December 26, 2004

The Must-est of Must Reads

Foreign Affairs - The Global Baby Bust - Phillip Longman: Foreign Affairs - The Global Baby Bust - Phillip Longman: "Japan's population, meanwhile, is expected to peak as early as 2005, and then to fall by as much as one-third over the next 50 years -- a decline equivalent, the demographer Hideo Ibe has noted, to that experienced in medieval Europe during the plague.""In nations rich and poor, under all forms of government, as more and more of the world's population moves to urban areas in which children offer little or no economic reward to their parents, and as women acquire economic opportunities and reproductive control, the social and financial costs of childbearing continue to rise."In the United States, the direct cost of raising a middle-class child born this year through age 18, according to the Department of Agriculture, exceeds $200,000 -- not including college. And the cost in forgone wages can easily exceed $1 million, even for families with modest earning power. Meanwhile, although Social Security and private pension plans depend critically on the human capital created by parents, they offer the same benefits, and often more, to those who avoid the burdens of raising a family.Fertility rates are falling faster in the Middle East than anywhere else on earth, and as a result, the region's population is aging at an unprecedented rate. For example, by mid-century, Algeria will see its median age increase from 21.7 to 40, according to UN projections. Postrevolutionary Iran has seen its fertility rate plummet by nearly two-thirds and will accordingly have more seniors than children by 2030.Countries such as France and Japan at least got a chance to grow rich before they grew old. Today, most developing countries are growing old before they get rich. China's low fertility means that its labor force will start shrinking by 2020, and 30 percent of China's population could be over 60 by mid-century. More worrisome, China's social security system, which covers only a fraction of the population, already has debts exceeding 145 percent of its GDP.The appeal of radicalism could also diminish as young adults make up less of the population and Middle Eastern societies become increasingly dominated by middle-aged people concerned with such practical issues as health care and retirement savings. Just as population aging in the West during the 1980s was accompanied by the disappearance of youthful indigenous terrorist groups such as the Red Brigades and the Weather Underground, falling birthrates in the Middle East could well produce societies far less prone to political violence.Although at first the fact that there are fewer children to feed, clothe, and educate leaves more for adults to enjoy, soon enough, if fertility falls beneath replacement levels, the number of productive workers drops as well, and the number of dependent elderly increase. And these older citizens consume far more resources than children do. Even after considering the cost of education, a typical child in the United States consumes 28 percent less than the typical working-age adult, whereas elders consume 27 percent more, mostly in health-related expenses.Population growth is a major source of economic growth: more people create more demand for the products capitalists sell, and more supply of the labor capitalists buy. Economists may be able to construct models of how economies could grow amid a shrinking population, but in the real world, it has never happened.Current population trends are likely to have another major impact: they will make military actions increasingly difficult for most nations. One reason for this change will be psychological. In countries where parents generally have only one or two children, every soldier becomes a "Private Ryan" -- a soldier whose loss would mean overwhelming devastation to his or her family. In the later years of the Soviet Union, for example, collapsing birthrates in the Russian core meant that by 1990, the number of Russians aged 15-24 had shrunk by 5.2 million from 25 years before. Given their few sons, it is hardly surprising that Russian mothers for the first time in the nation's history organized an antiwar movement, and that Soviet society decided that its casualties in Afghanistan were unacceptable.In 2000, the cost of military pensions amounted to 12 times what the military spent on ammunition, nearly 5 times what won't technology be able to make up the difference? Perhaps. But there is also plenty of evidence to suggest that population aging itself works to depress the rate of technological and organizational innovation.the Navy spent on new ships, and more than 5 times what the Air Force spent on new planes and missiles.London School of Business released their latest index of entrepreneurial activity. It shows that there is a distinct correlation between countries with a high ratio of workers to retirees and those with a high degree of entrepreneurship.This correlation could be explained by many different factors. Both common sense and a vast literature in finance and psychology support the claim that as one approaches retirement age, one usually becomes more reluctant to take career or financial risks. It is not surprising, therefore, that aging countries such as Italy, France, and Japan are marked by exceptionally low rates of job turnover and by exceptionally conservative use of capital. Because prudence requires that older investors take fewer risks with their investments, it also stands to reason that as populations age, investor preference shifts toward safe bonds and bank deposits and away from speculative stocks and venture funds. As populations age further, ever-higher shares of citizens begin cashing out their investments and spending down their savings.The Center for Strategic and International Studies has recently calculated that the cost of public benefits to the elderly will consume a dramatically rising share of GDP in industrialized countries. In the United States, such benefits currently consume 9.4 percent of GDP. But if current trends continue, this figure will top 20 percent by 2040a highly efficient, global financial market could lend financial resources from rich, old countries that are short on labor to young, poor countries that are short on capital, and make the whole world better off. But for this to happen, old countries would have to contain their deficits and invest their savings in places that are themselves either on the threshold of hyper-aging (China, India, Mexico) or highly destabilized by religious fanaticism, disease, and war (most of the Middle East, sub-Saharan Africa, Indonesia), or both.General Motors (GM) now has 2.5 retirees on its pension rolls for every active worker and an unfunded pension debt of $19.2 billion. Honoring its legacy costs to retirees now adds $1,800 to the cost of every vehicle GM makes, according to a 2003 estimate by Morgan Stanley. Just between 2001 and 2002, the U.S. government's projected short-term liability for bailing out failing private pension plans increased from $11 billion to $35 billion, with huge defaults expected from the steel and airline industries.if the United States hopes to maintain the current ratio of workers to retirees over time, it will have to absorb an average of 10.8 million immigrants annually through 2050. At that point, however, the U.S. population would total 1.1 billion, 73 percent of whom would be immigrants who had arrived in this country since 1995 or their descendants.Just housing such a massive influx would require the equivalent of building another New York City every 10 months.Some biologists now speculate that modern humans have created an environment in which the "fittest," or most successful, individuals are those who have few, if any, children. As more and more people find themselves living under urban conditions in which children no longer provide economic benefit to their parents, but rather are costly impediments to material success, people who are well adapted to this new environment will tend not to reproduce themselves. And many others who are not so successful will imitate them.

