Hungarian prime minister Viktor Orbán The consequences of population decline will be seismic unless we act quickly, writes Ray Kinsella
Once upon a time, when Ireland was less self-obsessed, issues like the financial burden of getting married and starting a family were the lifeblood of elections. No longer.
Our skewed fiscal system discriminates against marriage and starting a family. Instead of fixing this anti-marriage bias, recent governments have exacerbated it. None of the main political parties see this – which is bad – or they don’t want to see it, which is even worse.
Europe is confronted by an existential demographic challenge every bit as pressing as climate change. EU member states are projected by the UN to experience population decline by 2050. The impact is already evident in eastern and south-eastern Europe, where, according to Eurostat, ten EU member countries recorded an absolute decline in population in 2018. The equivalent of small cities are disappearing every year.
The consequences of falling population – of low birth rates, rural decline and the emigration of young educated adults – are deeply negative for any economy. They include a contraction in the tax base and in the Labour force – with a loss of intellectual capital and, therefore, the capacity for future growth of the ‘knowledge economy’. Ireland’s foreign direct investment ‘business model’ is vulnerable.
Impacts
The societal impacts of population decline are equally far-reaching: an aging population, increase in dependency rates and a sapping of the energy, enterprise and social solidarity of young and growing families across a country. Ireland’s present birth rate reflects our former attitudes to marriage and traditional preference for large families.
The aggressive State secularisation of Ireland’s Christian democratic tradition is changing this. The consequences, like it or not, will be seismic.
The current Croatian EU Presidency has put tackling Europe’s population decline at the very top of its agenda. The Financial Times recently reported that “Croatia is asking the EU to weigh up a host of family-friendly policies…as it seeks ways of reversing dismal birth rates”.
Perhaps the most innovative societal response to the EU’s demographic crisis has been in Hungary. The Hungarian economy, like Ireland’s, came through a torrid banking and economic crisis. It’s recovery has been impressive, with GDP growth of between 4% to 5%, low inflation and unemployment around 3%. Its debt ratio is down to around 70%, with the economy in budgetary as well as external balance.
But what makes it different to Ireland is that Hungary has rejected secularism. The overriding focus is on supporting marriage, family and household formation. Its government continues to systematically extend this ‘Hungarian Model’ transforming the country into a ‘family friendly’ nation. Some 5% of its strong growth – twice the EU average – is allocated for family friendly supports and incentives.
Hungary defines marriage and family the way Ireland did until a few years ago. In fact, both countries changed their constitutions at more or less the same time – but in totally opposite directions.
The extent, and the practicality, of Hungary’s fiscal supports encouraging marriage and household formation are striking. Women who have four children are exempt for life from personal income tax. Every married couple is eligible for a €30,000 interest free loan where the mother is between 18-40 and expecting a child.
It’s the single most important and productive investment any country can make in its families”
There are subsidised loans, with interest rates capped at 3%, for married couples building and purchasing their home and grants to encourage grandparents to participate in caring for their grandchildren where one or more of the parents are going back to work.
The backdrop to the Hungarian model is simple. Hungary is one of the EU countries most severely impacted by the political burden of low birth rates (well below replacement rate) a legacy of communism followed by a liberal socialist regime prior to 2010.
The focus of policy is not just on reversing population decline – now an EU imperative. It’s on enabling women and young couples to marry and – the government underline this point – to enjoy the experience of rearing their family.
In other words, to help alleviate the financial pressures and time pressures that deter many couples here from getting married: pressures which can so easily lead to breakup, with all of the stress that this entails, and the growing costs of state interventions to try to mitigate the collateral damage.
Hungary’s policies are working – marriage is at a record high, birth rates are rising and there has been a significant decline in abortions.
Katalin Novacks, Hungary’s innovative Minister for Family and Young Adults, is an economist, deeply-versed in European politics, languages and culture. She is also very clear that her most fulfilling role is being a young wife and mother. She wants that option – marriage and a young family as well as professional aspirations – to be accessible to other young couples.
But, a family friendly economy on these lines costs money. Currently, Hungary allocates 5% of its GDP to support and extend this model.
Auction politics
Mrs Novacks insists that this is not an economic expenditure and she is, of course, correct. Instead, it’s the single most important and productive investment any country can make in its families and in its future. The contrast with the billions pledged in election promises in Ireland’s auction politics could hardly be greater.
The Hungarian model represents a radical renewal of what was once a distinctively European social and economic mind-set – the social economics of Konrad Adenauer’s Christian Democracy which rebuilt post-war Germany.
A European Union confronted by a demographic crisis is having to re-learn the strengths of family-friendly policies. It’s the political X-factor that’s missing from our endless talk about coalition options.
Ray Kinsella was formerly Professor of Banking and Financial Services at University College Dublin.