It’s global population shrinkage we should really worry about

Summer 2010

by Joergen Oerstroem Moeller

The problems associated with a global population of perhaps 11bn by 2050 are already beginning to loom large, but Joergen Oerstroem Moeller warns that the real challenges will come when by mid-century populations begin to shrink and economic growth becomes constrained

Most policymakers are becoming aware that by 2050 the global population will be somewhere between 9bn to 11bn; but most are also uncertain as to the implications of this. Asia is set to account for 5.2bn of this, and at the other end of the scale there will be only some 664m people living in Europe. The big surprise, with strong repercussions for Europe, is that Africa with 1.9bn people will be the second most populous continent and the only one whose population will still be growing. European policy analysts tend to bemoan Europe’s shrinking weight in the world, yet when the global population begins to fall after 2050, the fact is that Europe will be exceptionally well placed to derive benefit from its long experience of managing within the constraints of low population growth and limited resources.

If the rise of Asia can be taken as the economic paradigm of today, the population trends for tomorrow augur a shift of much of the world’s low-cost, labour-intensive manufacturing from Asia to Africa, right on Europe’s doorstep. Recent history and contemporary developments have shown that since 1950 first Japan then several smaller Asian countries and then China, India, Pakistan and Bangladesh have profited from moving into the so-called demographic window that favours economic development when a large proportion of the population is aged between 15 and 64.

Assuming that basic economics will not change, this means the world’s engine of growth will move from south Asia to Africa from 2030 to 2040. Such a shift will not only favour Africa, but also neighbouring countries and notably Europe.

Africa’s rich resources will help its rise. For several years China has been buying raw materials from Africa, and recently Brazil began doing the same through its iron ore company Vale. These new investors are seeking either to dominate the global market or to secure supplies for their own manufacturing industries. So far this has brought mutual benefits, but when manufacturing starts to shift to Africa, stimulated by the demographics, Asia and perhaps Latin America too will not need so many raw materials, while Africa may be unhappy to have handed control of its resources to outsiders.

European countries will be well served by a panoply of treaties and partnerships with Africa, while present-day African scepticism, sometimes accompanied by resentment nourished by colonialism will hopefully have been consigned to history, opening the door to a fruitful European-African relationship.

But it is by no means certain that future economic development will follow the pattern we have become accustomed to. The era of plenty that has governed development over the last 200 years seems likely to be replaced by an era of shortages. Scarcities of food, commodities, energy, oil and water, and the world’s newfound awareness of the need to protect our environment, all impose constraints on economic growth. So far these have spilled over into rising prices, but in the future a much more determined effort to cope with scarcities will be needed. Broadly speaking, the world will move from a fairly smooth distribution of benefits, flowing from economic growth based upon cheap commodities, to the need to share the burden of coping with shortages.

This calls for a totally new economic paradigm, because today’s conventional growth and distribution theories all focus upon distributing more. The first case of what to expect on a global scale was seen at the climate change summit in Copenhagen last December, when the world’s national political leaders failed so abysmally to grasp the issue confronting them.

The impact of the new constraints will be felt differently across the globe, depending on population densities and population growth, industrial structures, infrastructure and social fabric. Europe has already experienced some of these problems because of its low population growth. Yet the interesting and encouraging fact is that Europe has nevertheless been doing well in the sense that its annual per capita economic growth over the last 20 years has at about 1.5% been about the same as the United States. The inescapable truth is that higher growth in the U.S. is not due to a more efficient economic structure but almost exclusively to its growing population.

European attitudes towards using resources – as exemplified by the EU’s Lisbon strategy for improving competitiveness and its policies on climate change – display a much stronger awareness of the problems of running an economy with little or no population growth, including Europe’s willingness to focus on quality of growth and the need to squeeze the highest amount of the available resources.

Europe’s social structure is much more close-knit than that of the United States and that makes it easier to implement burden-sharing. People will seldom be attracted by sharing the burden of living within constraints, but their willingness to accept it depends to a large extent upon whether or not they regard it as fair. The United States, with a highly segmented population, is far less suited to this than are European societies, and the growth of the U.S. population from around 300m now to some 400m by mid-century will not make it easier.

