MCDB 150: Global Problems of Population Growth

Lecture 18

 - Economic Impact of Population Growth


1) Population in China: Until recently, Chinese families did not much alter their fertility depending on life events such as deaths of children. However, under government prodding and eventually coercion, fertility dropped drastically in China in the 1970s, but to counteract momentum, the One-Child Policy started in 1979-80. 2) Population Growth and Economic Development: In Asia, rapid fertility drops have preceded economic booms by approximately fifteen years. In this time, children grow up and become workers. With many workers and fewer children to support, savings and investments rise causing the boom. Non-Asian countries with rapid fertility drops, like Ireland, fit this model. Sub-Saharan Africa, with still high fertility, makes little economic progress.

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Global Problems of Population Growth

MCDB 150 - Lecture 18 - Economic Impact of Population Growth

Chapter 1. Concluding Facts on Population in China [00:00:00]

Professor Robert Wyman: You remember, when I was talking about Europe, we discussed the fact that during marriage Europeans just had babies, in a sense willy-nilly, but we also said it was nowhere near the maximum that humans are capable of, but we thought it was sort of cultural constraints, late marriage, and stuff like that.

Now we come to China in which the birth rate within marriage was quite a bit lower and I introduced the question of whether this was voluntary in the sense of individually decided, an individual decides what they want and acts on it, or was this low birth rate due to cultural constraints in a crowded household with maybe the grandmother sleeping beneath you. There’s no opportunity, if the cultural rules say you can’t be friends with your wife, there may be a reduction in passion, and the conclusion that I gave you was that this didn’t seem to be an individual decision kind of thing but a cultural kind of thing.

It’s a little bit out of place but I just can’t–I love this data so much, it’s so very striking as an example of people that are not individually voluntarily controlling their fertility. How would you tell if someone is? –You have a big huge population, you can’t interview all of them, maybe it’s a dead population, old, how do you tell whether they’re making individual decisions? Well you have–one of the ways of doing it is to consider individual events in their lives that you think, under any reasonable idea of what it is to be a human, would affect their fertility. One of those events is the death of a child. There’s many–I mean I think you all would naturally say, if you want a certain number of children you’re going to control consciously–if your children die, you’re going to try harder to have more, you’re going to try longer.

Here is a Chinese population from 1982, so we’re talking about just at the time when the one child policy is starting. These are women who have finished their childbearing by 1982, so it’s the generation exactly prior to the one-child policy. It gives you a lot of data but look over here, it says what happened to the first four children, and it gives you two cases: all the children died or all survived. There’s a lot of intermediate cases which are not shown in this particular graph and it’s spread out by age to seeing if there some sort of age effect.

Here is the mother’s age at last birth, so if all of them survived–if all of them died you would think the mother would really want to have more. She stops giving birth at age 38.7. If they all survived, 1/10th of a year, she stops giving birth 1/10th of a year earlier, one month earlier. Same, a little bit older group you have 0.4 year, maybe four months later, and here’s 0.1 months again for women who are 20–their age at first birth.

I’m sorry; the age at which they stop depends on the age at which they start to a large degree. The numbers of this way are different because they started at different ages, but there’s no difference within an age group depending on whether all four children died or all four children survived. That’s just–to me that’s an amazing set of statistics that apparently the continuation, the attempt to have as many children as possible just does not depend on that event.

Here’s another example of this, this is–as was discussed in most of Asia, a lot of the world, and especially China, they need males, sons are much preferred over daughters. Here’s a very nicely displayed set of data saying how many sons have you had, how many daughters? Here’s–that have had no son or no daughter, and the question is how many of them proceed? These numbers show the fraction that proceeds to have the first birth.

When they get married and they have no children, neither a son nor a daughter 0.958–I’m sorry they have a son first; they have one son or one daughter. Those that have a son 95.8% of them proceed to have a second child and that can be either a boy or a girl. If their first child is a daughter 96.8% proceed, so you don’t have to look up here and the details aren’t important, but look at for instance those that have seven sons in a row, and 72%, 72.5% of them proceed to get pregnant again. Here’s seven daughters in a row, they want the sons, and they may not want daughters, 76%, a 3.5% difference, almost no difference in their life.

Again, how many of them, after having seven sons, you presume that’s enough sons, whereas seven daughters they would be desperate to have more but there’s a very small–a 3% difference between the fraction of them that proceed. You can also see the numbers are very high; those that have had seven children already, 76% proceed to have another birth. They just keep going, and whether they have all daughters in a row, or all sons in a row, makes very little difference. Finally at eight there is–it is a 10%–less than, yes, a 10% difference, but whether that’s–that doesn’t fit with the rest of the graph but it’s still very small difference.

