Panicked articles about the correlation between decreasing fertility rates and stalling GDP are a dime a dozen. Yet one economist recently took it a step further by ringing these familiar alarm bells while acknowledging in the very same breath that GDP is a poor metric for national prosperity.
On the one hand, the author laments that Japan’s aggregate economy will inevitably shrink due to population decline, thereby jeopardizing “Japan’s place in the world” as a “trailblazer.” On the other hand, he writes that “[t]he primary objective of Japanese economic policy should be to maintain living standards and increase per capita incomes, not grow the aggregate economy.”
Indeed, as the author points out, the quality of life enjoyed by Japan’s citizens has been consistently high since the early 1990s, notwithstanding Japan’s stagnant GDP throughout that time. Nor does a continuation of that negative GDP growth pose a threat to future living standards, as the author readily admits:
“Many countries are fixated on achieving GDP growth and the target for Prime Minister Shinzo Abe’s Abenomics reform package is 1 per cent GDP growth a year. Japan’s GDP growth has been closer to zero in recent times. What does negative GDP growth — a technical recession if it continues for six months or more — mean when the population is shrinking? Perhaps not as much as we thought. If GDP does not grow, per capita incomes may rise as the population falls.”
So how does the author justify his characterization of population decline as “Japan’s greatest challenge?” when Japan is likely to remain “safe, clean, comfortable and modern” despite said decline? The author’s argument is a bit muddled, but if you read between the lines, it seems to come down to a matter of values, where being “number one” in terms of aggregate growth is as important, or even more important, than the wellbeing of the individuals within that economy.
In stark contrast with GDP-obsessed public policy, the Fair Start modelseeks to achieve genuine economic prosperity, by contemplating (1) household incomes rather than national economies, (2) level of access to public services such as health, education, transportation, and (3) air quality, biodiversity, animal welfare etc. In this way, Japan’s population decline is far from “the greatest challenge,” but rather an outcome that other nations should seek to emulate through policies rooted in compassion for all rather than profit for a few.