Friday, 26 June 2015

Population Growth, Ponzi Schemes and Xenophobia

The Immigration Ponzi Scheme

A Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned by the operator.

Whatever the initial situation, the perpetuation of the high returns requires an ever-increasing flow of money from new investors to sustain the scheme

Now consider this. We have an aging population. Who will pay for the pensions for that older population? Who will fund the taxes for their health care?

The answer that we have been given, time and again, is that we need immigration because that will give us more working people to pay for the increasingly elderly population.

Of course, all those extra people will in turn themselves get old, so…. We need more immigration because that will give us more working people to pay for the increasingly elderly population.

It’s as simple as that, and the similarities to a Ponzi scheme could not be clearer. The older “investors” in the social security system can only get returns as long as there are new immigrant “investors”.

With a Ponzi scheme, the increased numbers needing returns to the original investors grows to the point where the scheme is unsustainable.

Joseph Chamie, a demographer, who spent 12 years of service as the director of the United Nations Population Division notes:

"While it may come in many guises, Ponzi demography is essentially a pyramid scheme that attempts to make more money for some by adding on more and more people through population growth."

"Among its primary tactics, Ponzi demography exploits the fear of population decline and aging. Without a young and growing population, we are forewarned of becoming a nation facing financial ruin and a loss of national power."

With a Population Ponzi scheme, the population can always grow – but it needs a greater flow of immigration as the numbers of elderly supported by the scheme grows and grows in turn. It is a vicious cycle of growth, which is fine if you have enough land, resources and infrastructure to accommodate it. But unfortunately, living on an Island, we don’t.

As we can see from the latest figures, immigration, despite the supposed controls of registration cards, is out of control. The “balance” as Senator Paul Routier likes to term the what purports to be a strategy, is weighed down heavily on one side.

But the balance we need is not growth but population stabilisation. As Chamie comments:

"Moving gradually towards population stabilization, while not a panacea for the world's problems, will make it far easier to address problems such as climate change, environmental degradation, poverty and development, human rights abuses and shortages of water, food and critical natural resources."

Disaffected Little Islanders

Alongside rising numbers of Islanders, and an immigration policy that appears to be as leaky as a colander, we see another troubling sign of the times.

Jason Maindonald, contract and estate manager with the Jersey Development Company, posted the comment about former Deputy Sean Power, who has been leading the protest against the Waterfront development: “Sean you know where the boat and the airport is if you don’t like it then please leave and do us Jersey folk a massive favour.’

It’s a long standing phrase - the “Boat in the Morning” – where anyone who criticises parts of the Island is told to leave; it dates from the days when the Sealink Mailboat ran from Jersey to Guernsey and thence to the UK, and left early in the morning. 

Condor – as anyone looking at going to Guernsey for a day trip will discover – doesn’t really have a boat in the morning. And if there are high winds so it cannot dock, or engine trouble so it limps along, there may not even be a boat at all.

But the phrase and the attitude persist. Here is one from Facebook in 2014: “This Island would be so better off if the people who consistently moan about it, just leave. It's not perfect. Where is? It is however a far better place to live and work than a lot of other places in this world.”

Alongside that we have blame for all the Islands ills being placed by one individual who really should know better on immigration, apparently suggesting that the 50,000 or more people who came here after the war are the cause of Jersey’s problems, and consistently asking the question – “Who is a true Jerseyman?”, by which he means a long established family like his own (even if it originally came from England!).

The problem of immigration must be detached from the focus on the immigrants and the latent and rather ugly xenophobia. The irony is that many well established Jersey surnames come from outside the Island and were themselves immigrants. As Balleine notes:

“Langlois was the Englishman, Le Gallais and Le Gallon the Welshmen (Galles is the French for Wales); Le Breton came from Brittany, Norman from Normandy, Le Poidevin from Poitou, D'Awergne from Auvergne. The Briards' native home was La Brie, the corn-growing plain east of Paris.”

“At least two of our old families have place-names from. north of the channel, the Hamptonnes from the town that we now call Southampton, and the Hottons from one of the English Houghtons, perhaps the one near Northampton or the one near Leighton Buzzard.”

