The Banking Executive Magazine - Septmber Issue 2021

Population Decline capita growth are hugely overstated and, in some cases, plain wrong. True, when populations no longer grow, there are fewer workers per re- tiree, and health-care costs rise as a percent of GDP. But that is offset by the reduced need for infrastructure and housing investment to support a growing population. China currently invests 25% of GDP each year on pouring concrete to build apartment blocks, roads, and other urban infra- structure, some of which will be of no value as the population declines. By cutting that waste and spending more on health care and high tech- nology, it can continue to flourish economically as the population de- clines. Meanwhile, a stable and eventually falling global population would make it easier to cut greenhouse-gas emissions to avoid climate change, and alleviate the pressure that grow- ing populations inevitably place on biodiversity and fragile ecosystems. And contracting workforces create stronger incentives for businesses to automate, while driving up real wages, which, unlike absolute eco- nomic growth, are what really matter to ordinary citizens. In a world where technology enables us to automate ever more jobs, the far bigger problem is too many po- tential workers, not too few. China’s population aged 20 to 64 will likely fall by around 20% in the next 30 years, but productivity growth will continue to deliver rising prosperity. India’s population in that age band is currently growing by around ten mil- lion per year and will not stabilize until 2050. But even when the Indian economy grows rapidly, as it did before the COVID-19 crisis, its highly produc- tive “organized sector” of about 80 million workers – those working for registered companies and govern- ment bodies on formal contracts – fails to create additional jobs. Growth in the potential workforce simply swells the huge “informal sec- tor” army of unemployed and under- employed people. True, fertility rates far below replace- ment level create significant chal- lenges, and China may well be heading in that direction. Many peo- ple expected that after the one-child policy was abolished in 2015, China’s fertility rate – then around 1.65 – might increase. But a look at the freely chosen birth rates of ethnic Chinese living in successful economies such as Taiwan (1.07) and Singapore (1.1) always made that doubtful. Other East Asian coun- tries such as Japan (1.38) and Korea (1.09) have similarly low fertility. the BANKING EXECUTIVE 32 ISSUE 153 SEPTEMBER 2021