Looking Towards 2040

One big piece of current news in the Netherlands is the release of a comprehensive report from the Centraal Planbureau (CPB) on “The Future of Europe.” That “Central Plan Bureau,” despite its name, does not occupy itself with any sort of economic planning – i.e. in the socialist sense (as in the old Soviet Gosplan) of presuming to choreograph the national economy by calculating how that economy should work to achieve given national objectives, and then issuing instructions to economic actors about what they are to do. Rather, it is roughly the equivalent, say, of America’s National Bureau of Economic Research, except that the CPB is not private but rather publicly-funded, organizationally being part of the Dutch Ministry of Economic Affairs. Nonetheless, the CPB claims that it is quite objective and independent in the research it performs and conclusions it draws, even if it is formally part of the government.

Back in 1992 the CPB produced, and released to the public, its “Scanning the Future” report, a long-term study of the future of Europe and of the Netherlands based upon a general-equilibrium economic model it had developed, called “Worldscan.” “Scanning the Future” was built around four different long-term scenarios of how the future might look, depending on what assumptions you adopted. Like that earlier report, the just-released “Four Futures of Europe” – written in English – is also constructed around four long-term scenarios.

I first became aware of this new report, naturally, via the Dutch press, specifically this treatment in Het Financiële Dagblad (but a subscription required) and this coverage in the NRC Handelsblad (which only requires on-line registration, although in Dutch). And right here I need to draw the distinction, which these reports do not make clear, between those “Four Futures” on the one hand and the much-more-interesting prescriptions which CPB researchers drew from that research.

It’s those conclusions to which the newspaper accounts devote most of their space, and they’re interesting enough: 1) The current European “welfare state” model is unsustainable over the long run. This is mostly because the “greying” of Europe’s population over the next forty years (i.e. the fact that older people will make up more of its composition, because of falling birth-rates), and because raising the necessary taxes will become increasingly difficult due to capital mobility. 2) The European Union should adjust its practice of the principle of “subsidiarity,” whereby individual states (or even lower jurisdictions) are supposed to be in charge of things they can best deal with, while the EU is given control of only those matters that really require pan-European attention. Right now, the CPB researchers claim, there is far too much involvement in social policy, especially having to do with working conditions, while there is too little involvement in financial policy (as in common rates of tax).

As I say, the CPB researchers supposedly drew these conclusions from their “Four Futures” report, although I can’t tell myself because that report comes in three installments (PDF files, everything still in English), totaling some 17 chapters and a couple hundred pages. I limited myself to the 67-page PDF summary of the “Four Futures” study (available at the bottom of this explanatory page, in English). That is interesting enough: the four “futures” or scenarios are called “Strong Europe” (high degree of international opening, strong European government), “Global Economy” (high degree of international opening, weak European government), “Transatlantic Markets” (low degree of international opening, weak European government), and “Regional Communities” (low degree of international opening, strong European government). But this will appeal mainly to those who are interested in the rather academically-presented economic models; the “Conclusions” presented in this paper verge on the technical, namely 1) That labor participation rates will decline by 2040 – probably, and 2) That in three of the four scenarios (“Global Economy” excepted) growth of absolute GDP and GDP per-capita will steadily decline over this period.

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