In­side the ‘just add peo­ple’ dogma

Suc­ces­sive gov­ern­ments have main­tained high lev­els of im­mi­gra­tion to stoke the econ­omy. The ar­gu­ment against this is grow­ing, bring­ing to­gether odd bed­fel­lows. By Mike Sec­combe.

The Saturday Paper - - Front Page -

It was the ex­pe­ri­ence of work­ing in Ja­pan that caused the scales to fall from David Pilling’s eyes.

Over 20 pre­vi­ous years as a re­porter in var­i­ous parts of the world, Pilling did the ortho­dox thing for a Fi­nan­cial Times jour­nal­ist and viewed “ev­ery­thing through the prism of eco­nomic growth”.

Writ­ing in his new book, The Growth Delu­sion, he says: “I taught my­self how to com­pare ev­ery num­ber to GDP and to men­tion it in al­most ev­ery ar­ti­cle …”

Then in the mid 2000s he was posted to Ja­pan, a coun­try he con­sid­ered to be a “bas­ket case”. That all-im­por­tant mea­sure – gross do­mes­tic prod­uct – had been stag­nant for two decades.

So had the coun­try’s pop­u­la­tion. And the con­ven­tional eco­nomic wis­dom to which Pilling then sub­scribed “could not imag­ine how a coun­try can pos­si­bly progress if it is not for­ever adding peo­ple to its work­force”.

This, of course, is the same con­ven­tional wis­dom that in­forms Aus­tralia’s im­mi­gra­tion pol­icy. In­deed, no other coun­try is so ded­i­cated to a sim­ple for­mula for jobs and growth: just add peo­ple.

So what Pilling has to say is in­struc­tive at this time of re­newed de­bate about im­mi­gra­tion.

The coun­try of his post­ing was reg­u­larly re­ported as be­ing “stuck in per­pet­ual stag­na­tion and without the wits to haul it­self out of mis­ery”.

But Ja­pan’s sup­posed mis­ery, as

mea­sured by nom­i­nal GDP, re­ally wasn’t mis­er­able at all, he found. Un­em­ploy­ment was ex­tremely low, prices were sta­ble or fall­ing, the stan­dard of liv­ing was ris­ing, com­mu­ni­ties were in­tact “cer­tainly in com­par­i­son with Amer­ica, Bri­tain and France”. Crime was low, drug abuse al­most non-ex­is­tent, and life ex­pectancy about the high­est in the world. The food was ex­cel­lent and con­sumer goods and ser­vices were world class.

That’s not to say he didn’t recog­nise Ja­pan’s prob­lems, only that his Ja­panese ex­pe­ri­ence drove home to Pilling the folly of equat­ing eco­nomic growth – as cur­rently mea­sured – with progress.

Ja­pan made him re­alise the fun­da­men­tal prob­lem with GDP as an in­di­ca­tor of how a so­ci­ety is do­ing: it is a mea­sure of quan­tity, not qual­ity. It tots up the neg­a­tive along with the pos­i­tive, mea­sur­ing ac­tiv­i­ties where money changes hands, be they worth­while or not. If crime goes up and more has to be spent on locks, jails and po­lice, GDP goes up; if cars burn more fuel be­cause they are stuck in traf­fic, GDP goes up.

A few years ago, the Bri­tish sta­tis­tics of­fice de­cided to es­ti­mate the “value” of ac­tiv­i­ties they had pre­vi­ously not in­cluded in their ac­counts, in­clud­ing sex work and the il­licit drug trade. Hey, presto: Bri­tain’s econ­omy in­stantly ap­peared big­ger by about 5 per cent, or £65 bil­lion, although no one was ac­tu­ally any richer as a re­sult and the prob­lems of drug traf­fick­ing, for ex­am­ple, were no less press­ing.

As Pilling says, there is some­thing wrong with a sys­tem in which un­paid ac­tiv­ity is un­counted, where if some­one steals your car and sells it, that counts to­ward growth, but if you look after an aged rel­a­tive or bring up three wellad­justed chil­dren, that does not.