Here’s the last graph of this nature. This is again the age at the mother’s last birth, and again, it’s the same kind of graph. Those that have had eight daughters in a row versus those that have eight sons in a row, and you think, in a son desiring culture, if they were controlling their fertility in any individualistic way, that the ones with a lot of sons would say, okay enough and the ones with a lot of daughters would be desperate to finally have a son. Look at the difference, the age of 41.4, if they have eight sons in a row and the age 41.7, again 3/10ths of a year. They try just a little bit longer, three months longer.

Basically I think what this data is telling you is that people are, for sure, not responding to the most important fertility events in their life, either the sex composition of their children or the death of the children; they’re just having children. Not at an enormous rate because of the cultural things that everybody is behaving under, not with respect to their individual experiences and desires.

This is the context into which the one-child–first the Wan, Xi, Shao, the later, longer, fewer policy drops in and then ten years later the one-child policy, so it gives you an amazing–here’s a population that’s just finished childbearing when the policy starts and there’s apparently no thought whatsoever of individually controlling fertility. All of a sudden the government tells you, hey you got to have fewer children, and I showed you the rate of fall, the rate of fall during the 1970s was just fantastic. Then after that fall, again as I told you last time, to control momentum, they instituted the one-child policy and the number of births levels off.

Why does the number of births level off? This is again the fertility drop, this is the longer, later, fewer policy in the 1970s and that’s where you get the big drop; 1980 the one-child policy, you don’t get any further drops. That was a sign of–well, an incompetent government, an incompetently carried out fertility policy. It turns out that one arm of the government was doing something to the opposite effect of another arm of the government. Here the Chinese were–for women’s rights issues and to control–somewhat control the population–they were encouraging later marriage, they didn’t want girls married at 13, 14, 15 and so forth.

It had been very successful, the revolution is out here, and the age of marriage is already up to 19.5 or so by 1965 and they’re being very successful and the age of marriage keeps going up until it reaches a quite respectable 23, that’s older than basically all of you are–most of you, not all of you. It reaches a peak there. Then what does the government do? It says well we’re doing great, we’re now very worried, this is the year where they introduced the one-child policy, we want this to continue on up.

They don’t have good demographic statistics and they don’t know this data, they don’t actually know what age people are actually marrying at, so they have an official age which was actually above this and they–I’m sorry, they raised that age to prevent more marriages but since people were below that what happened was–let’s see I’m getting this backwards. They–anyway the result of a policy they had an opposite result, that the result of instituting a new policy intending to raise marriage age reduced marriage age instead. Then you see when they introduce the one-child policy the mean age of marriage goes down and it goes down quite significantly. The one-child policy saying you should have fewer children is working oppositely to a new policy that actually reduces the age at marriage and increases the [childbearing time-span].

The result is, this is the number of new marriages, first marriages, and there’s a rise here, then there’s kind of dipsy doodles, and then, just at the time of the one-child policy, the number of new marriages goes crazy. This big rise in the number of marriages, and remember 98% of Chinese women, when the get married, get pregnant right away, so the next year they had babies, this counteracts basically all of the effect of the one-child policy. That’s one branch of government making one set of laws, not having the data and not being in accord with what another set of government is doing.

In fact the one-child policy–I don’t want to leave you with impression that the one-child policy had no effect but you have to do different statistics. Remember the total fertility rate takes all the women that are in an age group, whether they’re married or not, and ask how many children they’re having. Well when you have a big change in the fraction of women married then you have to use a different statistic. When the age of marriage changes, as it did in China at that time, you have to now look at a new statistic called the parity progression ratio which is very much like those triangle graphs that I showed you.

This says–this black line is how many proceed from having no children to having one child, so the fraction of women–and this is in the 95% range or something. Basically all the Chinese women, at this time when they get married, give birth to their first child. Now the next number is those that already have one child, what fraction of them proceed to have two children? The answer is, before this policy, even more than the one, 98% of women that already have one child proceed to have a second child and that may be that in this group are fairly–are sterile women or sterile men and so that may be the difference between here, but we don’t have that data.