This, of course, has been common through history in other culture and other land - those who criticise other immigrants and forget that their ancestors were once strangers in a strange land.

Population and Infrastructure: Remaking the Connection.

"If we lived in a world of unlimited resources—a Flat Earth with boundless resources expanding infinitely in all directions—unlimited population growth might not be a problem. But here’s a news flash: the Earth is not flat and infinite, but round, bounded and finite. It is a sphere, not a boundless plane." (Leon Kolankiewicz )

What we need to urgently consider is how immigration affects infrastructure, and avoid simplistic suggestions such as those by Mark Boleat that Jersey could support more, citing Hong Kong as an example. Hong Kong gets its water supply piped from China, something which Mr Boleat overlooked. We are unlikely to get water piped from France, even if there was any to spare.

The impact of immigration is increased pressure on roads, food security, schools, the hospital, water supplies, sewage treatment works – to name but a few parts of the island’s infrastructure. At present, water is fine just so long as we don’t get a long period of drought, but we are closing on the limit.

Electricity is supplied from France, but in an emergency, we fall back on local resources will also approaching their limits. Schools are becoming hopelessly overcrowded, and we badly need a new hospital and a new sewage treatment plant. Even as more come – and die – there is an impact on burial space, which is filling up faster than it used to.

Just as schemes by politicians to spend money on fanciful schemes - and there were a few in the last election – must be met with the question – how are you going to fund it? – so too the increase in immigration must be met with the question – what is the cost of the impact on infrastructure. We cannot let that disconnect continue.



James said...

The answer that we have been given, time and again, is that we need immigration because that will give us more working people to pay for the increasingly elderly population.

...which actually, to a substantial degree, is true.

You conveniently ignore the fact that large numbers of the island's young people leave the island at 18, never to return - because what the island has to offer (in terms of employment opportunities and also in terms of getting a foot onto the ladder) cannot sustain them. What's worse is that these are largely the productive kids who've developed some sort of work ethic and have some worthwhile skills.

The qualification system makes this worse, because the majority of these kids also gain automatic rights to return. Your real problem is that there are potentially 20000+_ people living away from Jersey who would have the right to walk in tomorrow and there would be not a thing you could do to stop them.

Is the solution a "mess of pottage" scheme - whereby for a suitable single one-off payment these people could be persuaded to yield up their birthrights?

TonyTheProf said...

An immigration neutral policy assumes that while we lose some 18 year olds - and I'd like to see your source of statistics for "large numbers" please - we gain skilled workers as well.

Regarding automatic rights - all that has to be done is to change the entitled status to put limits on it - don't assume that it won't happen some time. But at the moment, the statistics don't even allow for any check on returning Islanders after a long absence.

In terms of degrees, we seem to have lots of returning lawyers! But there are few opportunities for some degrees - for instance physics, marine biology, media studies etc, outside of perhaps teaching. Is there a breakdown of degree courses? I may have some information on that.

Matthew Robins said...


Eloquent and interesting, as ever, but you're presenting the known problem with no hints at any solutions.

I'm sure most in Jersey would love a situation where the population could be managed to a target number without impacting on living standards and taxation levels, but the ageing population is a fact, and the worsening dependency ratio is another fact, and no-one involved in public policy-making seems to be addressing them head-on.

In my view, the problem stems from the western welfare state dependency culture. The majority expect a working lifetime of depending on others for a livelihood, and many expect to depend on the state after retirement. The concept of "retirement" itself implies dependence. It's been a luxurious experiment for several generations, but I don't believe it's sustainable.

It's more acute in some countries than in others. The population of France, for example, is exhibiting particularly strong attachment to its "entitlement" to early and long fully state-funded retirement whenever the status quo is challenged. But they do at least have the option to using immigration to continuously adjust the dependency ratio in the right direction, without the pressure on infrastructure and resources that threatens Jersey.

