Tuesday, September 22, 2009

The role of population

If the assumptions and analysis of the prior two sections is correct then population growth in and of itself does not seem to be in New Zealand’s best interests. Growth seems to have come from the importation of foreign capital, which means it is likely to result from consumption spending rather production, which is then divided by an increasing population.
Figure 3

Original data source: Statistics New Zealand (www.statistics.govt.nz)
Figure 3 shows that, while natural population growth has been relatively constant, net migration has varied significantly with many more people migrating in and out of New Zealand than are dying or being born. The bold red line shows total population growth and the bold black line shows the population growth without immigration; immigration being the only component of population growth that is directly controlled by the Government. These lines show that New Zealand can have any population growth it wants from significantly negative to significantly positive. It also shows that New Zealand has chosen significant positive growth with 434,000 extra people over the eleven year period. Of this growth the uncontrolled components are 638,000 births, 306,000 deaths and 761,000 migrants leaving. Over the same period New Zealand has allowed 863,000 migrants to settle in New Zealand. The point here is that New Zealand could have selected the level of population growth that has occurred.
We can make the following provisional observations. It is likely that population has increased consumption. It seems that increased consumption has been sustained by debt only. Increased population has not increased sustainable production, but has thinned out that production across a bigger base. Even the debt driven productivity that has occurred is well below the levels achieved in other advanced economies on a per capita basis.
While New Zealand’s per capita GDP relativity has been dropping steadily for years, for practical purposes things don’t look so bad. New Zealand still comes near the top of the world in the quality of life standings[1] and so the consumer surplus in New Zealand (the amount that benefits exceed costs) still seems to be very high. This is another, more measured, way of saying that New Zealand is a cheap, nice place to live. Interestingly surveys that are more focused on lifestyle don’t tend to rank New Zealand cities so high. This suggests that New Zealand is a nice but not desirable place to live, which could be a significant factor in emigration.
Our problem is that population growth without an underlying increase in true wealth (economic resource development) puts downward pressure on all of New Zealand’s good attributes. The combined effect of higher populations (particularly where highly urbanised as in Auckland and Wellington) and low, and dropping, average individual wealth leads to an increasingly poor society. The colonisation of space without the underlying wealth to fund infrastructure leads to the deterioration of services, pollution and congestion; and starts to convert reducing wealth towards slums and poverty. All of which tends to lend a sensation of negative development, which is also an anecdotal element of New Zealand’s current status.
[1] For example the 2009 Mercer Quality of Living survey ranked Auckland the 4th best city in the world and Wellington 12th on a broad range of criteria which includes education, political stability, recreation, etc.

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