Bloomberg’s Wall Street Week this week has speaker from Hoover Institute. He said birthrate is declining across the globe. China is recovering from its one child policy but few are deciding to have the recommended 3 child family. South Korea also is trending toward the one child family.
Maintaining population requires a 2.1 birth rate. Most developed countries are well below that. They rely on immigration to make up the difference if they are to continue to grow. But some like China, Korea, and Japan are not receptive to immigrants. Their populations will fall. They must depend on robots to survive. The labor shortage will slow economic growth.
Birthrates are falling everywhere. Africa is the last to adopt new policies. Peak population is expected in 2060. The supply of immigrants is likely to decrease.
If birthrate falls below 0.5, the population can decline sharply.
You wonder if declining birth rate will limit China’s manufacturing cost advantage. And its military power?
The US currently depends on immigrants to make up the difference. He complements the Canadian immigration system that favors immigrants with skills not likely to require govt support. The US system is broken. Many skilled immigrants have trouble getting in legally. Illegal immigration brings too many without job skills.
Well that is an understatement! While a fertility rate say 1 above replacement is big but not unprecedented. In fact, with room health and food, the fertility rate generally moves to 6. Moving below is a much bigger deal per number.
For example, 1.8 is the U.S. birthrate currently. That works out to about .9 per person. In six generations the population will drop by about half. (With no immigration)
At 1.6 it takes about 3 generations.
At .5 it takes about one generation to drop the population by 75 percent.
Even a 1 percent drop in population makes it hard to keep your GDP out of recession zone. Think of it this way. GDP is the gross growth in the economy. If you have a two percent population growth, you don’t need to increase income per capita at all and stay on the hairy edge of a recession but not drop into one. But with a decline of one percent per year and you have to increase the per capita income by 3 percent to stay out of a recession.
If the population drops by amount to be worrisome we’ll need a different way to measure the economy. Something on the par of “GPD per thousand”. The economy can’t help but to shrink if a population drops by a lot, but that alone won’t be “bad” as it will be a necessary result. What we would want to know is if GDP is dropping faster or slower than population.
Peter Zeihan thinks so. His thesis goes something like this: Japan got rich before its demographic crisis hit, so Japan was able to move its manufacturing off shore. The shrinking population allows them to run budget deficits without inflation.
China however is not yet wealthy on a per capita basis. China’s population is already officially shrinking and probably has been for a few years. According to Zeihan this means China won’t be able to move its industries offshore before the demographic crisis really kicks in.
That’s oversimplified of course but bottom line is China appears to be in a bad position and there is nothing they can do about it.
FWIW, Zeihan predicted the current Ukraine war several years ago, for the same reasons. Russia’s demographics are collapsing and if it waits too long it won’t be able to wage a large scale war of conquest.
Reports tell us Russia is kidnapping children from Ukraine. Maybe confirmation of their demographics problems.
Germany had so many men killed in WWII that women had trouble finding spouses. Russia probably had that problem too. Given that they may have expertise we are not aware of.
The problem is that the fractional reserve banking system demands an economy that is growing. A contracting economy is deadly poison to the fractional reserve banking system. We saw what happened in 2008.
…and China built enormously more housing than was economically justifiable, a lot so shoddy it has to be torn down, all paid for from retirement savings of all but the poorest and richest parts of the population combined with badly mortgaging the future of local governments – a cluster fork of immense magnitude.
In Russia it is crucial to remember vodka. The majority of vodka production enriches the owner of the biggest distilleries, a guy named Vladimir Putin. He has an interest in everyone being drunk, and that condition has consequences.