My view is that the only sustainable option in Jersey is for the concept of "retirement" to change in the minds of our people into something that works for a small island with a very successful economy and limited options for infrastructure and resources. It means that the concept of "retirement age" needs to change so that it is no longer about when one is entitled to retire, but when one can afford to retire. It means that there needs to be strong fiscal incentives for people to become independent of the state if and when they retire. It means that businesses need to be given incentives to provide work to older people to enable them to remain financially independent into old age, without necessarily having to work hard and long. It means that workers need to start thinking about their careers differently, such that they look for opportunities to take career breaks and enjoy experiences that they might previously have regarded as "when I retire" experiences.

Perhaps, as a self-employed person with no specific plans ever to "retire", I see things very differently from average citizen. Perhaps the general change in outlook that I'm proposing is politically impossible to make happen.

But one thing is absolutely certain in my mind - as people living on this beautiful rock, we can't continue to have it all: population at or below current levels, low taxation, thriving economy, and fully-funded pension and healthcare from mid-60s to death.

If we choose to do not enough about this fundamental societal problem, market forces will intervene as taxes rise progressively to fund the ever-growing dependent retired population. The working age population will shrink as people flee the growing fiscal burden, the dependency ratio will worsen even faster and the economy will collapse. It will likely happen slowly at first, and then suddenly.

The only way to stop the Ponzi scheme is to change the way we think about "retirement". I take the view that it's actually an incredibly exciting opportunity to change the Jersey social contract over one or two generations and secure our future. But I'm not sure I see the political leadership of the calibre needed to make it happen.

Jonathan Renouf said...

The reason we get the answer "we need more immigration" is because establishment politicians start with the wrong question. If the question was: How can we support the level of welfare we want whilst stabilising population?", then we might start to get to the answer. The problem is, the question has never been seriously asked.
At the moment the Council of Ministers believe that net population growth of 325 a year will be enough to support pensions and other benefits into the future. Cutting that to zero wouldn't mean no new immigrants. Currently about 2500 people come to the island a year, so it would reduce this to about 2200. Would this really make such a huge difference?
Other things can be done if the starting point of the debate is the desire to stabilise population. There are a lot of economically inactive people on the island - serious efforts could be made to get them back into the labour market. Similarly, a major effort could be made to persuade people who currently leave the island once they leave full time education to stay. It wouldn't need to have to persuade many to make a significant difference.
These things would undoubtedly be tougher than just sacrificing ever more of the island to housing. But if the Jersey's unique character and quality of life is to be preserved, then the old answers have to be rejected.

Nick Palmer said...

I think the type of net immigration that the Ponzi'ers want is young economically active employees to participate in high return, low impact, employment. It occurs to me that this is another more subtle form of the effect that some of Jersey's financial industry has in economies in the rest of the world - depriving government's of revenues for their own economies by enabling some of their better off citizens to avoid taxation.

The subtle effect of such immigratin is that other jurisdictions also need these young Turks to drive their own economies to pay for whatever welfare/pension schemes they may have. In effect, this COM immigration solution to our pension problems works by exploiting "cream" from other jurisdictions and depriving those jurisdictions of their own needed "cream".

Mark Forskitt said...

Yes it is a ponzi. Jonathan has a good point there, and I agree with Nick on the young worker point. Those younger workers are the ones who end up settling and having children and in effect increasing the rate of internal growth in future years.
Politicans round the world, not just locally, seem to have lost the perspective of their role. It is reflected in the current 'debate' in the UK about the EU- 90% of the commentary and campaign claims concern economic impacts. Stoppng Europeans killing each other in near perpetual wars as used to happen seldom gets mentioned.

realist said...

A very good read,and I found myself agreeing with most of the comments.My main concern is that all pyramids/ponzis rely on a fresh flow of other peoples money,when this is not forthcoming they ALWAYS collapse,we have now reached the tipping point in the Western World,interest rates at 0% since 2008, No Growth, and debt to GDP ratios in excess of 100%,nowhere to run or hide,at least here in Jersey we have a history of having a diverse economy and no debt, Oh S@@t! I forgot. QE4 to infinity

Best piece of local thought and comment I have read in many a year,what a shame the above thoughtfullness integrity and honesty does not abide in the states chamber.