Bernardo M. Villegas
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Benefiting From Declining Global Population

           In an article entitled “Population Decline and the Great Economic Reversal” by George Friedman, Chairman of Stratfor, a leader in the field of global intelligence, there is a prediction of an inevitable decline of population all over the world, both developed and developing.  Friedman presents solid evidence that in virtually all societies, from the poorest to the wealthiest, the birthrate among women has been declining.  By the end of the twenty first century, all countries will be at 2.1 births per woman or below (that is, at or below the rate of replacement or what is needed for Zero Population Growth).  The forces behind this irreversible trend are captured in the following succinct explanation:  “It is primarily a matter of urbanization.  In agricultural and low-level industrial societies, children are a productive asset.  Children can be put to work at the age of 6 doing agricultural work or simple workshop labor.  Children became a source of income, and the more you have the better.  Just as important, since there is no retirement plan other than family in such societies, a large family can more easily support parents in old age.  In a mature urban society, the economic value of children declines.  In fact, children turn from instruments of production into objects of massive consumption.  Children cost a tremendous amount of money with limited return, if any, for parents.  Thus, people have fewer children.”

          The worst case scenario is that there will be massive economic dislocation because of a rapidly ageing population.  There will be a relatively small number of workers supporting a very large group of retirees, particularly as life expectancy in advanced industrial countries increases.  Some actuarial scientists estimate that by the middle of this century, the average life expectancy can be over 90 years.  What do you do with so many senior citizens and relatively very few young people to take care of them and financially support them?  There is also the problem of the debts incurred by the older generation.  The smaller, younger generation will have to pay them off.  Finally, there is also the view that a country’s political might could contract with the population since a smaller population would lead to fewer soldiers for the military force.

          Mr. Friedman proposes immigration as the obvious solution.  He sees some obstacles, however: “The problem is that Japan and most European countries have severe cultural problems integrating immigrants.  The Japanese don’t try, for the most part, and the Europeans who have tried—particularly with migrants from the Islamic world—have found it difficult.  The United States also has a birthrate for white women at about 1.9, meaning that the Caucasian population is contracting, but the African-American and Hispanic populations compensate for that.  In addition, the United States is an efficient manager of immigration, despite current controversies.”

          Fortunately for the Philippines, any possible decline in population will still be towards the end of the twenty first century.  There will be opportunities for those born in the Philippines to freely choose to live and work in the advanced countries suffering from serious demographic winter.  They will do so no longer out of economic necessity.  Their decision will be based on the freedom to choose to reside wherever they please.  A good number may still choose to work abroad, bringing their families with them, for at least most of their working lives and then decide to retire in the Philippines where it will always be “more fun.”   I agree with Mr. Friedman that countries like Japan, Germany, Spain, Italy, Canada, and other countries where Filipinos are more welcome than migrants from other cultures will not suffer a decline in GDP per capita even if their population is declining.  As he rightly points out, “there is no reason to think that GDP would fall along with population.  The capital base of society, its productive plant as broadly understood, will not dissolve as population declines.   Moreover, assume that population fell but GDP fell less—or even grew.  Per capita GDP would rise and, by that measure, the population would be more prosperous than before”   It would be reasonable, therefore, for some Filipino families to freely decide to reside and work in these more prosperous countries, even if the Philippines would already have eradicated poverty in the next twenty years.  Filipinos will always be the preferred immigrants in practically any culture because of their extraordinary human qualities.  This includes the fact that English is widely spoken in the Philippines.

          For those who do not want to migrate to other countries, there will still be the almost unlimited opportunities in such industries as Information Technology and Business Process Management, tourism (including medical tourism), retirement, and other human resource-intensive industries that will expand in response to the demand for these services by the ageing advanced economies.  The shortage of young people in these countries will make the Philippines a continuing haven for BPO and shared services.  As long as we invest in improving our infrastructures over the next twenty years, we will attract numerous retired people from abroad to have their medical treatment in our hospitals and even spend a good number of months in the year in our retirement resorts.  The Philippines will be to the advanced world what Spain was to the rich Northern European countries in the last century.  There will be many opportunities for those young people today specializing in the hospitality industry.  Professionals in the health care industry will also be in great demand, both within the Philippines and outside.

          Friedman ends his essay with the following strategic insights:  “The argument I am making is that population decline will significantly transform the functioning of economies, but in the advanced industrial world it will not represent a catastrophe—quite the contrary.  Perhaps the most important change will be that where for the past 500 years bankers and financiers have held the upper hand, in a labor-scarce society having pools of labor to broker will be the key.”   This suggests another sunrise sector in the coming years:  the executive search industry, manpower recruitment, executive coaching and other forms of skills training and professional development programs tailored to the needs of the labor-short economies. Given a young, growing and English speaking population for at least the rest of the century, the Philippines can be an educational center for the rest of the world.  Let the entrepreneurs seize these opportunities.  For comments, my email address is bernardo.villegas@uap.asia.