Infrastructure in the United States also poses barriers to restructuring the economy. Major U.S. cities are laid out on the assumption that people use their own cars to get to work, making it very difficult if not impossible to introduce taxes on petrol, however necessary they may be. If such taxes were to be introduced, employees would immediately demand higher wages to compensate for higher costs, which would erode U.S. competitiveness.

The shift from an era of plenty to an era of burden-sharing will favour Europe. In fact, the winners in the decades to come will be those countries accustomed to living with a stable population, modest growth and tight control over their use of resources. Europe is the only part of the world that currently fits that description.

This leads to a further observation. It is likely that not long after 2050 populations will start to fall in all major regions, including Africa. The world will then face for the first time face the imperative of managing economies and societies with shrinking rather than growing populations. History tells us that economic growth depends on populations rising, but this is precisely the condition we will no longer be able to count on. Add to this the need for burden-sharing in an era of scarcities and it is not difficult to see that a whole new economic model is waiting to be invented. A simple calculation shows that if consumers around the globe imitate the American and European mass consumption pattern over the next half-century, societies will implode. The resources are simply not there.

Many arguments would lead one to expect that this new economic and social model will be crafted in the large Asian countries under the incentive of strong population pressures. Yet Europe will still have some cards up its sleeve, because along with Japan it is already the first region that has learnt to come to grips with the constraints imposed by a stable population on economic development and social stability.

Many other countries are beginning to look at consequences of having a stable population and they do not like what they see. There are indications that China may abandon or modify its one child policy on the assumption that population growth is necessary for economic growth, but while this may postpone the quandary, it will not make the problem go away. Sooner or later, the global population will stabilise and then begin to fall. This will become the determining factor for mid-21st century society.

Whether we like such a situation or not is largely irrelevant. First, it seems certain to happen. Second, if we try to reverse the trend – supposing we can, which is doubtful – this would trigger a disastrous scramble for resources that will not be there.

Europe’s contribution to future global development, in keeping with its civilisation and cultural heritage, might be to help the world face the coming era of constraints by marshalling the intellectual power and political will be needed to shape an economic and social model that suits the world as it is going to be, rather than trying to force the world to conform to the outdated model of today.

Why the EU newcomers still don't make the best of membership

Summer 2010
by Pavel Telicka

Many of the EU’s newest member states are no longer the euro-enthusiasts of yesteryear, and they also complain they have less influence on policymaking than they had hoped. Pavel Telicka assesses the newcomers' track record so far

Shortly after the Berlin Wall came down, Vaclav Havel led the so-called “new democracies” in declaring that Prague’s goal was to join the European Union. Knowledge of the EU among Central Europeans was at that time superficial to say the least, yet that goal of EU accession was to become an indispensible part of post-communist Europe’s political and economic transition.

The real reasons why these countries should join the European Union would only become clearer once the enlargement process was under way, and in any case they would differ not just between countries but also between the different age groups, social strata and professional structures that made up their populations. They nevertheless had a number of reasons in common. In Vaclav Havel’s words, the enlargement process was to lead to a “return to Europe.”

And then, of course, the applicant countries were concerned to have a seat at the table and a voice that could exert some influence on political and economic developments in Europe and beyond; for decades they had been isolated and forced to accept decisions taken in Moscow. But the change was at first less than democratic. In the early years after democracy was restored, the countries of central and eastern Europe found themselves exposed to the stern regulatory environment of the EU’s internal market without any chance to influence the way it was shaped or implemented.

Almost 20 years on, it is worth looking at whether and how effectively these countries’ two principle accession aims have been achieved. President Havel has often been criticised by Czech politicians for "disputing" the idea that even during the years of Soviet domination these countries were still a part of Europe.

The reality is, though, that it was only during the 1990s that the formerly communist countries regained their European heritage; Poland, the Czech Republic, Slovakia, Hungary, Lithuania and all the others are once again part of Europe, belonging beyond any question at all to the same family as Spain, Italy or Greece. The big question, then, is what influence do the new EU members of this family have on the EU’s political processes?

