Saturday, February 2, 2013

Will a New Baby Boom Solve the Financial Crisis?


If only, if only…

If only everyone had more children we could solve all of the world’s problems, presto! The fault for all of our economic ills is… underpopulation.

There is much to be said for the idea, and Jonathan Last says it well:

Forget the debt ceiling. Forget the fiscal cliff, the sequestration cliff and the entitlement cliff. Those are all just symptoms. What America really faces is a demographic cliff: The root cause of most of our problems is our declining fertility rate.

The fertility rate is the number of children an average woman bears over the course of her life. The replacement rate is 2.1. If the average woman has more children than that, population grows. Fewer, and it contracts. Today, America's total fertility rate is 1.93, according to the latest figures from the Centers for Disease Control and Prevention; it hasn't been above the replacement rate in a sustained way since the early 1970s.

The nation's falling fertility rate underlies many of our most difficult problems. Once a country's fertility rate falls consistently below replacement, its age profile begins to shift. You get more old people than young people. And eventually, as the bloated cohort of old people dies off, population begins to contract. This dual problem—a population that is disproportionately old and shrinking overall—has enormous economic, political and cultural consequences.

Among the consequences are these:

Low-fertility societies don't innovate because their incentives for consumption tilt overwhelmingly toward health care. They don't invest aggressively because, with the average age skewing higher, capital shifts to preserving and extending life and then begins drawing down. They cannot sustain social-security programs because they don't have enough workers to pay for the retirees. They cannot project power because they lack the money to pay for defense and the military-age manpower to serve in their armed forces.

America is certainly not alone in this category. The declining fertility rate in Spain and Greece has produced debt-driven depressions. The Japanese fertility rate has been falling for decades and Japan has suffered economic stagnation. Even in Iran and Egypt fertility rates have fallen precipitously over the past few decades. In Iran they are now below the replacement rate.

Last points out correctly that we Americans believe that we can overcome the problem through immigration, legal and illegal.

Yet, he notes, fewer immigrants have been coming to the United States from Latin America of late. Besides, the fertility rate in many Latin American countries has also been declining, in some cases below the replacement rate.

But why is the female fertility rate declining? Are people the world over too stupid or too self-centered to reproduce the species?

The question is not as easy as it appears at first glance. China has had a strict one-child policy for decades now and its economy has done very well indeed.

China’s policy was based on a different calculation: not enough food. In the early 1906s China suffered a famine that killed around 35 million people. The Chinese government is especially sensitive about feeding its people.

A malnourished population is not going to work hard or to innovate.

China has succeeded in tamping down the fertility rate, but the despotic means it used to do so will have little appeal to free or to well-fed people.

In any event, our problem is too few, not too many. The Chinese example suggests that fewer children are not necessarily a bad thing.

It’s well and good to prescribe a new Baby Boom, but mere quantity does not, in itself mean very much. How many of the extra children Last and others are prescribing will become contributing members of society and how many will become career criminals? How many will become dependent on the state?

In a time when marriage is far less stable than it used to be, many people have fewer children because they are not married or because they fear the breakup of their marriages. Broken homes are not the best places to raise children well. They are certainly not the best places to raise a brood of children well.

We also need to mention that parents used to have more children because they did not expect all of their children to survive childhood. In a time when medical care and sanitation has advanced to the point where the chances of a child reaching adulthood are very, very good, one reason for having a large family has disappeared.

Interestingly, the declining female fertility rate seems to be universal. If so, we cannot blame it on a specific culture or imagine that if only our culture placed more importance on having children, then we would see another Baby Boom.

What if the real issue, as the Chinese example suggests, is not lower fertility rates, but diminishing resources? Perhaps the planet is becoming overcrowded. Under the circumstances, declining replacement rates might be a way to manage shrinking natural resources.

Somewhere, somehow there must be a limit to the number of humans who can successfully share the planet. Perhaps people’s minds are attuned to the problem and make appropriate  adjustments.

While I am generally sympathetic to the demographic analysis that Last and others have offered, I suspect that they are caught in a dream.

One senses that the dream of a new Baby Boom might prevent us from trying to get a grip on our and the world’s debt problem.

It makes sense. There is no solution to our national debt that does not involve considerable pain, now or later.

For more than two decades the Japanese have been trying to deal with their debt problem by ignoring it. Today, America seems to want to deal with its problem by inflating and debasing the currency. It’s easier to inflate the currency than to inflate the population.

The other way of dealing with an unsustainable debt load is to begin defaulting on some of it, cleaning out the system and starting anew.

That would entail serious pain, so no one really wants to think about it.