Yet GDP, he writes, is pre­sented to us as a moral mea­sure and a “proxy for well­be­ing”. And in pur­suit of end­less growth “we are told we may have to work longer hours, slash pub­lic ser­vices, ac­cept greater in­equal­ity, give up our pri­vacy and let ‘wealth-cre­at­ing’ bankers have free rein”.

“Only in eco­nomics is end­less ex­pan­sion seen as a virtue,” Pilling writes. “In bi­ol­ogy it is called can­cer.”

As for why Ja­pan, among all the coun­tries across five con­ti­nents in which Pilling worked, should have in­spired an epiphany and a book? Well, Ja­pan is unique.

For about 40 years, the Ja­panese have been hav­ing fewer ba­bies than is nec­es­sary to main­tain the pop­u­la­tion, but that is not the unique bit. More than half the peo­ple of the world now live in coun­tries where the fer­til­ity rate has fallen be­low the re­place­ment level.

What makes Ja­pan dif­fer­ent is that it has not sought to cover the short­fall through im­mi­gra­tion. There’s no deny­ing the rea­son: Ja­pan is xeno­pho­bic. It is not wel­com­ing to for­eign­ers, no mat­ter their cir­cum­stances.

In 2016, for ex­am­ple, it ac­cepted just 28 refugees, and an­other 97 peo­ple for un­spec­i­fied “hu­man­i­tar­ian rea­sons”. It does give very gen­er­ously to the UNHCR – al­most $US165 mil­lion that year – but only so refugees can be cared for some­where else.

As a re­sult Ja­pan’s pop­u­la­tion has be­gun to fall. From a peak of just over

128 mil­lion in 2010, it is al­ready down by about 1.5 mil­lion.

It is fea­si­ble for coun­tries to man­age pop­u­la­tion de­cline so long as their birthrate is just a lit­tle be­low the re­place­ment rate of about 2.1 chil­dren per woman, on aver­age, says Peter McDon­ald, pro­fes­sor of de­mog­ra­phy at the Univer­sity of Mel­bourne.

Once you drop be­low the 2 to 1.7 range, though, “you cause too much dam­age to your age struc­ture”.

Ja­pan’s re­pro­duc­tion rate is less than 1.5. In the longer term, if the coun­try main­tains its de­mo­graphic tra­jec­tory, it is likely to be in trou­ble. We can’t be sure, of course, be­cause it has never hap­pened be­fore.

For now, Ja­pan de­fies econ­o­mists’ talk of a de­mo­graphic death spi­ral. Over the past decade, its GDP has grown by an aver­age of about 0.5 per cent. In 2017, it grew by about 1.6 per cent.

That looks poor, com­pared with Aus­tralia’s long-term aver­age of more than 3 per cent eco­nomic growth, and even against last year’s 2.4. But things look very dif­fer­ent when you ex­am­ine how that growth is shared.

Aus­tralia’s per capita growth last year was just 0.8 per cent, by the re­cent cal­cu­la­tion of busi­ness jour­nal­ist Alan Kohler.

“That is, two thirds of last year’s eco­nomic growth came from pop­u­la­tion and most of that from im­mi­gra­tion,” he wrote.

“So Aus­tralia’s ac­tual na­tional eco­nomic strat­egy, as op­posed to the pre­tend one, is to sim­ply add num­bers – not to en­cour­age jobs and growth through tax cuts – and it has been since 2005, when John Howard dou­bled aver­age im­mi­gra­tion from 100,000 per year to 200,000.”

In con­junc­tion with the nat­u­ral in­crease in the pop­u­la­tion, im­mi­gra­tion now adds about a mil­lion more peo­ple to Aus­tralia ev­ery three years.

By tacit agree­ment, both ma­jor po­lit­i­cal par­ties, as well as the econocrats who ad­vise them, per­sist with the “just add peo­ple” strat­egy. It’s con­ve­nient be­cause it al­lows them to main­tain the fic­tion that Aus­tralia is some kind of mir­a­cle econ­omy that due to their su­pe­rior eco­nomic man­age­ment hasn’t had a re­ces­sion for more than a quar­ter of a cen­tury.