Influence in Brussels’ decision-making could come only with accession, and even then a say in directing EU affairs would only come gradually. But the key elements that would determine the new candidate countries' political weight included their democratisation record, their ability to comply with EU objectives, including external policies, and the maturity of their own political system.

The formerly communist candidate countries naturally had to undergo an unprecedented democratisation process after 40 years of rule from Moscow. For the rest of the EU this was a process that is not only hard to understand but also defies assessment. The majority of central and eastern European countries nevertheless achieved their transformation goals, even if some of these achievements have proved somewhat fragile. But they were in any case sufficient for accession to the EU to go ahead, while also giving these countries a solid and credible basis for building on.

It is also fair to point out these criteria were never met by some of the older member states, and in recent years we have also witnessed an erosion of EU solidarity and heightened levels of national self-interest. The crises in EU politics has become a reality, and so much so that some people in western Europe were looking to central and eastern Europe in the hopes that their own tired democracies would get fresh impetus from the lively new politics of the newcomers. Sadly, this was true of the 1990s and is no longer the case. The older member states have firmly established their influence in various parts of the Union’s decision-making process, whereas the newcomers have yet to establish themselves in a club that they do not know and did not build.

Once the "big bang" enlargement had become a fact, when in May 2004 the 10 new members increased the EU from 15 states to 25, with Bulgaria and Romania to bring that to 27 two years later, the question being asked by the EU’s top officials was what European policies might be expected from the newcomers, and which would integrate the most easily. My own country, the Czech Republic, despite the well-known euroscepticism of political leaders like Vaclav Klaus, was expected to perform well.

But although, along with the other candidates, we in the Czech Republic were eager to join the EU, very little had been decided as to the policies to adopt once we were a full member. There was a lack of clarity concerning the country’s vision, its major interests within the EU and on strategy and priorities. There had been little political or public discussion on these issues. So it came as no surprise that many Czech politicians had little connection with the EU and to this day still perceive the EU as being the “other side.” The warnings by Vaclav Klaus that “we cannot influence anything in the EU and we will melt like a sugar cube in a cup of coffee” have borne fruit of a sort, for we Czechs can still hardly claim to have a conceptually sound European policy, and in that we differ little from the other new member states. This absence of a European policy has worrying implications for the predictability and positioning of the country, and thus for its influence within the wider EU structure. And on top of this we as a nation share with the older member states a propensity to blame the EU for anything and everything.

The last few years have seen politics in Europe become more nationally focused and pragmatic, responding all too readily to the whims of public opinion as they ebb and flow. It is hardly an exaggeration to say that European politics are now in crisis, and that being the case in the old EU, it exacerbates the political fragility of the new member states.

At the same time, it is a sad truth that both the Czech Republic and the other new members failed to appoint their best people to EU-related jobs. And given that the majority of older member states still send their best negotiators to Brussels, this is a practice the new member states can’t afford.

The combination of factors limiting the newcomer countries’ influence in the EU is daunting but not disastrous. It spans a lack of carefully prepared policies, sometimes antagonistic attitudes towards the EU (not that the EU does not deserve constructive criticism from time to time), weakly defined national interests, the absence of a strategic approach and the lack of a truly European mindset.

Are all these factors reason for pessimism? Not so much pessimism, perhaps, but rather impatience. The new member states' potential is being wasted. It is probably fair to say that they have not met the expectations of many people, and that the heritage of 40 years of isolation is proving heavier than anticipated.

On the other hand, there is evidence that the new members are becoming better equipped to cope with challenges and that their performance is improving. The evidence for this was provided by the EU presidencies of Slovenia and the Czech Republic. Neither of them were failures if compared to the presidencies of older member states, and the Czechs found themselves in the chair at a particularly difficult time. Not everyone appreciated the Czechs’ style, and the controversial “Entropa” installation by Czech artist David Černý in the entrance hall of the Council of Ministers building certainly provoked irritation as well as public attention. But the presidency nevertheless delivered in a number of areas, particularly transport and energy.