But then, it’s all a vicious circle. As Japan has demonstrated a massive debt burden sucks money out of the private economy and makes it impossible for individuals to retain enough of their income to be able to raise more children. Like it or not, it's a rational calculation.  

7 comments:

Dennis said...

We may have a much larger problem than the decision about the need for a "Baby Boom" or not. http://www.livescience.com/17028-prostate-cancer-risk-birth-control.html

Though the results are inconclusive right now if one considers what providing free birth control to larger and larger numbers of women might do we may not be able to make the above decision because we won't have the capability especially since sperm counts seem to be going down for some reason.
Large cities are inundated with estrogen and it has to go somewhere, Just a cursory look at some of the food ingredients is interesting.
Just something to ponder while we watch the continuing failure of the "blue model."

Jim said...

The Bible considers children a gift of God. The modern world considers them to be liabilities. I think we humans got that one terribly wrong. My fellow baby-boomers who are childless are now facing a lonely retirement with devalued retirement plans and a social security/medicare system that is unsustainable. Who will care for them? We see what is happening to aging societies. The US is actually better off than most nations but once we cease to be innovative, we are doomed. Perhaps someone can create robot children.

Lastango said...

I've been reading a fair bit about this phenomenon lately. Here are a couple of links to help anyone who wants to read a few more stats and comments:

http://www.economist.com/node/21526329

http://www.zerohedge.com/news/2013-02-01/japan%E2%80%99s-demographic-disaster

Most of the discussion at those two posts relates to economic considerations. Elsewhere, I've read an argument that people in Asia are figuring that the costs of having children have come to outweigh the benefits, and are therefore finding no compelling reason to marry. The speed of this change is cultures which were highly family-oriented has been astounding.

There's something else to add to the mix: the possibility that men and women are no longer much interested in each other -- at least not enough to make the effort at building a life together. The WSJ reported that 36% of males aged 16 to 19 surveyed described themselves as "indifferent or adverse" to having sex -- a 19% increase since 2008.

http://blogs.wsj.com/japanrealtime/2011/01/13/no-sex-please-were-young-japanese-men/

In North America, some think this is partly because men have figured out marriage is a ticket to institutionalized exploitation, and suspect that women secretly hate them. Some observers report women are delaying marriage until their 30's, only to find out the men they want to marry don't much want them anymore. (There is a ton of internet material available on those two points - plus numerous other possible influences.)

Whether or not we understand the huge trend in Asia toward childlessness and the single life may be immaterial. There may be nothing anyone can do to stop it, no matter how good our information is, or how much we endorse the societal value of the traditional family.

Dennis said...

Lastango,
I am beginning to believe that it is more than men starting to be indifferent or adverse to having sex or for that matter finding women suspect. There is, I believe a growing number of reasons why this is beginning to occur. It is the reason I included the link I did in my previous comment. Question; What happens to men with Low T? Along that line of questioning. Why do they tell men with Low T to ensure that women are not in contact with the testosterone replacement medications that treat Low T? If testosterone has an adverse affect of women would the converse of that not be a possibility?
It is an interesting problem which has far to many paths to follow effectively at the moment, but for one who likes to extrapolate ideas to their ultimate conclusion it opens a large number of paths to follow.
I don't think we have reached the point of no return yet though just think of the economic impact if men and women begin to ignore marriage. Children not being born, the need for homes for families, schools, and an every expanding group of things that will no longer be needed.
This is not to even address the affect on the survival of the species. It maybe that when one tries to fool Mother Nature (GOD) one gets made a fool by Mother Nature (GOD.)

herenvardo said...

"In the early 1906s China suffered a famine that killed around 35 million people."

Famines aren't caused by overpopulation. Socialist nonsense about production causes famine.

"The Chinese example suggests that fewer children are not necessarily a bad thing."

To which i humbly submit the following:
http://www.telegraph.co.uk/finance/comment/9845959/IMF-sees-140m-jobs-shortage-in-aging-China-as-Lewis-Point-hits.html

Stuart Schneiderman said...

Thank you for the clarifications. I did not mean to suggest that the famine was caused by overpopulation-- there is no doubt but that it was caused by Mao's Great Leap Forward.

The Telegraph article is very interesting, though I do not quite understand why China will need a century to increase its population. It doesn't take that much time to enact and implement a two-child policy, or am I missing something?

Anonymous said...

Marriage is just plan not worth it anymore. Women want only the top 20% of men and plain ignore all the other men in their 20's until they begin to get baby crazy. Only now its those men who women will *settle* with. We either become players ourselves. Or we've already tuned them out as we've moved on in life ans are happy to have our freedom (mgtow). Either way I'm not sympathetic to them or society.

Enjoy the decline!

Rorak