Shrinking populations bode poorly for world economies

The Kid Issue

Joel Kotkin, 09.08.09, 12:00 AM EDT

Shrinking populations bode poorly for world economies.

The full article is available at http://www.forbes.com/2009/09/07/japan-elections-birthrates-opinions-columnists-joel-kotkin.html. For an excerpt, see the following:

Japan's recent election, which overthrew the decades-long hegemony of the Liberal Democratic Party, was remarkable in its own right. But perhaps its most intriguing aspect was not the dawning of a new era but the emergence of the country's low birthrate as a major political concern.

Many Japanese recognize that their birth dearth contributes to the country's long-standing economic torpor. The kid issue was prominent in the campaign of newly elected Democratic Party Prime Minister Yukio Hatoyama, who promised to increase the current $100 a month subsidy per child to $280 and make public high school free. The Liberal Democrats also proposed their own pro-natalist program with a scheme for free child day care.

Japan's predicament seems obvious. Its fertility rate has dropped by a third since 1975. By 2015 a full quarter of the population will be over 65. Generally inhospitable to immigrants, Japan could see its population drop from a current 127 million to 95 million by 2050, with as much as 40% of the population over 65 years of age. By then, no matter how innovative the workforce, Dai Nippon will simply be too old to compete.

While Japan's demographic crisis is an extreme case, many countries throughout East Asia and Europe share a similar predicament. Even with its energy riches, Russia's low birth and high mortality rates suggest that its population will drop 30% by 2050 to less than one-third of that of the U.S. Even Prime Minister Vladimir Putin has spoken of "the serious threat of turning into a decaying nation."

Russia's de facto tsar has cause for concern. Throughout history low fertility and socioeconomic decline have been inextricably linked, creating a vicious cycle that affected once-vibrant civilizations such as as ancient Rome and 17th-century Venice.

Persistently low birthrates and sagging population growth inevitably undermine the growth capacity of an economy. Children provide a large consumer market and push their parents to work harder. By having children, parents also make a commitment to the future for themselves, their communities and their country.

In contrast, a largely childless society produces other attitudes. It tends to place greater emphasis on leisure activities over work. It also shifts political pressure away from future growth and toward paying pensions for the aging. An aging society is likely to resist risky innovation or infrastructure investments meant to serve future generations.

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As the Japanese increasingly recognize, it's better to experience some population growth than to become a giant nursing home. A somewhat youthful, gradually growing population certainly may create considerable environmental and social challenges, but a scenario of persistent decline and rapid aging seems far worse.