Mistakes were made too, of course. Many of them had their roots in the silly so-called euroscepticism of certain Czech politicians that inevitably were aimed in an open and competitive environment. But in general the Czechs performed no worse than the EU Presidency average up until the moment when domestic political calculation gained the upper hand over national interests and the Presidency’s responsibilities. The downfall of the government during its EU presidency caused by opportunistic opposition politicians devalued many efforts of officials and even some of the ministers.

Sadly, the flavour that remains is bitter. Yet the Czech Republic’s EU Presidency provided the country and many of its senior politicians with an important learning experience. There is now a much better understanding of what the EU really is about, and what is needed for any member state to have a say and at least exert some influence. There is also a better sense of responsibility in EU matters. The views of Vaclav Klaus are now without doubt in the minority, and perhaps even an extreme minority at that. This became painfully clear during the final stages of the Lisbon treaty saga. Czechs have learned that although they may have had a disproportionatly large influence on EU matters during the presidency, if they had less short-sighted political leaders they might have generated even more political capitial to be spent advantageously at a later date.

Yet the whole experience clearly strengthened the country’s integration into the EU, and there can be no doubt that the influence of the Czech Republic and other new member states is significantly higher than before the accession. That said, they have yet to exploit their full potential, and that's to the detriment of themseves and the European Union as a whole.

Source - www.europesworld.org

Georgia's mental revolution

Seven years after the Rose revolution, Georgia has come a long way

Aug 19th 2010 | Tbilisi

FOUNTAINS dance, children play and families stroll along Batumi’s five-mile seafront boulevard, lined with palm trees, hammocks and playgrounds. Less than a decade ago, Ajaria, a verdant south-western corner of Georgia of which Batumi is the regional capital, was the personal fief of Aslan Abashidze, a strongman who seemed to own the place more than run it. He never appeared without an army of goons, and closed the streets when his son felt like racing his Lamborghini. Cut off from the rest of Georgia by checkpoints, the economy was stagnant.

Today this gently beguiling holiday resort is an exhibition of Georgia’s capitalist achievements, a showcase of its transition and an advertisement for what Abkhazia, a separatist region to the north, could have become had it not been, in effect, annexed by Russia following the short Russia-Georgia war two years ago.

Like any advertisement, Batumi does not reveal the full picture. Away from the seashore, there are striking signs of poverty and unemployment in Georgia. But the change here is real—not just in the five-star hotels springing up in Batumi, its restaurants or the casinos full of Turkish punters, but in the way Ajaria is administered. So real, in fact, that some Russian officials are starting to worry about the unflattering gap between Ajaria and unreconstructed Abkhazia.

Ajaria’s governor, 38-year-old Levan Varshalomidze, has done much for Ajaria and rather less for himself. As he walks through Batumi’s old city, clad in jeans and without a bodyguard in sight, locals come up to thank him—and there is nothing forced in the gesture. Mr Varshalomidze belongs to the cohort of Georgians that came into their own after the Rose revolution of 2003. For all its problems, Georgia is in the hands of a young, pragmatic generation which has thrown off the Soviet-era personality cults, privileges and paranoia.

Merab Mamardashvili, a Georgian philosopher, once wrote that “A Soviet man is a product of invisible changes, degradation and progressive deformation. Breaking the chain of those changes is hard. Perhaps they are irreversible.” No post-Soviet country is completely free from its legacy but Georgia has gone further than many in breaking the chain.

Gia Kancheli, a 75-year-old celebrated Georgian composer, says: “In the old days the decent people of my generation tried not to be Soviet. Today we are again trying not to be Soviet, but the new generation is different. They don’t have to try: they are simply free of that pressure and those lies.”

Georgia suffered gravely under Stalinist repression, but in the late Soviet period it learned to play by the rules and profit from the system. It became a playground of the Soviet empire, a source of wine, culture and entertainment. But when the empire collapsed, Georgia descended into a near-failed state: dysfunctional and disfigured by banditry and ethnic conflict. By 2003 the violence had largely stopped but the state remained weak and corrupt.