Today there is a strong correlation between religious conviction and high fertility. In the United States, for example, fully 47 percent of people who attend church weekly say that the ideal family size is three or more children, as compared to only 27 percent of those who seldom attend church. In Utah, where 69 percent of all residents are registered members of the Church of Jesus Christ of Latter Day Saints, fertility rates are the highest in the nation. Utah annually produces 90 children for every 1,000 women of childbearing age. By comparison, Vermont -- the only state to send a socialist to Congress and the first to embrace gay civil unions -- produces only 49.

Does this mean that the future belongs to those who believe they are (or who are in fact) commanded by a higher power to procreate? Based on current trends, the answer appears to be yesCurrent demographic trends work against modernity in another way as well. Not only is the spread of urbanization and industrialization itself a major cause of falling fertility, it is also a major cause of so-called diseases of affluence, such as overeating, lack of exercise, and substance abuse, which leave a higher and higher percentage of the population stricken by chronic medical conditions. Those who reject modernity would thus seem to have an evolutionary advantage, whether they are clean-living Mormons or Muslims, or members of emerging sects and national movements that emphasize high birthrates and anti-materialism.To cope with the diseases of affluence that make older workers less productive, rich societies must make greater efforts to promote public health. For example, why not offer reduced health care premiums to those who quit smoking, lose weight, or can demonstrate regular attendance in exercise

How can secular societies avoid population loss and decline? The problem is not that most people in these societies have lost interest in children. Among childless Americans aged 41 years and older in 2003, for example, 76 percent say they wish they had had children, up from 70 percent in 1990. In 2000, 40-year-old women in the United States and in every European nation told surveys that they had produced fewer children than they intended. Indeed, if European women now in their 40s had been able to produce their ideal number of children, the continent would face no prospect of population loss.

The problem, then, is not one of desire. The problem is that even as modern societies demand more and more investment in human capital, this demand threatens its own supply. The clear tendency of economic development is toward a more knowledge-based, networked economy in which decision-making and responsibility are increasingly necessary at lower levels. In such economies, however, children often remain economically dependent on their parents well into their own childbearing years because it takes that long to acquire the panoply of technical skills, credentials, social understanding, and personal maturity that more and more jobs now require. For the same reason, many couples discover that by the time they feel they can afford children, they can no longer produce them, or must settle for just one or two.