The Demographic Debacle

The Demographic Debacle

As I have touched on before, no political or economic event for the remainder of this century will have more impact on the world than the demographic disaster unfolding in China. Nothing like it has happened in world history — not even the Black Death of the 14th century.

The birth rate needed to maintain a population at a level size is 2.1 children per couple. If the birth rate is 1.0, the population will be more than half in 40 years. The only exception to these ironclad rules is immigration. Still, China and Japan are highly homogenous and anti-immigration. This means their birth rate will determine their destiny as a society.

China’s birth rate today is reported to be 1.7, although there’s good evidence that the actual birth rate is closer to 1.1. At that rate, China will lose 630 million people by 2100. Its population will drop from 1.4 billion to 770 million. This doesn’t mean China and the world will have 70 years before the impact is felt. The effect will be felt starting now and will only worsen as China’s population implodes.

Not only will the population shrink catastrophically, but it will also age dramatically. China will soon be a society with hundreds of millions in their 80s, 90s, and even more than 100 years old. This longevity is highly correlated with the onset of dementia, Alzheimer’s disease, Parkinson’s disease, and other forms of physical and cognitive decline.

More and more prime-age workers will be required to provide care for the aged, who will in many cases be mentally disabled. Elder care is a kind and humanitarian calling, but it doesn’t lend itself to productivity increases. Bathing an elderly patient has not changed much in 5,000 years — robots don’t give baths.

This population implosion is the result of urbanisation, education, and increases in women’s choices in family life and career. This phenomenon isn’t limited to China and is pervasive in developed economies including Japan, Western Europe, the US, and Canada. China simply seems to be the most extreme example (with the possible exception of Japan).

Who will be blamed for the consequences?

China’s declining birth rate was greatly amplified by China’s one-child policy from 1980–2015. Because of a cultural preference for boys, the one-child policy led to the murder of 60 million girls through drowning and sex-selective abortions. This resulted in a skew of boys to girls of about 120:100. The normal biological skew favours boys about 102:100. This means that 60 million men in China cannot find wives because of the murder of infant girls.

China ended the one-child policy in 2015 and announced a two-child policy. Recently, China changed to a three-child policy. But it’s too late. Chinese women have decided they will defer marriage, defer children, and perhaps not have any children, in order to pursue educational and career opportunities. The Chinese culture has become profoundly anti-child. No government policy can change that.

This cultural change slams productivity because China will lose productive workers as society ages. More of the productive workers who remain will be occupied in low-productivity elder care, and China will be left with hundreds of millions of elderly people who have zero output and incur huge costs for care. This will be the end of the ‘China miracle’, which was never really a miracle — just a case study in growth from a low base, followed by inertia in the middle-income trap, as described above.

The declining birth rate, crashing population, sex skew, and lost productivity will cause a crisis of confidence in the Communist Party and may precipitate regime change independent of other factors, including the potential for war, which I will discuss next time. Make sure you stay tuned for that…

All the best,

Jim Rickards Signature

Jim Rickards,
Strategist, The Daily Reckoning Australia

This content was originally published by Jim Rickards’ Strategic Intelligence Australia, a financial advisory newsletter designed to help you protect your wealth and potentially profit from unseen world events. Learn more here.