“Demographics is Destiny” is a common phrase used by historians and geostrategic thinkers. It isn’t entirely true. But demographics does play a major role in the rise and fall of civilizations and world power.
The Telegraph has an article on Japan’s shrinking population. Most of it is old news:
Japan is slowly shrinking. Last year it became the first nation in modern history to tip over into outright demographic contraction, pioneering a path that will soon be followed by Italy, Germany, Spain, and most of Eastern Europe, with China close behind.
Then there’s the economic woes that come with such a decline in the population:
The population peaked at 128m in 2005 and is expected to fall below 100m by the middle of the century, when 36% will be 65 or older. The dynamics of decline are already contaminating every aspect of the economy. The trend rate of growth has dropped to 1.5%. The blistering 10% pace of the early 1970s seems like a distant dream.
Wages have fallen for the last five months in a row, vastly complicating efforts to stave off deflation. Officials at the Bank of Japan blame the subtle effects of ageing. A bulge of baby-boomers is retiring at the top of the pay scale, to be replaced by younger workers – many on part-time contracts, at half the rate. Salaries have fallen 8% over the past decade.
That’s Japan. Yet what makes the article interesting is how it describes China’s future perils in a few short years, which are far greater than Japan:
It will be much worse for China, where the workforce peaks in just eight years before plunging into the fastest downward spiral ever seen in peacetime. The one-child policy of 1980s and 1990s has already baked a population crunch into the pie, whatever is done now…
China’s development is 40 years behind Japan on most indicators, and its return on investment (incremental capital output ratio) is a dismal 4.4, far worse than those of Japan (3.2), South Korea (3.2), and Taiwan (2.7) during their growth spurts.
When the crunch comes around 2015, China’s per capita income will be a sixth of Japanese and western levels. The society will turn grey before it escapes poverty.
The conclusion to be drawn from the article defies all conventional wisdom — it turns out that, if you look at the demographic realities, China isn’t going to be the superpower of the 21st century, but an aging country with an enormous population and an inefficient industrial economy that is barely rich enough to pay the pensions of all the oldies running around.
What of the rest of the world and the future of the balance of power in the 21st century? More on that in part 2, to be posted in 48 hours.