In this week's New Yorker, Malcolm Gladwell has an interesting article with the hook --
What’s behind Ireland’s economic miracle—and G.M.’s financial crisis?
The answer? The dependency ratio, the ratio of dependents (children and retirees) to the working-age population. In the Irish context, he's relying on recent economic research findings, as he explains:
.. as the Harvard economists David Bloom and David Canning suggest in their study of the "Celtic Tiger," of greater importance may have been a singular demographic fact. In 1979, restrictions on contraception that had been in place since Ireland’s founding were lifted, and the birth rate began to fall. In 1970, the average Irishwoman had 3.9 children. By the mid-nineteen-nineties, that number was less than two. As a result, when the Irish children born in the nineteen-sixties hit the workforce, there weren’t a lot of children in the generation just behind them. Ireland was suddenly free of the enormous social cost of supporting and educating and caring for a large dependent population. It was like a family of four in which, all of a sudden, the elder child is old enough to take care of her little brother and the mother can rejoin the workforce. Overnight, that family doubles its number of breadwinners and becomes much better off.
For General Motors, the corresponding issue is that of laid-off and retired workers who must still be supported by the firm's cash flow, a consequence of American reliance on corporate safety nets.
While it's doubtless that something as basic as the number of people who must be supported by others can explain quite a bit about the world, it's less clear that the contraception-induced transition in Ireland is quite as dominant as the Harvard researchers argue. For one thing, what was this big reform in 1979? It was availability of condoms with a doctor's prescription. Now perhaps it was always intended that this was a law to be more honoured in the breach than in the observance, but such a half-hearted law could not itself be the ingredient of a big societal reform. Furthermore, the law itself could have reflected an emerging preference for smaller family size -- a bunch of different things were going on at the same time.
More seriously, there's one thing missing from the reliance on dependency ratios, and it's also one thing that makes the Ireland-GM analogy a bit strained: unemployment. Of course it's good for a country to have an age distribution that results in plenty of working-age people relative to children and retirees. But working-age is not the same as working. If all these young people can't find jobs, then they're effectively part of the dependent population too. And in 1980s Ireland, they could not, for well-known reasons: a fiscal crisis, a paralysed political system, and deeply unfavourable global economic developments.
Instead, the country was forced into a 3 part strategy for dealing with its bulging working-age population: emigration, college education, and unemployment benefits. The last in particular being very costly and contributing the budget crisis that was the source of problems in the first place. Only in the late 1980s, when a political consensus emerged for retrenchment, world interest rates had fallen, and long-standing corporate tax policies and EU membership finally kicked in, did the boom begin. Helped along of course by the ready-supply of working-age people at home and abroad, who now had something to do.
UPDATE: The actual Bloom and Canning paper does make similar qualifications, which don't appear in Gladwell's account. And more Gladwell blogging via Deal Breaker here and here.
FINAL UPDATE: More analysis on this Slugger O'Toole thread, and Gladwell responds to critics (and adds caveats) on his own blog.