Is Economic Growth Morally Uplifting
The immediate dilemma involves the welfare state. It requires fast economic growth to generate the income and government revenues to pay all the promised benefits. But the mounting costs of those benefits -- especially as populations age in the United States, Europe and Japan -- may stifle growth through higher taxes and budget deficits. If so, the welfare state may cause the stagnation and strains against which Friedman warns.
Here is the real rub:
Declining population will curb economic growth; there being less Demand for Goods coupled with fewer Labor elements to produce those Goods. Another element states that as Populations age, the proportion of the population engaged in Labor declines faster than the aging of the population, at least; until Life Expectancy drops somewhere into the low Forties, leaving fewer and less competent Workers (due to their Aging) to produce insufficient Goods. There must be a long-term shortage of Goods leading to a decline in overall GDP.
The basic thesis of Friedman, though, remains very solid. GDP declines will foster factionalism, discord, and increase of discrimination. The accommodation of economies to increasing populations stands far higher in providence than do declining populations. Aging populations possess about 15% of the adverse impact of declining populations, because aging populations decrease their Expenditures while hoarding their financial assets in less-protected but Safer investments. It is irony that Aged Populations require a higher economic expenditure, because their needs insist on expensive- provision Goods like Drugs, Hospitalizations, and Rest home care. The previous expense draws unnaturally huge drafts of the younger, healthier, more expensively-trained Labor assets.
Our GDP, as those of the rest of the World, will enter into a decline sometime within the next decade according to the Author's estimate. How We handle this decline will be the challenge. lgl