Demography is Destiny
The Greek tragedy
by Marcus Roberts | January 19, 2019
The economic collapse of Greece was in the news everyday a few years ago. The bailout and the terms and conditions that the EU (read Germany) placed upon that bailout were discussed at length. There were also lovely debates about the moral culpability of whole classes of people: the Greeks (feckless, debt-addicted and lazy) and the Germans/banks (lending money when they shouldn’t have, allowing Greece into the Eurozone when it shouldn’t have, supporting a currency that was to Germany's and not Greece’s benefit). Gosh, weren’t those were fun times. Remember how so many supporting the UK remaining in the EU now, were then excoriating the EU as punishing the Greeks and supporting big banks?
Now that the urgency has gone out of the issue (for everyone but the Greeks of course), it might be a good time to see what impact the Greek economic crisis has had on the country, in particular what impact it has had upon the Greek demographic outlook. According to the independent economist Bob Traa, writing at ekathimerini.com, the answer is that the impact has been large.
But first, let’s remember what an absolutely devastating economic crisis it was: the Greek national income collapsed by a quarter, the unemployment rate peaked at 27.5 per cent and there were months and months of social and political turmoil.
So, nine years after that crisis, what has it done for Greece’s demographic outlook? In 2011, the Greek population was projected to increase to about 11.3 million in 2025 and then slowly subside to around 10.6 million in 2060. The new outlook from 2018 is much different: the population actually peaked in 2011 and since then has declined to about 10.7 million today and this decline will continue. Greece is projected to have close to 8 million people in 2060 – a population smaller by 2.4 million people than was projected back in 2011.
Furthermore, the working-aged population of Greece will also decline further than was expected back in 2011 – by 2060 this cohort will be 1.2 million people smaller than was predicted in 2011. It is already about 200,000 people smaller now than was predicted eight years ago. This shows how much immediate impact that the economic crisis had on the Greek population. It immediately ushered in the peak of the Greek population and its subsequent decline, 15 years earlier than was originally forecast. Of course, it also shows the danger of placing too much faith in long-term demographic forecasts: they have a tendency to be overtaken by events!
This is not overly surprising: as Traa notes, when an economy is doing well people tend to have the financial confidence to stay put (especially working-aged people who can get employment elsewhere) and have children. Conversely, under economic stress, people look abroad and perhaps migrate for jobs, while those that stay tend to delay having children or have fewer of them.
And the economic effects of this lower population? There will be less consumption and less investment and a lower absolute level of employment. The potential for the size of the Greek economy is reduced. Further, the very high amounts of debt that Greece owes will only get larger per capita as the population and working (and taxpaying) cohort decreases. Overall, Traa estimates that the revised population figures will reduce Greece’s “average potential growth” by 0.5 per cent a year over the next few decades. The demographic impact of the Greek economic crisis will continue to be felt there for at least the next 30 years.
And that is assuming that there isn’t another crisis in the meantime.