Demographics is destiny
(Part 1)
The long-term bright economic future of the Philippines is based on two dividends: a geographic dividend and a demographic dividend. The first refers to our being at the epicenter of what will be the most dynamic economic region in the world in the coming two or more decades: the Indo-Pacific region. More than just being in the Asia-Pacific region, the Philippines is in the Indo-Pacific region. No government or business leader today can ignore India, which has just surpassed China in population as reported by the United Nations on July 1. With a population of 1.429 billion people, India is now the most populous nation in the world. This prompted the charismatic CEO of Twitter, Elon Musk, to remark “Demographics is destiny.” For some time now Musk has been a very vocal proponent of higher birth rates as a means of combatting the problem of ageing populations that has afflicted all highly developed countries in Europe and East Asia as well as a few middle-income countries like China and Thailand.
Already India is manifesting its economic prowess by registering the highest 2023 GDP growth rate in the Indo-Pacific region as China slows down at a GDP growth rate of 3% to 4%. The median age of India’s population is 28.2 years (the Philippines’ median age is 24 years) whereas that of China is 39. With the average Indian being 10 years younger than the average Chinese, India can depend on a significant workforce, as well as a more dynamic domestic market, for a considerable time. Many experts consider this is a potential advantage that India has over China during the coming decades. The challenge to India, as it is to the Philippines that is also enjoying the benefits of a growing and young population, is to follow the advice of one of the most famous Indian economists, Amartya Sen. Nobel Laureate Sen, in his renowned book Development as Freedom, highlighted that investments in education, health, and social infrastructure are necessary for young people to contribute to eradicating poverty and attaining First World status.
According to Elon Musk, the United States is not spared the crisis of China. Thanks to the USA’s relative openness to immigration in the past, the low birth rate of its population has not yet resulted in a serious aging crisis. Mr. Musk, however, is not one to be complacent. He has been repeatedly sounding the alarm, warning Americans that there should be serious efforts in the US to raise the birth rate to avoid the demographic suicide that countries like Japan have already committed. Musk referred to Japan as the “leading indicator” of the global aging crisis. He referred to data from the US Centers for Disease Control and Prevention’s National Center for Health Statistics which reported that approximately 3.7 million babies were born in the US in 2020 (the peak of the COVID-19 pandemic) but the 1% increase was still short of 2019 levels. Pulling no punches, Musk is confronting squarely the “population control mongers” who proliferated in the past in international organizations like the World Bank and the United Nations. He has been making it clear that the bomb is not population explosion but population collapse which has become the greatest risk to the future of civilization. According to him, population collapse due to low birth rates is a much bigger risk to civilization than climate change.
Not everyone agrees with Mr. Musk. Tomas Sobotka of the Vienna Institute of Demography says that with 8 billion people and counting on earth, a collapse is not expected at the present time. Even the most dramatic projections put the world population in 2100 at around 8.8 billion. Most projections agree that the world population will peak in the second half of the 21st century and then plateau or gradually drop. According to the UN, the only region that will see a decline between 2022 and 2050 will be eastern and southeastern Asia (especially Japan, China, South Korea, and Singapore). Sub-Saharan Africa’s population will almost double from 1.2 billion in 2022 to just under 2.1 billion in 2050. During the same period, India’s population will grow by over 250 million, leaving China’s population farther behind.
However, the case of Japan illustrates that the crisis has more to do with the rapid ageing of the population rather than the absolute number of people. Deaths have outpaced births in Japan for more than a decade, posing a growing problem for the Government of the third largest economy in the world. Rather than just a decline in population, the crisis can be attributed to a ballooning elderly population, along with a shrinking workforce that is hard put to fund pensions and healthcare as demand from the aging population surges. Japan’s population has been in steady decline since the boom years of the 1980s, with a fertility rate of 1.3 babies per fertile woman, far below the replacement rate of 2.1 babies. The country also has one of the highest life expectancies in the world. In 2020, government data showed that one in 1,500 Japanese were 100 years old or older. Its East Asian neighbors like China, South Korea, Taiwan, and down south, Singapore, are experiencing a similar ageing crisis, some of them struggling for decades to encourage young people to have more children in the face of rising living costs and social discontent but to no avail.
The current Prime Minister of Japan, Fumio Kishida, warned that Japan is on the brink of not being able to maintain social functions. In a bid to address the ageing crisis, the Japanese authorities are pushing for more foreign residents and workers, not an easy task for a highly homogeneous nation with comparatively low levels of immigration. Japan’s shrinking labor force is prompting calls from politicians to increase the retirement age to 68 and have seniors re-join the labor force on a part-time basis. The government plans to unveil “radical” countermeasures to try to boost the birth rate, including financial assistance to help with child rearing, preschool education, nursing cares services, and workplace reforms. The government intended to raise the lump sum baby bonus to 500,000 yen (around $3,800) starting April this year. Many other financial support programs are being planned to encourage mothers to have more children. There is a feeling, though, that the population crisis of Japan has reached the point of no return. Similar pro-natalist programs introduced in countries like Singapore decades ago have had very little success.
The case of Japan is clear evidence that those who disagree with the analysis of Elon Musk are literally whistling in the dark. They are still suffering from the anti-natalist mindset promoted in the last century by international organizations like the United Nations and private institutions like the Rockefeller Foundation and the Bill and Belinda Gates Foundation. The harsh reality today is that the unwarranted fear about a “population bomb” led many countries to introduce birth control programs that have resulted in the ageing crisis of today. The negative financial consequences of ageing are being highlighted by rating agencies today. On May 18, the Financial Times published an article by Mary McDougall that warns of serious downgrades to nations who fail to tackle the costs of ageing. Rating agencies have observed that the rise in borrowing costs is compounding both the impact on the growth of changes in working-age populations and the hit on public finances from rising healthcare and pension bills. Analysts say that central and southeastern Europe countries have among the worst demographic profiles worldwide, while singling out Germany, whose population is ageing at one of the fastest rates in the world.
(To be continued.)
Bernardo M. Villegas has a Ph.D. in Economics from Harvard, is professor emeritus at the University of Asia and the Pacific, and a visiting professor at the IESE Business School in Barcelona, Spain. He was a member of the 1986 Constitutional Commission.
