YGGDRASIL
Ladies and Gentlemen:
I am delighted to be here tonight to speak before the Tuesday Dinner Club here in Washington D.C. Thank you for inviting me.
I thought I might say a few words first about the future - some predictions about how economics will drive politics over the next 30 years. Following these brief prepared remarks we can have a fairly wide ranging discussion.
While I am not an economic determinist, I am convinced that economic forces will drive the transformation of the current Republican and Democratic Parties over the next 30 years.
As you know, party affiliation in the United States has gradually come to be identified with race. The Democratic party now seeks in very open and public ways, to represent the racial interests of a coalition of Blacks, Browns and Jews. The primary thrust of this coalition is to increase taxation and government transfers from which they derive disproportionate benefit.
In contrast, European-Americans increasingly identify with the Republican Party's public agenda of less taxes and less government, which inevitably means opposition to the financial demands of this Democratic minority coalition.
Thus, the racial polarization of the parties involves a classic competition between races for scarce resources within a multi-racial country. It is the very beginning of a completely predictable process that leads to intensifying political conflict.
Yet given the current mood and posture of Republican politicians, I am sure you have questions about how this conflict might evolve in future years. The content and shape of this evolution that will be dictated by economics.
The baby boom generation (those now between the ages of 35 and 53) is given to manias. Its first mania was the boom in housing prices beginning in 1972 and ending approximately in 1985 through 1990 (depending on the region of the country). This boom was brought on by the demand for housing arising as the lead edge of this group reached age 27 in 1972. In 1982, as the lead edge of the baby boom reached age 37, and thought for the first time about retirement, this group began its second mania - the greatest bull market in stocks of all time.
Three years of boomers are now past age 50. As more boomers reach age 50, they continue to save as much as they did while in their 40s. But they also start to curb their spending, to pay down debt and to lower their consumption. No more Porsches and Ferraris. Further, they become much more price and value conscious and less brand loyal. As the generations of 20 year olds entering the work force are smaller than the baby boomers who are ageing, we get a dramatic slowdown in demand.
The problem is that Euro-American baby boomers only had 1.6 children per couple on average. College educated blacks had even fewer children. The net result is that there are 30% fewer people between the ages of 20 and 30 than there were 30 years ago. In the U.S. there are tens of millions of young immigrants working in the minimum wage economy as well as additional tens of millions of youthful immigrant and native-born welfare recipients. Their numbers mask the demographic reality that drives production and consumption in our economy.
It is only the educated, productive portion of the population that generates real economic supply and real economic demand.
Indeed, declining birth rates are the rule throughout the civilized world. The White population is in a steady and rapid decline in all of Russia, Europe, North America and Australia. The population of Japan is also declining. The Japanese now have a birth rate of 1.5 per woman. The birth rate in China has fallen to 1.9, below the replacement level of 2.1 per woman.
These populations generate and consume approximately 80% of the World's GDP. Japan is illustrative. Their population is approximately 7 years older than the U.S. population. Their stock market peaked in 1990 and has been falling ever since. The problem is falling demand. Although the living standard of Japanese individuals has not declined in the current recession, aggregate demand for the population has declined. And there is nothing that the government can do to stimulate demand. Lowering interest rates is counter productive. Low yields on savings stimulates consumption on the part of people in their 20's and 30's, but low yields merely stimulate more saving and less consumption by an aging population.
Thus, the first effect of an aging population is falling aggregate demand. Then, as this population retires, it begins to withdraw funds from the financial markets in order to survive, driving down prices. Finally, the burden of government old age pensions depletes government resources, at a time when those resources are declining.
A falling population is the economic equivalent of nuclear winter.
The United States faces the exact same scenario.
The leveling off of demand in the U.S., coupled with rapidly escalating wage rates for young people with middle class skills will make profit growth an impossibility, even as it increases the risk of excessive and redundant investment. In about 7 years, we will see a dramatic increase in the number of retirements, at which time the flow of funds into financial markets will slow down and then reverse, with net selling for the next 30 years as retirees seek to support themselves out of their prior savings and investments. This phenomenon will occur throughout the civilized world, comprising over 80% of its financial markets.
Approximately 8 years after that, the claims on government resources will escalate just as government income falls dramatically.
Think for a moment about future demand for two items, diamonds and suburban houses. For that segment of the population that cares to marry and to honor the commitment of marriage with a diamond ring, each 100 Grandmothers already have 30 more diamonds than their granddaughters need. Demand for diamonds (other than large D-IF stones with excellent polish, excellent symmetry and no florescence) will effectively disappear. Similarly, each 100 boomer couples already own 30 more houses than their children will need. Prices for middle class housing (along with local tax collections) will collapse.
One can argue that growth can continue as long as those scarce youngsters with middle class skills become fabulously rich. But this implies a massive inflation in salaries and wages. It cannot possibly occur as a result of return on invested capital.
Now the meaning of falling populations for our politics seems clear.
First, the resources available for support of the minority racial coalition of the Democratic party will contract. Their frustration will increase.
With falling demand, falling stock prices, and falling housing prices, the demands of the Euro-American population that non-whites stop using the government to steal from them will escalate. Inevitably, politics will become much more polarized along racial lines.
By and large, the Democrat politicians see the handwriting on the wall. They already urge their constituents to ever greater levels of explicit racial grievance and demand for reparations.
