Thursday, July 02, 2009

China's Aging Dependents Problem

The unintended consequences of prematurely curtailing population growth are often not obviously apparent at the beginning. Normally a developing society begins with larger families to smaller ones as the cost of having and raising kids moves higher.

China, on the other hand, has had an aggressive one child policy that it has only relatively recently relaxed. Whether the relaxation is a recognition of the crisis that's building or simply political pressure, this graph says it all (the Economist via Paul Kedrosky):

It's useful to remember that China's fears of population growth are a direct result of the belief that more people consume resources. The contrarian, cornucopian view of those like the late economist Julian Simon, is that people are the only finite resource. People create resources by innovating which in turn literally creates wealth where none existed before. If India finally gets its act together I get the sense that they will end up pulling well ahead of China on the development tables in the future. It's also why short term protectionism against China, brought on in part by a bad recession, are rather silly given what's to come.

Update - as one of the commenters notes at Paul Kedrosky's blog, is it little wonder that they have such a high savings rate? Personally, the theory I like best is that people in China save because they have to plan for the unexpected particularly as they may not trust insurers or that insurance products may not exist.

Update #2 - also via Paul Kedrosky, Foreign Policy makes the argument that population control is necessary for development to happen using such stunningly great examples of governance like Pakistan and the booming mecca of Iran. Sorry, I just don't buy it.

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