It’s con­ve­nient, too, for Aus­tralia’s cor­po­rate sec­tor, be­cause it’s a lazy way to make money. In­deed, the Busi­ness Coun­cil of Aus­tralia would like to im­port even more peo­ple each year.

“The BCA/board­room or­tho­doxy sim­ply says ‘the more the mer­rier’,” says for­mer New South Wales premier Bob Carr, a long-time scep­tic about the ben­e­fits of high im­mi­gra­tion.

“Aus­tralian growth is de­pen­dent on the high­est rate of im­mi­gra­tion, pro­por­tion­ately, of any de­vel­oped coun­try. It is ex­ces­sively de­pen­dent on … build­ing apart­ments and strug­gling to build in­fra­struc­ture,” he says.

“That’s not a smart so­ci­ety. That’s not in­no­va­tion. Maybe it’s time to shift the de­bate to the ap­pro­pri­ate­ness of this eco­nomic model. I pose the ques­tion: would it be such a tragedy if we took about six years be­fore we added an­other mil­lion to our pop­u­la­tion, in­stead of three, as we do now?

“It might free up cap­i­tal to in­vest in other ar­eas, like in­no­va­tion.”

Carr has been ex­press­ing his con­cerns about the en­vi­ron­men­tal and de­vel­op­ment con­se­quences of “un­tram­melled” pop­u­la­tion growth for years, but lately he’s been pleas­antly sur­prised at the odd coali­tion of peo­ple who’ve joined him.

Still, he can’t help ques­tion the mo­ti­va­tions of some of those now call­ing for a re­think of im­mi­gra­tion, such as John Howard and Tony Ab­bott.

“Howard and Ab­bott were part of an or­tho­doxy that drove im­mi­gra­tion to higher lev­els,” he says.

And that’s ab­so­lutely true. Dur­ing the term of the Howard govern­ment, the mi­grant in­take dou­bled. And the per­ma­nent migration pro­gram, which Ab­bott now wants re­duced to 110,000 a year, has been set at 190,000 mi­grants a year for the past six years. Ab­bott was prime min­is­ter for two of those years.

Carr sus­pects mis­chief, but what­ever Ab­bott’s mo­ti­va­tion, he’s boots and all with the im­mi­gra­tion crit­ics now.

Back in Fe­bru­ary, in an ad­dress to the Syd­ney In­sti­tute, Ab­bott ad­vanced sev­eral ar­gu­ments for cut­ting the in­take: that too-high im­mi­gra­tion de­pressed wages and in­creased the de­mand for hous­ing, in­flat­ing prices. The rate of pop­u­la­tion growth, he said, was so high that the in­fra­struc­ture of Aus­tralia’s ma­jor cities was “clogged”.

Where, he wanted to know, was the plan­ning? Why was it that “no one on the front bench of govern­ment or op­po­si­tion had been pre­pared to raise the one big con­tribut­ing fac­tor that is wholly and solely within the fed­eral govern­ment’s con­trol – un­til Peter Dut­ton fi­nally said last week that im­mi­gra­tion could be cut ‘if it’s in our na­tional in­ter­est’ ”?

“Just 16 years ago,” Ab­bott said, “in the first In­ter­gen­er­a­tional Re­port, it was ex­pected that our pop­u­la­tion would not reach 25.3 mil­lion till 2042. But due to cur­rent im­mi­gra­tion lev­els, we’re go­ing to achieve that fig­ure next year – or 23 years early.”

Ab­bott could not re­sist bring­ing is­sues of race into it, blam­ing the im­mi­gra­tion rate for “eth­nic gangs that are test­ing the re­solve of po­lice”. This is where the ar­gu­ments fes­ter: there is an eco­nomic ra­tio­nale here, pow­er­ful on the num­bers, but it is un­done by ugly ap­peals to racism and xeno­pho­bia.

Trea­surer Scott Mor­ri­son promptly slapped Ab­bott down, say­ing the pro­posed cut would cost the bud­get $4 bil­lion to $5 bil­lion over four years and de­prive the coun­try of nec­es­sary skilled mi­grants. Mor­ri­son’s claims were in turn sys­tem­at­i­cally taken apart in The Aus­tralian, of all places, by eco­nomics writer Ju­dith Sloan, who al­leged “an im­mi­gra­tion con­spir­acy go­ing on in­volv­ing Can­berra bu­reau­crats and politi­cians, among oth­ers, who are only too happy to over­state the ben­e­fits of im­mi­gra­tion while down­play­ing the costs”.