However, in 1998, most Euro-Americans want their Republican representatives to oppose the racial demands for resource transfers, but want them to do it in a non-offensive way - without further inflaming the racial demands of the blacks and browns who form the base of the Democratic party.
Republican politicians labor under a unique set of disabilities. First, they face the implacable and uniform opposition of a hostile media. That hostility will not change over the next 30 years. The media will be controlled by the same ethnic group for the foreseeable future. It will not be possible for any view other than that of implacable opposition to the interests of Euro-Americans as a group to gain a voice in that media.
Second, Republican politicians are dependent for campaign contributions on a small fraction of the Euro-American population - primarily permit-getting entrepreneurs such as developers and owners of businesses seeking public contracts, subsidies or protection. I consider these people a long-term liability for the political health of the Party.
First, this entrepreneurial group surrounds most Republican politicians and distorts their outlook. While they talk like champions of free enterprise, they actually seek to personalize profits while socializing costs. Not only are they "corporate socialists" but they are wildly optimistic and opposed to anything "negative." Inevitably, they force Republican politicians to blunt their message of opposition to the looting of the middle class.
Second, their wild optimism means that a Republican message tailored to an aging population in an era of shrinking resources simply will not compute with this crowd. They will stubbornly deny the facts. They are a problem that every Republican politician must learn to manage carefully.
Third, these people will have fewer resources to contribute in the future. Republican politicians are going to have to generate more financial support from the typical freeway commuting jobholder who calls in to the talk radio shows. At the moment, these ordinary job holders very seldom contribute to campaigns. Republican politicians know perfectly well what this constituency wants. But they are going to have to go one step further and start motivating them to contribute. The motivational message will inevitably be a negative one, focused on helping them keep slices of a shrinking pie as the labor market, and not government, allocates them.
To survive politically in their own Euro-American districts, Republican politicians are going to have to move away from the mantra of growth and away from the belief in the universal "economic man" that appeals so much to their present contributors. They are going to have to learn to speak of economic defense against the demands of sharply defined groups of political aggressors.
It is going to become increasingly implausible to campaign on the promise of growth - increasing the size of the pie for all groups - in an environment of perpetual contraction. Euro-American voters are likely to hear that message as an excuse for maintaining and expanding massive wealth transfers to the increasingly visible minority extortion coalition.
Republicans are going to have to promise to stop the Democrats from using government to steal from Republicans!
A collateral casualty of this new political environment will be corporate socialism itself. In this changing environment, it is going to be much more difficult for Republicans to pay back their corporate contributors with permits, contracts, protection and subsidies. The Democratic minority extortion coalition will not be the only economic enemy.
While researching the Euro-American high school populations in California and Texas, I uncovered an interesting fact. While non-Hispanic Whites constitute nearly the same percentage of the population of California and Texas, only 39% of high school students in California are non-Hispanic Whites, while 50% are in Texas.
Euro-American birth rates are much higher in Texas than in California. In fact, Utah has the highest White birth rate on earth.
The willingness to sacrifice for the future generation correlates with traditional religious belief. In contrast, populations that believe society should organize for the purpose of maximizing individual pleasure, happiness and freedom simply perish.
But unlike the sudden massacres to which demoralized populations were exposed in ancient times, a modern population that believes the community has no right to make demands of the individual impoverishes itself in the process of its extinction.
Indeed, as just one example, the abortion of a Euro-American baby will come to be seen not only as a sin against ancient texts, but a crime with economic consequence. Any law enacted by the Congress or courts of our multi-racial country that allows such killings will be seen as wildly illegitimate by its largest population group. Republican politicians will have to find ways to allow a different law to operate within the Euro-American community.
Indeed Republican politicians will be forced to learn that the "social issues" are the "economic issues". In ten years, they will be one and the same.
The modern evolutionary biologists and psychologists say that the mind of a newborn is like a fully exposed film. It can be developed badly, but its basic abilities and personality predispositions are determined from birth. It is for this reason that growth in economic demand from those lands with growing populations - Latin America, India and sub-Saharan Africa - will not rescue us. It takes a long time for the habits and culture of a people to change. Joseph Schumpeter will be proven correct.
In 80 years, these populations may develop the kinds of skills and habits that produce widespread prosperity within their nations. However, by that time, their populations may be falling just like ours, according to the most recent U.N projections. Indeed, it is this slow pace of human adaptation - the slowness with which human perception of our selves and our consumption needs changes - that has produced the current world wide recession. We in the West have invested in these countries in the expectation of instant cultural change. Consequently, we over-invested relative to the real economic demand generated in these countries.
Likewise, because of the powerful correlation between childbearing and religious belief among Euro-Americans, that Euro-American population 30 years hence will have dramatically different average predispositions than we do today.
Euro-Americans will come to understand that survival and prosperity depend upon the ability of their community to curb self-centered individual behavior and "life styles" that tend to keep its collective cradle empty. The argument will be moral as well as economic. The demands that this understanding will justify placing upon Euro-Americans will have no validity as applied to other races. Indeed, these communitarian demands will be understood by those other races as a form of aggression, just as the Palestinian birth-rate of 8 children per woman is so understood in Israel.
The moral strength of one racial community will be perceived as a threat to the others until national borders are re-drawn or citizenship and national jurisdiction are redefined in such a way as to subject each race to its own separate government as a means of preventing political competition for resources.
We are condemned to live in interesting times.
It will be interesting to see how Republican politicians will react to the challenges ahead.
Yggdrasil-
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