Low Birth Rate Can Be a Gift
More people is not always better. And why India's demography is a disaster in the making.
If you follow international economics and politics, you very regularly see claims about how China and Japan are heading for demographic collapses.
The very same data is also used to show how quickly the population of India is growing. This is usually made as an argument on how China’s growth is over and India will be the new rising superpower.
I STRONGLY disagree with tweets like the one below.
When a Growing Population is Good
I agree in general that a growing population is a good thing in most cases.
First, it often provides what economists claim for ALL demographic growth:
rising consumer pool
increased capacity for innovation
the 2 above generate higher economic growth
easy handling of social welfare costs thanks to a younger population
strong geopolitical capabilities, including in case of war
A growing population is often the result of underlying good factors:
healthy culture promoting the formation of families
a children-friendly society
higher level of social stability
good standard of living
good overall health (low mortality, good healthcare, …)
This is not an accident that birth rates collapse during recessions or wars. More babies often mean people are happy with their lives and optimistic about the future.
So looking at this, you could think that ANY decrease in birth rate, especially if below 2.1 children/ woman is a sign a country is doing badly and getting weaker in the geopolitical scene.
China, Russia, or Poland, and most of Western Europe come to mind.
But this is not ALWAYS true, and China is the perfect example of this.
When a Large Population is Too Much
Many economists are unable to look beyond GDP numbers. By these metrics, more people mean more GDP, so it is always good.
But the quality of life is not GDP. And a growing GDP due only to a growing population means an actually stagnant country, even if it is now a bigger stagnant country. Growth for growth's sake is both irrational and intellectually lazy.
Higher population density also puts serious pressure on resources: food, energy, wood, metals, living space, transportation, sanitation, all the basics for life that a financialized economy and its thinkers have slowly forgotten about.
Of course, you might be able to import grain from abroad. But this can quickly turn into a huge vulnerability. What if there is not enough for sale? Or you are threatened by a blockade from a hostile foreign power?
Already, you can see how a massive population requiring massive energy and food import is a liability for China. Something that might be the downfall of the country as I described in my report “The coming blockade of China”.
Resources limitations
Relying on imports also ignores the requirement for resources that are not possible to import from abroad: things like water for example.
The higher the population density, the harder it is to supply enough clean fresh water to the population. Especially as more density means more intensive farming, which itself requires more water.
Such a problem is compounded by industrialization and development. More water pollution, more fertile land used not for farming but for urbanization, highways, railroads, solar farms, coal mines, etc…
In comparison, the out-of-control population explosion of India is deeply concerning. I remember reading that almost 80% of all photosynthesis in India was directly or indirectly used by humans. This implies that there is almost no spare capacity left in the ecosystem, and a dreadful dependency on chemicals to keep feeding the population.
Avoiding famines and lower birth rates will be the main business of Indian politicians for decades to come.
In summary, any land and country has a maximum carrying capacity, depending of its ecosystem and water resources. Malthus is wrong until he is not.
And before that, living at the edge of the ecosystem’s capacity is a huge geopolitical vulnerability. The equivalent of a just-in-time supply chain, but where failure would mean hundreds of millions dying from famine.
This is something China’s leadership is well aware of.
The one-child policy was all about avoiding a catastrophic population boom that would have doomed the country. Something India is dramatically failing at.
Also, something ghoulish pro-West “analysts” like Peter Zeihan predict with disturbing glee.
"The Chinese are utterly dependent on globalization," he explained. "You put two destroyers in the Indian Ocean basin and cut the energy line, three months later, the trucks stop running. Three months after that, the lights go out. And a year later you have 500 million dead Chinese due to famine."
The End of GDP Growth - So What?
The consensus is that China’s aging demography means its days as a rising power are over. The crux of the argument is that the working-age population will decline, and GDP growth will stop from there.
Once again we fall back on the all-so-central focus on GDP in modern economics.
Even by that metric, China is already one of the top world powers. Its GDP is standing at $18T dollars, versus America’s $25T.
Measured in PPP (Purchase Power Parity), China is at $30T vs the USA at $25T. So in practice, China has already outpaced its main rival.
As I discussed before, when it comes to actual real-world power, industrial capacity is a lot more important than GDP. We see it currently, with Russia’s industrial capacity and large access to resources allowing it to outproduce the entirety of NATO in terms of missiles, artillery shells, etc…
In the report “The Future of Russian Oil” I had taken notice of this:
When it comes to war and “hard” power, the main factor is industrial capacity. You might have fewer deli shops and fewer concerts, but this matters little on a battlefield. Russia has a similar industrial percentage to Germany (26%), and MUCH higher than Italy (19%) or France (14%), or the USA (15%).