Sloan’s ev­i­dence-based de­bunk­ing was quite com­pelling, and also rude and pa­tro­n­is­ing. She took Mor­ri­son’s ar­gu­ment as proof that “he doesn’t know the first thing about eco­nomics”. That is per­haps the more in­ter­est­ing as­pect of the de­bate: the way it has cut across nor­mal ide­o­log­i­cal bound­aries.

Ian Lowe, emer­i­tus pro­fes­sor of sci­ence, tech­nol­ogy and so­ci­ety at Grif­fith Univer­sity, and a for­mer head of the Aus­tralian Con­ser­va­tion Foun­da­tion, is not one you would usu­ally hear singing from the same song sheet as Ab­bott, but he is in whole­hearted agree­ment on the need to work to­wards a long-term pop­u­la­tion goal, rather than a short-term im­mi­gra­tion tar­get.

“We should have a pol­icy of sta­bil­is­ing our pop­u­la­tion at a level that can be sus­tain­ably sup­ported,” he says.

“You can de­bate the level, be­cause [sus­tain­abil­ity] de­pends on things like lev­els of con­sump­tion – whether we con­tinue to have the largest houses in the world, whether we con­tinue to drive large, in­ef­fi­cient cars.

“But it is self-ev­i­dent that pop­u­la­tion can­not ex­pand for­ever. We need a long-term goal be­cause of the in­er­tia of growth. If we had zero net migration today … the pop­u­la­tion would take about 20 years to sta­bilise.

“The ABS has done three pro­jec­tions of fu­ture pop­u­la­tion based on dif­fer­ent as­sump­tions about birthrate and migration rate. The ‘A’ pro­jec­tion has us at 60 mil­lion at the end of the cen­tury, but we are cur­rently track­ing above the A pro­jec­tion.”

Aus­tralia is the dri­est con­ti­nent, with a very limited car­ry­ing ca­pac­ity, Lowe says. “At 60 mil­lion peo­ple, we could not even feed our­selves.”

The more im­me­di­ate prob­lem, though, is that Aus­tralia’s in­fra­struc­ture just can’t keep up, and will fall fur­ther be­hind over time, Lowe says.

And the govern­ment’s own bu­reau­crats – at least the ones not party to Sloan’s al­leged con­spir­acy – lend strength to the ar­gu­ment.

The Bureau of In­fra­struc­ture, Trans­port and Re­gional Eco­nomics es­ti­mates the “avoid­able” so­cial costs of traf­fic con­ges­tion in the eight Aus­tralian cap­i­tals cities. They reck­oned it to to­tal $16.5 bil­lion in the 2015 fi­nan­cial year, up from $12.8 bil­lion in the 2010 fi­nan­cial year. By 2030, they fore­cast, the cost of con­ges­tion would rise to be­tween

$27.7 bil­lion and $37.3 bil­lion. That is roughly the cost of the Na­tional Dis­abil­ity In­surance Scheme, fully im­ple­mented.

In Ja­pan, bul­let trains ar­rive on sched­ule mea­sured to the frac­tion of a sec­ond; here we can’t get a light rail sys­tem built on time.

As with trans­port, so with hous­ing. A re­port last month from cen­trist think tank the Grattan In­sti­tute warned that Aus­tralia’s ma­jor cities were strug­gling to keep up with de­mand.

And no won­der, re­ally. In ad­di­tion to the 190,000 per­ma­nent mi­grants brought into the coun­try each year, there are, ac­cord­ing to Trea­sury and the Depart­ment of Home Af­fairs, nearly 1.6 mil­lion tem­po­rary mi­grants in Aus­tralia: stu­dents, work­ing hol­i­day­mak­ers, tem­po­rary skilled mi­grants, and New Zealan­ders liv­ing in Aus­tralia.

Un­like the per­ma­nent mi­grant pro­gram, the tem­po­rary stream is largely un­capped, and has grown like Topsy over re­cent years.

