The Bear’s Lair: Public charge principle could usefully operate globally

The Trump administration last week announced a substantial tightening of the “public charge” rules by which immigrants drawing welfare would be ineligible for permanent resident “green card” status. As Milton Friedman said: “It is just obvious you can’t have free immigration and a welfare state,” so this is good policy. However, it made me wonder: should, we apply the same principle on a global basis, and if so, how?

Friedman’s objection to the combination of a welfare state and unlimited immigration differed from those of immigration restrictionists: he rejected the welfare state. His ideal was the pre-1914 U.S. immigration system, in which immigrants flowed into the country in huge numbers but received absolutely no welfare services after they arrived. That system eliminated the welfare costs of high immigration, but produced very impoverished immigrant and low-skill ghettos with low wages, even in a society that generally had the highest living standards in the world, or close to them.

Only after the restrictionist Immigration Act of 1924 did U.S. wages at the low-skill end increase, and the country become a paradise for ordinary working people with limited skills. Unrestricted immigration, which for such an attractive country as the United States produced very high immigration, produced a highly unequal society and one with shockingly poor living conditions at the bottom end. Even if GDP were increased by allowing completely unrestricted immigration, GDP per capita would be diminished, and the overall happiness and social stability of the society would be badly affected.

Globally, the same economics holds. Rapid population growth produces great poverty in those countries subject to it, making societies more unequal and less stable. Also, as even relatively poor countries have rudimentary social security and unemployment benefit systems today, rapid population growth puts huge stresses on those systems, impoverishing the society as a whole, raising taxes to economically counterproductive levels and preventing spending on other needs. Education in particular tends to suffer if population is growing rapidly, squeezing the society’s ability to pay for adequate schooling for its oversized population of young children.

A dozen years ago, it appeared that the global population problem would solve itself. Even though the world’s population had increased from 2.6 billion in 1950 to 6 billion in 1999, early 2000s projections showed that the global birth rate was turning downwards so definitively that world population would peak around 9 billion in 2045 or so and would then start declining. In such a case, the economic and environmental costs of global overpopulation would be containable. As technology improved, we could hope to provide all 9 billion of the world’s inhabitants with a decent standard of living.

Now alas, that picture has changed. By the latest UN estimates, global population is expected to continue increasing, to 9.7 billion in 2050 and 11.2 billion in 2100. By any reasonable estimate of global satisfaction, whether economic, hedonic or environmental, the world will be less prosperous and more polluted in 2100 with 11.2 billion people than with 9 billion. The extra 2.2 billion represent a net cost to the world, on a per capita basis, subtracting from human happiness and making our species’ future more unpleasant and less assured. As with immigrants to the United States who cannot support themselves, the extra 2.2 billion people will be a “public charge” levied on the rest of humanity.

We can quantify the cost of this. World GDP today is about $70 trillion. Allow it to grow at 1.5% per annum in real terms to 2100, and with a population of 9 billion, global GDP would be $234 trillion, or $26,000 per capita. Now suppose that the costs of the additional 2.2 billion people are equal to their net benefits, taking into account all the additional facilities they would require and the environmental damage and resource depletion they would cause. Then GDP with the higher population would again be $234 trillion, but GDP per capita with an 11.2 billion population would be $21,000.

The cost of the additional population to each of the original 9 billion people would be $5,000; its cost to humanity would be 9 billion x $5,000 or $45 trillion per annum. That figure, 19% of 2100 world GDP, is far higher than the central estimate of the cost of global warming, even on the United Nations’ alarmist projections.

Whether or not that rough calculation is close to accurate, there are clearly plenty of resources that could be used to reduce the surplus population, which in aggregate produces little or no value and impoverishes everyone else. The difficulty will be to get resources applied to the problem in an effective way, without either providing a slush fund to be abused by NGOs and international bureaucrats or violating norms of freedom and individual self-determination (which themselves differ from society to society).

As I have outlined previously, the least effective way to achieve this, and the most likely to politicize the objective, is a global bureaucracy that operated on a monopolistic basis, dictating regulations to the world, without allowing market forces to work. Instead, we should use a multitude of channels and methodologies to reduce global population. This work should be carried out by individual nations and programs wherever possible, with the private and nonprofit sectors fully involved.

It is impossible in any individual case to determine which newborn babies will be productive over their lifespans and which will not. Nevertheless, there are some indicators, valid as an overall average if not individually. Babies born into a society with a very high rate of population increase are likely to be net drains, because their society will lack the infrastructure to educate, feed and house them properly. Equally, babies born into a society with a poor education system, or with a high level of diseases or other social pathologies, are also a poor actuarial risk.

The potential gain to the world from birth reduction, and especially the direct gain to inhabitants of poor countries with high birth rates, justifies an almost total diversion of resources from other international aid programs, almost all of which are ineffective and many of which do more harm than good. A reduction in births in a poor country that currently has a pathologically high birth rate and a rapid rate of population growth, will produce far greater long-term benefits than infrastructure or even health projects (the latter, however well-meant, often make the population problem worse).

The most effective way to reduce population pressure in poor countries with high birth rates and poor education systems is through incentives. For example, payments could be made to those couples and individuals who were prepared to have themselves sterilized. The payments should take two forms: a modest cash bonus up-front and in addition a pension benefit, payable from the age of 65 or 70. In that way, the normal wish of poor country citizens to have large families to ensure a comfortable old age would be circumvented. Participants in this program would enjoy a modestly comfortable old age without leaving the world the burden of a large inadequately provided for family.

By making most of the incentive payment a pension, rather than an up-front payment, the donors would avoid the problem of individuals taking decisions they later regretted because of short-term financial difficulties. Any such decisions would be truly voluntary. For the recipients, the pension would be guaranteed by a major international bank or insurance company, thus relieving them from worries about changes in political will among the donors.

With a broad variety of donors from rich countries and wealthy private sector participants, different approaches to population control could be tried and the most effective scaled up, while keeping the whole structure voluntary. Poor country host governments should in general be happy to have their population problems alleviated and their pension obligations partially relieved. Inevitably, there would be a few recalcitrant countries whose governments were hostile to the programs or where civil wars were in progress. However, this is a clear case where solving 80% of the problem produces if anything more than 80% of the benefit from its solution. Over the decades the few hold-out countries would see the benefits of participating in population control programs as their neighbors became richer and happier.

Through application of the “public charge” principle to massive global programs of population reduction, the incomes of poor country inhabitants would be directly increased. Rich country inhabitants would benefit from an enormous reduction in the global demand for resources, species loss and environmental degradation. It is by far the most useful activity for the rich world’s foreign aid budgets, producing long-term economic and social gains that would generally be a huge multiple of its costs.

(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)