The principle of the pig in Europe

The contours of what could be the near future of Europe are slowly being drawn.

Oliver Thansan
Oliver Thansan
15 March 2023 Wednesday 17:25
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The principle of the pig in Europe

The contours of what could be the near future of Europe are slowly being drawn. Although what we do not know weighs much more than what we can intuit, some lines seem quite solid.

The first is the prospect of demographic stagnation. What some predicted almost a century ago is happening: we Europeans have discovered that there are more rewarding, more interesting, or more fun ways to spend time than raising children, and there is some (perhaps wrong) consensus that the trend is irreversible.

Forecasts suggest that, in the coming decades, the European population will be reduced by around 50 million people, slightly more than the current population of Spain. Immigration is not expected to fully cover that deficit. The resulting ageing, if not offset by an increase in average productivity, will make it necessary to dedicate a growing part of GDP to healthcare and pensions.

The second is imposed by climate change: we are already seeing that the energy transition will be much slower than what the experts recommend. On the other hand, it will be much more expensive than expected, because the estimates of the aid that the poorest countries will require to carry out this transition have been rising until reaching figures that were previously called astronomical (today they are called economic): more than double of the gross domestic product of Spain per year. The resources will have to come, to a large extent at least, from European pockets.

The third perspective is the increase in defense spending that Europe's “strategic autonomy” demands. An imperative need? Authorized voices repeat that yes. However, let us bear in mind that common sense advises that general rearmament may increase the risk of conflict, although I suspect that the official version will prevail, at least for now. More expense.

With that scenario, doesn't it seem to the reader that it is very likely that the European standard of living will decline in the near future? Don't be fooled: even if our GDP shows modest growth, guns will weigh more in that GDP than butter and solar panels than social housing; part of our economy will not be available to satisfy other more mundane needs, desires or whims. The European citizen will notice that he has to tighten his belt. It should be noticed above all by the richest, because it is necessary to reach a slightly more equitable distribution of income.

Among economists, the maxim that says that when one thing is good, more is better is known as the “pig principle”. According to that principle, belt-tightening, having less of those good things, is something that reduces our well-being, something one has a right to oppose.

But before we go out with our yellow vest, let's remember that the principle has a very limited scope, since the economy deals only with material wealth, and our happiness is nourished by many other elements. "To think you have to eat", said the old adage. But we eat to think, we do not think to eat. After a certain point, more of a good thing is not better. Who has not had indigestion or suffered a hangover?

A little austerity and a little more fraternity towards the less favored will help us order whims, desires and needs. The pig principle has paid off, but it's time to abandon it. Each pig gets its San Martin.