something about it and they will carry on the same way?

David - Look, every individual country can think of a reason why they shouldn't. Either they don't have the same historic responsibility, or now we are so small compared to everyone else, it won't make much difference. Or, we've got a particular economic problem. Now we can all think of an excuse, but it's not really an excuse that anyone can use. We've got to do it all together. And I think that is the only way forward. But the other point I'd make is that, linking this to population, first of all technology can help. There is no reason why we shouldn't be able to enjoy the levels of prosperity we have today, but with far less carbon dioxide production. And actually the good news is, although it's hard to install, we know how to have decarbonized electricity. We know how we can better insulate our homes. And one of the reasons why I think this matters more than exact population numbers is that people are not just producers of carbon dioxide, they can also be innovative. They can also be creators. The people are creators of culture, they're creators of scientific ideas, they're developers of technologies. And so we should also remember that in our path through the world, we can create things that make the world a better place. The challenge is therefore to try to ensure that even relatively populous countries like we in Britain, contribute to new economic growth and new ideas whilst not producing large amounts of carbon dioxide and not extracting resources from the world that can't be replaced.

Chris - David, thank you for sharing your insights. That's David Willetts from The Resolution Foundation.

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