Today Georgia has reinvented itself as the star of the Caucasus. It is less corrupt than most former Soviet republics and one of the easiest places in the world to do business, according to the World Bank. Its liberalised economy has weathered Russian embargoes, and the state held together during the war with Russia. Its police do not take bribes and electricity is no longer a luxury. Most important, people are no longer surprised by such success. The biggest transformation is in their minds.

A playground no more

Georgia’s transition from a former Soviet republic into a non-Soviet one began with the Rose revolution of November 2003, in which the 36-year-old Mikhail Saakashvili and his friends pushed aside the 75-year-old Eduard Shevardnadze. This was not the move from dictatorship to freedom sometimes portrayed in the West; Mr Shevardnadze was no dictator, and some of the reformers were his protégés. Rather, as Levan Ramishvili, who runs the Liberty Institute, a Georgian think-tank, says, it was a social and generational shift, almost a cultural revolution.

It was certainly a change of elite. Some of the new guard, like Mr Saakashvili, a graduate of Columbia University, had studied and worked in the West. Others came from NGOs. Most were under 40. All were free from Soviet bureaucratic baggage and electrified by the promise of getting their country back and rebuilding it as a modern state.

The support base for this revolution was not the capital, Tbilisi, the traditional driver of Georgian politics, but villages and small towns, where family structures and individualism were stronger and Soviet rule was weaker. The new ruling class did not seek approval from Tbilisi’s intelligentsia, which had become enormously powerful in the late Soviet period. Piqued by Mr Saakashvili’s lack of reverence, many started to oppose his rule. Vano Merabishvili, Georgia’s interior minister, recalls that a few weeks after taking office he received a call from a famous theatre director pleading for the release of two of his actors, who had been arrested in a drunken brawl. Mr Merabishvili refused, violating the special relationship between the state and its cultural elite.

The reformers have also eschewed popular legends of Georgian exceptionalism, which the intelligentsia and their nationalist opponents fought to appropriate in the early years of independence (and which some opposition leaders are trying to revive). The young Western-educated elite cringed at the day-long banquets laced with toasts and songs, the celebrations of idleness. They promoted an alternative national story, of a hard-working, dynamic and European country: “Switzerland with elements of Singapore,” as Mr Saakashvili once put it.

Georgia’s modernisation was vigorous, even brutal. Gia Sulkhanishvili, a businessman and a former student of Mr Mamardashvili, says: “The government took an axe to the Soviet practices and destroyed the environment which bred nepotism, hypocrisy and idleness.” The change is all the more startling when Georgia’s fate is contrasted with that of other former Soviet republics, including Russia. “As in Russia, there were laws in Georgia, but then there were informal rules which trumped them,” says Mr Sulkhanishvili. “Those rules are largely gone.”

Overnight, the reformers abolished the corrupt 15,000-strong traffic police and replaced them with 2,300 American-style road patrollers. The new recruits were motivated not only by decent pay and new cars but by the fact that their new bosses did not take bribes. Entire ministries were culled, along with 30,000 bureaucrats. The government slashed red tape, privatised everything from hotels to hospitals and used the money to build new roads.

Much of this liberalisation was pushed forward by Kakha Bendukidze, a business magnate of libertarian temperament who had made his fortune in Russia before Vladimir Putin started to put pressure on business. Georgia, Mr Bendukidze argued, was so poor that only radical reform would do. But he also realised that economic reforms needed to be backed by humanities and education projects to engender a new national elite. In 2007 he founded the Free University in Tbilisi, which teaches law, business and languages. Each graduate undertakes to finance a new student, creating a sense of stakeholding in Georgian society.

A virtual democracy?

In 2003 the young, energetic, English-speaking Mr Saakashvili represented a visible change from the old Soviet-style nomenclature. Today an even younger generation has come of age. As liberal, patriotic and Westernised as the president, its members object to his obsession with power, his centralisation and his populism. They see the state not as a sacred cow but as a provider of basic services and security.

