The Banking Executive Magazine - Septmber Issue 2021

Population Decline It is a bias to assume that population drop is bad for the economy, espe- cially in a world where technology permits us to automate ever more jobs. China’s latest published census which shows that its population has almost stopped growing, brought cautions of severe problems for the country. “Such numbers make grim reading for the party,” reported The Economist. "This could have a disas- trous impact on the country,” wrote Huang Wenzheng, a fellow at the Center for China and Globalization in Beijing, in the Financial Times. But a comment posted on China’s Weibo was more insightful. “The de- clining fertility rate actually reflects the progress in the thinking of Chi- nese people – women are no longer a fertility tool.” China’s fertility rate of 1.3 children per woman in 2020 is well below re- placement level, but so, too, are fer- tility rates in every rich country. Australia’s rate is 1.66, the US rate is 1.64, and in Canada it is 1.47. In all developed economies, fertility rates fell below replacement in the 1970s or 1980s and have stayed there ever since. When the US rate returned to just above two from 1990 to 2005, some commentators hailed America’s greater dynamism and “social confi- dence” versus “old Europe.” In fact, the increase was entirely due to im- migration, with Hispanic immigrants initially maintaining the higher fertil- ity rates of their less successful coun- tries of origin. Since 2000, the US Hispanic fertility rate has fallen from 2.73 to 1.9, while rates for white people have been well below 2.0 since the 1970s and for black people since around 2000. Only in poorer countries, concen- trated in Africa and the Middle East, are much higher birth rates still ob- served. In India, all the more pros- perous states – such as Maharashtra and Karnataka – have fertility rates below replacement level, with only the poorer states of Bihar and Uttar Pradesh still well above. And while the national rate in 2018 was still 2.2, the Indian National Family Health Survey finds that Indian women would like to have, on aver- age, 1.8 children. A half-century of evidence suggests that in all prosperous countries where women are well educated and free to choose whether and when to have children, fertility rates fall sig- nificantly below replacement levels. If those conditions spread across the world, the global population will eventually decline. A pervasive conventional bias as- sumes that population decline must be a bad thing. “China’s falling birth rate threatens economic growth,” opined the Financial Times, while several comments in the Indian press noted approvingly that India’s popu- lation would soon overtake China’s. But while absolute economic growth is bound to fall as populations stabi- lize and then decline, it is income per capita which matters for prosper- ity and economic opportunity. And if educated women are unwilling to produce babies to make economic nationalists feel good, that is a highly desirable development. Meanwhile, arguments that stable or falling populations threaten per ISSUE 153 SEPTEMBER 2021 the BANKING EXECUTIVE 31