by Patrick Cox
November 20, 2015
Economists and geopolitical experts around the world pay a lot of attention to the Chinese economy these days, with very good reason. Today, I’d like to look past the immediate future to speculate about the ways life extension and reduced birthrates will affect Asia over the next several decades.
35 years ago, China’s communist leadership decided to blame the country’s economic problems—actually caused by massive top-down intervention in markets—on population growth. Facing the shortages that inevitably occur when the market’s distributed decision making is replaced by central planning, the government imposed mandatory population controls. Though often brutal, these policies were cheered by those who believed that overpopulation would yield global apocalypse in the near future. Chinese leaders promised a population accustomed to much larger families that reduced birthrates would produce an economy so powerful that the world would bend to its will.
Given China’s history, many in the West feared a modernized Chinese economy and military. The country with the most at stake, however, was China’s ancient rival, India.
Overpopulation activists also encouraged India to implement population controls, but the less powerful central government didn’t have the option. Though India provided some incentives for families to have fewer children, the country never put the harsh penalties into place that were used to control Chinese birth rates. Subsequently, the Indian population grew at a much faster pace.
In the meantime, the spectacular financial accomplishments of Hong Kong, barren of nearly all resources but human creativity, demonstrated the superior ability of capitalism to power economies. Chinese officials allowed some market forces to operate, though like most governments, they couldn’t keep their fingers off the control panel.
China’s economy improved, but behind the scenes, things were going wrong. Public-works policies failed to produce the desired results while the Malthusian policies adapted by the country undermined its aspirations.
China’s birthrate is now below replacement rate, but its aged population is growing and demanding more and more of the country’s resources from a shrinking population of younger workers. Only weeks ago, plans to eliminate the one-child-policy were announced. Adam Minter of Bloomberg View, however, rightly notes that the new “Two-Child Policy Is Too Little, Too Late.”
Though India’s demographic trend lines will eventually lead to the same sub-replacement birthrate that China and most of the West are experiencing, India will overtake and replace China as the world’s most populous country before that happens. While this may not seem like a big deal to you, it does to many people.
The chart above, from this source, doesn’t factor in relaxation of the one-child policy, but many demographers believe that the urban portion of the Chinese population that was subjected to birth restrictions will not appreciably increase fertility rates. This is because the Chinese are now experiencing the longer lives that yield the low birthrates typical of the demographic transition.
Moreover, India’s population will be not only be larger but much younger than China’s. It will, therefore, enjoy a much better ratio of younger, productive contributors to older, dependent beneficiaries, ensuring that more of India’s wealth will be available for the investment and innovation that produce economic growth.
The following chart, produced by the Treasury of the Australian government in its Intergenerational Report 2007, still looks pretty accurate to me. It shows the ratio of people over 64-year-olds, the dependent population, to the 15-64-year-olds, those who work and contribute to a nation’s wealth. Japan’s old-age dependency ratio is terrible, already about one-to-one and worsening rapidly. India’s dependency ratio, however, is healthy and projected to stay that way for decades.
Demographics is destiny. Sometime in the last few years, the global birthrate and the employable population maxed out. They are both falling now, and the impact will be dramatic, altering the political and economic realities in profound and often unexpected ways. The ratio of contributors to beneficiaries will determine how well individual countries will be able to adapt to the future and increase their economic well-being and political influence.
We now know that birthrates, once they’ve stalled, tend only to fall. We can, however, move people from the dependent to the contributorcolumn by increasing their health spans. This would provide significant economic benefits for any country that adopted a policy of promoting anti-aging technologies. There are many powerful reasons for governments to reform the policies that currently impede biotechnologies capable of increasing healthy life spans. Some, such as those faced by China, are geopolitical.
— China and the Consequences of Authoritarian Malthusianism was originally published at Transformational Technologies.