"South Korea, Hong Kong, Taiwan and Singapore have over 40 years averaged roughly the highest consistent economic growth rates in the world. All but Korea have steadily accumulated massive surplus savings and foreign reserves.
But change the national accounting principles behind these rosy numbers and a different picture emerges, one that the societies concerned have barely begun to grapple with. In one vital respect these countries (soon to be joined by China) collectively may have the worst record of investment in the future since homo sapiens evolved: Investment in the next generation.
They have the lowest fertility rates in the world. Hong Kong is at the bottom (excluding births to non-residents), with around 1.0 births per woman of child-bearing age (the replacement rate is 2.1). Taiwan, Singapore and Macau come in at 1.1, while South Korea, at 1.2. is on par with Europe's lowest, Belarus. None of these economies has had replacement-rate fertility levels since the late 1980s.
Now, imagine if national income data included all spending by parents and government on food and clothing, education and health care as investment, and gave an economic value to time spent in child-rearing rather than paid employment. The GDP of Asian countries like Malaysia and Indonesia, or much of the middle income developing world of Latin America and the Middle East, would be a lot higher, while South Korea, Hong Kong, Taiwan and Singapore would show a steadily declining proportion of investment in the future. Economists forget that people as well as buildings depreciate at a roughly predictable rate. Child-rearing is at least as essential as building roads.
Imagine if these four economies had invested less in infrastructure and reserves and more in people. They would now most likely have much lower foreign-exchange reserves, but they would not be facing a situation in which their work forces - unless replaced by immigrants - will decline dramatically within 20 years as the population over 65 continues to grow. The payback for years of what may well have been the misallocation of resources is not far in the future.
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Almost all developed and many developing countries now face demographic challenges from a reverse in the high fertility rates of the past. There are no easy solutions. But by changing national accounting principles to make child-rearing a priority, attitudes toward it might change too."
Philip Bowring, "Underinvesting in the future", International Herald Tribune (7 July 2008).
Philip Bowring writes editorial page commentary on Asian and international economic affairs for the International Herald Tribune and other publications.
Apart from the suggestion of changing the definition of investment in the national accounts, which should remain focused on measuring the production of economic output rather than the production of children, the points Bowring makes are important to note.
Few people realize how rapidly fertility is dropping across the world and the tremendous ramifications it will have for every person living today. In the early 1970s world fertility averaged 4.5 children per woman; by the early 2000s the total fertility rate of the world had fallen to 2.6 children per woman, and it has continued its decline to today. Thirty years ago the more economically developed areas of the world recorded a replacement level TFR of 2.1; now it is down to 1.6, far below replacement. In Eastern and Southern Europe the TFR has dropped to 1.3, and this includes the impact of an increasing number of immigrants with a higher than replacement TFR. Elsewhere in Europe it is a little higher, but still well below replacement. In Japan the figure is 1.3.
It is literally true to say that if these trends continue a large part of the population of these countries will fade away in the next few decades. The past rapid pace of their economic growth means nothing for the sustainability of their societies. Indeed, despite extraordinarily high incomes compared to the rest of the world, all these countries nonetheless face enormous economic and political problems as their rapidly ageing and dependent populations confront working age cohorts unwilling to carry the burdens of an increasingly senescent society.
In the case of the U.S., with a TFR of 2.0, the immediate pressures are less. But this close to replacement fertility level masks a TFR of only 1.8 for the native born population and an increasing reliance on a foreign-born population not simply for labor but for its demographic future. Decades of contraception, abortion and now homosexuality have taken and will continue to take their toll on future U.S. population trends. Unfortunately, it is difficult to see how the dissipated nature of many present American life-styles can be changed and the overall decline in fertility reversed.
The U.S., it should be noted, will probably age faster and fertility will drop faster than official projections indicate because increases in life expectancy are underestimated, declines in fertility are underestimated, and immigration is likely to fall off faster than present estimates assume. We, too, face the same demographic future as Europe and Japan, but with a lag, and, like the Europeans, when the changes come our high incomes will mean nothing.
In Islamic countries, on the other hand, birth rates remain high and population increases rapid. In North Africa and Western Asia the TFR is 3.2, well above replacement. In the Muslim countries of Sub-Saharan Africa, South Asia, and Central Asia the TFR is usually higher than 3, sometimes much higher (Pakistan has a TFR of 4, Niger and Mali of 7). In some of these countries there has been little or no decline in fertility for decades. Muslim countries may be poor and they may not grow economically, but they have a demographic future.
I wonder whether we do.
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