Again, this is very, very high and then the other numbers, those that have two children how many go to three? Those that have three children how many go to four or more and so forth and we don’t have data before this. You can see that the first child is uninterrupted; the Wan, Xi, Shao, the later, longer, fewer policy and the one-child policy does not interrupt the first birth. That goes on as normal which is what is expected, but going to a second child now at the time of the introduction of the one-child policy, this crashes as does later births.

The one-child policy did have an effect if you look at those already married, but the two different policies, one lowering the age of marriage counteracts the effect and for a number of years the fertility rate stays constant. We’ve just had some visitors, let me show what I was talking about. This is the birthrate in China, what’s called the total fertility rate, and here is 1970 when the later, longer, fewer policy was introduced and it was the decade of the 1970s where the fertility rate in China fell. In 1979/1980 the one-child policy is introduced and for about a decade or so the birthrate does not decrease under that. We have some guests apparently.

Chapter 2. Urban vs. Rural Fertility in China [00:14:15]

What was happening was that in the cities, as I mentioned, there was a very significant birth drop in the 1960s, even before the government was–then in the 1970s, during Wan, Xi, Shao, the city populations went down to below fertility [replacement] level. In the countryside’s, even though there was a big drop in the 1970s, it wasn’t anything like it was in the cities. As you heard from Qing who talked about her family’s experience, in the cities there were many people that worked for the government, and so were under tight government control.

Many of them worked in government owned factories so were under tight government control, and in general, in cities there is much more ability to control the people. However, at that time, 80% of Chinese people lived in villages. It was still a very rural country and there the story is different. Among other things, in many villages, all the people are related, they’re all relatives. So, the professor who’s got the next lab to mine is named Zhong and in his village everybody is a Zhong, and they’re all related.

If people don’t believe in a policy, they don’t want to obey the government and everybody is related, your uncle second removed can’t really enforce a policy on you if you’re a relative, especially in a culture where kinship means so much and the relationship between relatives means so much. The one-child policy was much, much less successful in the countryside. Similarly, the cities were beginning to have excess jobs and people were streaming out of the countryside, also because of the population growth there was no land left, so they were streaming out of the countryside going into the cities, they didn’t have legal living permits.

They have a system where you document where you live and you have to stay there and they were not allowed officially to come into the cities, but of course they did, and so the government didn’t know where they were and basically had no control over them and so they were very hard to control. Even though among–Then another thing that happens, again just at this time, is that previously everybody–the peasants had been in communes and I talked about them last time, several thousand families in one big farm, and under again, strict control of the government. Then with the Great Leap Forward they realized the commune system has failed and the land goes back to the people, they break up the communes and people get their own plot of land.

They don’t own it in our sense but they have the rights to work on that plot of land. Well they started growing their own food, private markets for food grow up, and the people are not getting everything they need from the government. If they really oppose some government policy then they can tell the government ‘bye-bye,’ I don’t need anything from you, I’m now an independent farmer and I’ll do what I want. The change to a market economy, that changed to more economic freedom for the individuals, led to all kinds of personal freedom and led to the ability to say no to the government.

At the time, in the press, there were all kinds of examples of what was going on, and for instance here’s one article from 1980 again–I’m sorry this is 2000. The one-child policy has been in effect for 20 years, “No one can accuse Huo Suifa of not knowing what he wanted. The 47-year-old farmer dreamed of having a son. After seven daughters he finally got a male heir in 1989. Ho named him Gaifeng, or ‘change-in-the-weather,’ and then he stopped having children,” so seven daughters and a son, so this person–most–almost all of that time must have been under the one-child policy; eight children.

He says, “It wasn’t easy to have all these children, but it wasn’t hard either,” the farmer said. “If things became tough in our village, if there was a campaign to enforce the rule in their village” and China has these political campaigns to get people to change their behavior quite routinely at this time, “Well my wife just went to another township to have the child.” What’s the other side of the coin is this Huo now has a wife and eight children to support, and how much land does he have? One-third of an acre for eight, nine, ten people; this is not a good economic system, exactly why the one-child policy was instituted.

An American misconception, fed by our press, is that China’s government is very monolithic. The chairman in Peking or some bureaucrat says this is the rule, this is law, spells it out, everybody has to obey this law. Isn’t the case; there’s whole books now on how China is actually ruled, and the story is that the government almost gives a slogan, it’s a one-child policy, or they sometimes call it the only child policy, is not a set of rules it’s kind of almost a slogan. Then it goes down to the provinces, and each province has to determine in accord with local conditions as which is the official way of stating it.