.The decisive moment, some of them say, came in November 2007, when Mr Saakashvili, faced with the prospect of losing power, sent riot police to crack down on a demonstration and to trash a television station. The government said it acted to avert a coup. But its decision shocked Georgia, and the outside world.

Shorena Shaverdashvili, an American-educated editor of the Liberal, a weekly magazine, says this was the point at which Mr Saakashvili became more interested in retaining power than in pushing through reforms. “He alienated and then turned against the part of Georgian society which was most willing to catalyse the transformation,” she says. Several of Mr Saakashvili’s former allies have now turned into opponents.

On paper Georgia has all the institutions proper to a democracy. In practice few of them enjoy real power. Parliament, dominated by Mr Saakashvili’s United National Movement party, has become little more than a rubber stamp. The police and judiciary are beholden to politicians. Key decisions are taken by a circle of insiders whose influence often extends far beyond their job titles. Democratic procedure is often sacrificed to expediency—catastrophically so in the case of Mr Saakashvili’s decision two years ago to attack South Ossetia with heavy artillery fire, giving Russia the excuse it needed to invade.

The situation is not helped by the motley state of Georgia’s opposition, which often does a better job at discrediting itself than the government, or by the weakness of civil society. Yet, as Ms Shaverdashvili puts it, “The government makes sure that we don’t get strong fast.” Businessmen are wary of financing the opposition or advertising in Georgia’s critical media for fear of incurring the government’s displeasure.

Mr Saakashvili is more a moderniser than a democrat. Yet in order for his reforms to become irreversible, Georgia needs strong democratic institutions; above all an independent judiciary and the rule of law. Mr Merabishvili argues that these cannot be simply decreed; they need to become entrenched tradition, recognised by Georgian society as a whole. So for the time being, he believes, it is the government that is best equipped to administer justice. This argument is all the more dangerous for being persuasive.

Too much personal power is concentrated in the hands of Mr Saakashvili and Mr Merabishvili, his feared interior minister. That is ominous for a country where power has not been transferred peacefully since independence. A set of proposed constitutional changes would shift more power to parliament and its nominated prime minister. But Mr Saakashvili’s critics say that discussion of the proposed reforms has been limited. They fear that the president will follow the example of Vladimir Putin and stay on as prime minister when his term expires in 2013. If he does, he risks destroying his own legacy.

After the collapse

Despite all the progress, Georgia’s future is fragile. Two years after the war, relations with Russia have not yet normalised. Russia’s heavy military presence in Abkhazia and South Ossetia remains a threat to Georgia’s security. There is also a risk that Mr Saakashvili will exploit this threat to consolidate his own power. Earlier this year a television channel controlled by a friend of the president broadcast a spoof documentary about another Russian invasion, sparking panic among Georgians. The film, allegedly made with Mr Saakashvili’s approval (although the channel denies it), was meant to mobilise the population. Instead, it infuriated it.

And yet the mental shift which has occurred in Georgia will make it hard to turn the country backwards. On June 25th police cordoned off the central square in Gori, the birthplace of Stalin, and, in the dead of night, toppled a statue of the former dictator that had survived the Soviet collapse and Russian bombardment in 2008. Yet there was neither celebration nor protest. Georgians had moved on.

Source - Economist.com

The end of Eastern Europe

Platform's comment on the article "The end of Eastern Europe" at Ukrainian magazine "Tyjden"

http://www.ut.net.ua/art/165/0/4224/

Any geopolitical constructions are affected with simplified patterns. Europe's division by regions isn't an exclusion. Ukraine is a part of Eastern Europe as it is Bosnia with its triple identity. All these countries are tied up by joint communist past as, for example, Latin American nations are intertwined through their colonial past. Geopolitics is more concerned with history, and to a lesser extent with economics. No secret that Europe is moving to prosperity and open society with various speeds. Unfortunately, we are in Europe's slow lane and on the same level as Macedonia, Albania or Bosnia. P.S. Some Ukrainian journalist of this magazine has already brought up the issue of geopolitical division in the centre and east of Europe. We'd like to read any conceptually new research articles from such trustworthy expert as Mr. Edward Lucas.