Bernardo M. Villegas
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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 that has just surpassed China in population as reported by the United Nations last July 1, 2023.  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 population that has inflicted 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 GDP growth rate in 2023 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 years.  With an average Indian ten 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 its past relative openness to immigration, the low birth rate of its population has not yet resulted into a serious ageing 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 U.S. 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 ageing crisis .  He made reference to data from the US Center for Disease Control and Prevention’s National Center for Health Statistics which reported that approximately 3.7 million babies were born in the U.S. in 2020 (the peak of the pandemic) but the 1% increase still put the level 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 rate 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 accounting 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 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 health care 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 has also one of the highest life expectancies in the world.   In 2020, government data showed that one in 1,500 Japanese were age 100 or older. Its East Asian neighbors like China, South Korea, Taiwan and 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 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.  The shrinking labor force of Japan 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 2023.  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 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.  Last May 18, the Financial Times carried an article by Mary McDougall that warns of serious downgrades to nations who fail to tackle costs of ageing.  Rating agencies have observed that the rise in borrowing costs is compounding both of the impact on growth of changes in working-age populations and the hit in 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.