The Grattan re­port scrupu­lously avoided nom­i­nat­ing the “right” num­ber of mi­grants, but it cau­tioned that un­less the states could pro­vide hous­ing for them all, it would be nec­es­sary to cut the in­take.

A big part of the im­mi­gra­tion dilemma is that it is the feds who de­cide num­bers, and reap the tax div­i­dends, while states mostly have to pro­vide the nec­es­sary in­fra­struc­ture and lo­cal gov­ern­ments are re­spon­si­ble for much of the ur­ban plan­ning.

Nearly 90 per cent of those tem­po­rary visa hold­ers also have work rights. The govern­ment in­sists this enor­mous in­flux of labour does not drive down wages. Tony Ab­bott and ACTU sec­re­tary Sally McManus – an­other ex­tra­or­di­nary al­liance – in­sist they do.

There is a grow­ing body of aca­demic re­search that sug­gests Ab­bott and McManus are right. But like al­most ev­ery as­pect of im­mi­gra­tion, it’s com­plex and con­tentious.

Some ev­i­dence sug­gests per­ma­nent mi­grants raise wages, while tem­po­rary ones lower them. As the depart­ment tells us, “al­most half of the in­di­vid­u­als granted per­ma­nent res­i­dency are al­ready in Aus­tralia on a tem­po­rary visa”.

There are, ac­cord­ing to the depart­ment, more than 5500 pos­si­ble path­ways through which tem­po­rary visa cat­e­gories can con­vert to per­ma­nent res­i­dence. So work­ing out whether migration is a net ben­e­fit or cost is ex­ceed­ingly dif­fi­cult.

There is one ar­gu­ment ad­vanced by the high-im­mi­gra­tion lobby, how­ever, which can con­fi­dently be dis­missed as rub­bish. That is the claim that im­mi­gra­tion pro­tects us against the age­ing of the pop­u­la­tion.

Trea­sury and Home Af­fairs made the ar­gu­ment again in their most re­cent re­port, “Shap­ing a na­tion: Pop­u­la­tion growth and im­mi­gra­tion over time”. That is that high im­mi­gra­tion serves as a way of “ame­lio­rat­ing the age­ing of Aus­tralia’s pop­u­la­tion”.

It doesn’t. At best is de­fers it, and the rea­son is ob­vi­ous: mi­grants also age. There­fore, the quest for eter­nal na­tional youth means bring­ing in ever more young mi­grants to aug­ment the ranks of those who have got old. It is the very def­i­ni­tion of a Ponzi scheme.

A few other things are clear, be­cause they can be pre­cisely mea­sured.

From 1996 to 2016, mi­grants ac­counted for 63 per cent of all pop­u­la­tion growth in Syd­ney, and 50 per cent in Mel­bourne and Perth, the lat­ter due to the min­ing boom. Mi­grants were re­spon­si­ble for more than 40 per cent of the growth in ev­ery other cap­i­tal, save Ho­bart, were they caused one third of it. In some sub­urbs, where mi­grants clus­ter, they ac­counted for 100 per cent of growth.

Ac­cord­ing to the 2016 cen­sus, for the first time in Aus­tralia’s his­tory, a greater pro­por­tion here of peo­ple born over­seas are now from Asia rather than Europe.

That pro­por­tion will likely con­tinue to grow, if for no other rea­son than that all of Europe now has fer­til­ity rates be­low re­place­ment level – some even lower than Ja­pan. As they shrink into the fu­ture they will have fewer peo­ple to send. The coun­tries that still have high birthrates are al­most all in Africa, South Asia and the Mid­dle East.

But pur­su­ing end­less GDP growth through end­less pop­u­la­tion growth is not a vi­able op­tion. Very soon, we will have to set a limit on growth.

And in do­ing it, as David Pilling con­cludes at the end of his book, we will have to con­sider other mea­sures of progress. “Some things – safe streets, good jobs, open spa­ces, a sense of se­cu­rity and well-be­ing – are a good in

• them­selves,” he says.



MIKE SEC­COMBE is The Satur­day Pa­per’s na­tional cor­re­spon­dent.

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