Icarus Economics – John Rapley (1)

That’s not accidental, since wealth ages a society, both literally and figuratively. That in turn alters the character of the economy in profound ways. Let’s start with the literal aspect of ageing. Wealth makes a society older in that it raises the average age of the citizens via two channels, both of which have a restraining effect on growth. Firstly, as incomes rise, fertility declines. This is one of the most reliable rules of development, and while it has many drivers,1 the basic fact is that in pre-industrial societies, children can contribute to family finances by being a source of labour, usually from a very young age.

On the other hand, children in rich societies attend school and don’t enter the workforce until they have attained independence from their families, acting instead as a net drain on family resources. So, the natural tendency in the latter case is to have fewer of them. Whereas a century ago in most Western societies, the average couple had around four children, today they have half that, or less.

Secondly, as incomes rise, people live longer. The average Briton lived to be sixty in 1939; today they make it past eighty. Italy’s improvement was even more impressive, going from fifty-seven to eighty-three. The most dramatic of all, however, has been Japan, whose life expectancy nearly doubled from forty-eight to eighty-four in the same period. That’s because nutrition improves as we can afford healthier foods – and enough of it never to go hungry – while more resources are available for healthcare. Whereas childhood and retirement once bookended human lives, today retirement has turned into an entirely new chapter in life, one that can even outlast most people’s careers and has given rise to a whole industry dedicated to helping people live their best lives.

Wealthy societies therefore have fewer young people, longer retirements and pension regimes that have gone from being welfare programmes keeping people indigent in their final years to providing incomes that support them during golden years in which they maintain their standard of living. In the 1950s, the British state pension alone consumed 2 per cent of GDP;2 today that figure has reached 5 per cent, and on its current path it will only increase, with private pensions raising that figure further. This ageing of the population then alters the behaviour of both individuals and societies in such a way as to slow economic growth.

It raises the dependency ratio, as we’ve seen, which increases the share of economic output committed to consumption, thereby depressing the investment share. After the war, for instance, Americans routinely set aside 10–15 per cent3 of their income towards savings, creating a large pool of capital in the banking system; today, that figure hovers closer to 5 per cent.

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www.arccompliance.com OceanofPDF.com CONTENTS Introduction 1 The Story of Our Ascent 2 Transcending Nature’s Limits 3 The Pandemic Paradox 4 The Wealth Paradox 5 The Wealth Trap 6 The Kill Switch Within 7 The Icarus Economy 8 The Middle Course Conclusion Notes Index OceanofPDF.com M INTRODUCTION an plans, God laughs. At one time or another, we’ve all experienced the cold wisdom about hubris in that old Yiddish proverb. For me, it happened one day in 2020. After spending the Christmas season in Canada visiting my family, I’d flown back to London to pack up my flat, say goodbye to old friends, go back to Cambridge one last time and prepare for my imminent onward journey to Johannesburg.

Having spent the last few years at the university, lecturing in development studies and enjoying college life, with its formal dinners and lunchtime fellowship, I’d started to feel a yearning to return to the global frontier. But no sooner had I landed in London for what was only ever intended to be a short layover than God laughed at us humans on an epic scale.

This is a short excerpt from the opening of “” by Unknown, quoted for review and introduction purposes. All rights belong to the copyright holders.

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