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Martin Wolf on demography as destiny

by Robert Teitelman | Published February 22, 2011 at 1:12 PM

Over the weekend, the Financial Times' Martin Wolf published a typically lucid column explaining the turmoil in the Middle East, and a lot more, through the demographics of the various groups of nations. Wolf sums it up best himself: "Demography is destiny," he writes. "Humanity is in the grip of three profound transformations: first, a far greater proportion of children reaches adulthood; second, women have far fewer children; and third, adults live far longer. These changes are now working through the world, in sequence. The impact of the first has been to raise the proportion of the population that is young. The impact of the second is the reverse, decreasing the population of young people. The third, in turn, increases the population of the very old." All this is fascinating. And these demographics do seem to explain a lot, not only in the Middle East, but in the developed world, with its aging population putting great strain on safety nets. But the notion that demography is destiny raises a variety of questions. How tightly determined are these demographics? What's the role of large social trends like demographics and individual agency, not just the willingness of protesters to put their lives at risk, but of the kind of planning, coordination and leadership by a few individuals? How important is the trend, how essential the individual? What is essential?

Like any major social or market eruption, you have to struggle not only to parse out multiple causes, some of which are primary, others of which are secondary, but to wrestle with the role of the individual as opposed to an often large-scale, long-term, abstract trend. In this sense, the financial crisis and these political "revolutions" are very similar. In the popular commentary, two interpretative tendencies occur: The number of causes contract and simplify, and the focus turns on individuals or groups -- Goldman, Sachs & Co., the Muslim Brotherhood, "criminals" like Dick Fuld or "leaders" like the young Egyptian Google executive, or even technologies like derivatives or the role of Twitter and Facebook. Indeed, the spat over the role of social media has dragged high-profile pundits into the cockpit, pitting the likes of Andrew Sullivan (Twitter is essential) against Malcolm Gladwell (Twitter is overrated), and producing a debate that grows ever more arcane and self-referential. Gladwell, of course, has built an entire career on playing with the ambiguity of explanations, by either provocatively simplifying or complicating the equation of cause and effect.

Wolf himself tends in the opposite direction. He is the great expositor of the large, mostly economic trend: In the financial crisis, he was an earlier analyst of the trade imbalance argument. Here, he persuasively wields the patterns of demography.

Wolf, of course, is far too sophisticated to say that demography, for instance, "caused" the spreading revolutionary fervor. On the other hand, he does utter the cry "demography is destiny," from which there is very little wiggle room. Indeed, Wolf himself argues that "such great [demographic changes as in the Middle East] always bring huge social upheavals." There is to this kind of statement the exact kind of retrospective certitude produced by many commentators after the financial crisis blew by: Look at how ugly the subprime real estate situation was. Given that obvious problem, the only explanations for the failure of journalists, regulators, economists and other financial expert to foresee it was corruption. But, in fact, while trade imbalances and demography may be contributory factors to a certain kind of behavior, they are not necessarily "destiny," that is, inevitable. After all, the demography that Wolf discusses is no great secret; and only a fool would try to predict insurrection at a given time period based on raw numbers. Similarly, derivatives did not make a meltdown inevitable, nor did Twitter make revolutionary fervor necessary. Meltdowns have occurred without trade imbalances, and revolutions have certainly taken place without social media.

Both extremes suffer from grave weaknesses in isolation. The belief in the inevitability of great trends tends to reduce political action to merely getting on the right side of history and riding the wave; this for years was the best argument offered by various communist parties. Belief in the power of individuals produces paranoia and demonization; we see it every night on cable television. In the real world, the two extremes support each other in fascinatingly complex ways that are extremely difficult to predict. It's a little like a market with active and passive investors. As John Authers writes in the FT also on the weekend, a market of indexers would be a market replete with inefficiencies. A market with nothing but active investors might be so efficient that it would produce lousy returns. In fact, active investors require those passive enough to ride the trend to allow inefficiencies to develop; and the passive require the active interest to provide some rationality to prices. They exist in tension with each other; they support each other; they require each other.

So too when we try to explain these large, often destabilizing events. You need the destiny of the trend and the tweeting activism of the individual. The single cause may make for a provocative argument, and will certainly simplify profoundly complex situations for those who believe the world should be simple. But the true test of that underlying complexity is our continuing failure to produce timely predictions on history's random walk with any accuracy. - Robert Teitelman

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