For reference, China is an astonishing (considering its size) 36%.
If you take both PPP and industrial capacity into account, it is likely China has 2-3x more capacity for great power rivalry than the US.
So even if China’s GDP never grows much from here, it simply does not need much growth to be neither the second, nor the largest world power, depending how you count it.
The (Non)Threat of Automatization
Another amazing failure in the analysis is that the very same GDP-focused economists are equally obsessed with technological progress and the rise of automation.
Automation threatens 800 million jobs, but technology could still save us, says report - The Verge
Automation means you need fewer people for the same productivity. Equally, these people will consume more resources per capita for achieving said productivity. A problem as we are after all entering a decade of shortage for copper, lithium, oil, gas, etc…
But do you know which countries will not have to deal with unemployment and mass retraining created by automation?
Countries with declining demographics and very high levels of education in STEM. Robotics and automation will need a LOT of electrical and mechanical engineers, and not just programmers.
This is nothing new. A 2003 article emphasizes how “China consistently has graduated more engineers than the U.S., Japan and Germany combined every year since 1997“
After a bit of digging I found some numbers about graduates in some countries:
There are convincing claims that both Chinese and Indian numbers are artificially inflated. So maybe the real number should be divided by 2 or 3. So take the above data with a pinch of salt.
Even if the real number is lower, China seems to train more people in STEM than the rest of the world combined. Short of Indian engineers, the West would be ridiculously outmatched in the training of people able to work in STEM.
So not only China's declining population will help it handle the rise of automation. But its overabundance of STEM graduates will allow it to benefit greatly from that trend.
Interestingly, this abundance is also visible in political leadership, with the topic of CCP dominated by scientists and engineers, up to 90% of top officials.
Everything I said here about China is valid for Japan as well. When taking into account the total population, Japan is doing ok (and similarly to China, is very densely populated and close to its max carrying capacity).
Endless demographic decline?
The other sign of unserious analysis is taking short-term trends (10-15 years) and projecting them over almost a century. This is how you get tabloid titles like this”
China's Population Projected to Fall by Half Within 30 Years
For sure the recent decades have seen a demographic decline due to a multitude of factors:
the extremely harsh one-child policy
urbanization
rising costs of living
changing social norms
women's education
high education costs
exploding real estate prices.
The cherry on the cake were the Covid lockdowns. Looking objectively, what are the conditions we should expect in the next decades:
Cheaper real estate, with the construction bubble unlikely to reflate
Financial incentives to build large families (“Three child policy”)
Promotion of traditional gender roles and removal of representation on TV of gay people
All tutoring companies forcibly turned into non-profit organizations.
Westerners might find many of these policies distasteful. It is nevertheless likely to succeed at turning the demographic trends.
Personally, I forecast a Chinese population stabilizing at around 1 billion people (+/- 100 million), with steady and “low” economic growth in the 2-5% range, coming from growing modernization and automation but compensated by a declining population.
GDP per capita will rise quickly and reach if not American standard, something closer to current Southern or Eastern Europe.
Economic growth might be more stagnant in the next decade, with high population decline and not-yet-visible results of modernization and cheap nuclear power. Expect this underperforming period to be extrapolated to death by “cluessless intellectuals-yet-idiots” (like Nassim Taleb calls this sort of short-sighted thinking).
Conclusion
China's demographics are far from as catastrophic as mainstream analysts (propagandists would be more accurate) want us to believe.
First, a slightly lower population than the current 1.4 billion will reduce greatly the pressure on the food, water, and energy supply. It will also make the country MUCH more resistant to the looming threat of a blockade.
Secondly, the birth rate decline is unlikely to persist for long. The rejection of Western culture, combined with aggressive government policies, should boost family formation in the next years.
For me this is almost a litmus test on whether to trust an analyst or not. If they repeat mindlessly that Indian demographics will make it outcompete China, I know I can easily ignore it.
Such analyses rely on first-degree thinking only, are obsessed with GDP, and fail to learn from history, sociology, biology, and ecosystem analysis.
Instead, the more China's population stabilizes smoothly to around 1 billion, the more we should expect it to rise as a Great Power.
Automation should increase the productivity per person, even if overall, the Chinese economy will grow slower. More productive workers leveraging automation will be a richer consumer.
So in the long run, we should invest accordingly in consumer goods exposed to China and Asian automation/robotic companies.
Do you have any examples of countries where policies did turn around the declining birth rate or at least mitigate the slope of curve? If yes, are those policies similar with what the Chinese government is trying to do?