Then each province gives it down to the prefectures and the same thing, it’s interpreted by local–under local conditions and then it goes down to the villages where it’s completely changed. There’s no–absolutely no uniformity from village to village. What that resulted in was the policy was never able to be consistently put into practice. The statistics give you the answer to that. The total fertility rate during this initial period of enforcement of the one-child policy never fell below two, so the policy was one child, but it never fell below two children. In the rural areas it never fell below 2.5.

As you saw a couple of lectures ago, Qing showed you the one child certificate where the couple promises, it’s just a promise, this doesn’t say you’ve done it and this is just–even to promise that you’re only going to have one child, and less than 20% of married couples ever signed onto even that promise of having one child, which was telling the government, no we’re not going to comply with this policy.

Throughout the 1980s, which again was when the policy was strictly enforced, nearly half of all the births were second, third, or higher order births. Eighty percent of China’s children had brothers or sisters, or both, many had both and only 1/5th of the 300 million children under age 14 were from single child families. In 1986, again after the first–Question?

Student: Would you say this is a result of inconsistent applications of the one-child policy or a reflection of the fact that the one-child policy was never (inaudible) one child and not in that urban area?

Professor Robert Wyman: Both, at this time initially it was supposed to be one child for all except minority people, so a very small part of the population. I’ll tell you in a minute that–because of popular resistance they immediately loosened it up, so the main thing which you’re probably referring to is that rather soon they said peasants–the city people had already had their fertility drop. Many of them were not very interested in having more than one child. It was not a huge issue for you; one of your readings discusses that.

In the countryside the peasants still wanted, certainly a son, more children, so the policy was changed rather rapidly so that if you–if your first child is a daughter you can have another one and try for a boy, but two is the limit and of course two was not–even that was not always observed. Remember I told you last time that the goal when the Chinese population crossed a billion, or looked like it was very close to crossing a billion, and the government sort of desperately wanted to keep the population below 1.2 billion in the year 2000 they didn’t make it, the population was 1.3 billion. They missed by a 100 million and now it’s considerably over that and the population is still growing.

Because of population momentum, again the age structure of China, China’s population is expected to grow by another 150 million people by 2025, so even though they’ve worked so hard and suffered so much under these various policies to restrict fertility, they’re still going to increase from now, from 2008 [sic] to 2025 by half the total population of the United States.

Again, comparable to a calculation I gave earlier, Hu Jintao, who was president of China recently [sic] says, the party plans to quadruple economic output per capita in that time. This was before the economic crash that has just happened. He wanted to quadruple the per capita income, which would still bring China up only to a low European level perhaps. With a 1.3 billion population, and you’re quadrupling it, that’s equal to 5.2 billion and the whole population of the earth is only 6.3, so you’re talking about China’s economic and population growth alone almost doubling the world’s economic activity and therefore something like doubling the economic drain on it.

China’s TFR now, after this period of stability and after the marriage thing got settled it has drifted down slowly as almost all of the world has. It’s now 1.6, it’s still nowhere near one child per family, its 1.6 now, but that will eventually reduce the size of the Chinese population if it is maintained. What you should keep in mind is, this was the Chinese route to lower population. I described to you the population that they started with that was not paying any attention to individual desires in fertility and they brought it down by strong government policy, good amount of coercion and so forth.

The Chinese populations around other parts of East Asia have lowered their birth rate even more, or I should say they started lower; they reached an even lower level. China is 1.6 as I told you; the Chinese population of Singapore is 1.4 children per women. The Japanese, who are not Chinese obviously, 1.3; Taiwan 1.1; South Korea, again not Chinese, 1.3; Hong Kong 1.0 and Macau 1.0. None of these places were under the one-child policy. Actually I’m not sure about Macau, but all the others are not under the one child policy, and they have a lower birth rate than the Chinese policy, and we’ll have to discuss in a later lecture why this should be so.

Chapter 3. Economic Globalization and China [00:26:15]

I’m going to finish up talking specifically about China to mention a little bit about economic globalization which you’re all aware of. Because of globalization the U.S. and China are joined at the hip. For both our economies to succeed, we have to buy a lot of Chinese stuff, they have to buy our bonds, they keep their people employed by shipping us stuff, and we send them green paper back. The economics of this is quite crazy altogether because they can never use–what’s interesting is they basically can never use the money that we send them.

That if–they have a trillion dollars or so in U.S. bonds and if they ever try to sell them the value of the dollar goes to zero and they have to sell them for nothing. That’s a separate story, it’s crazy. Lot of causes–reasons for globalization. Number one is shipping costs, the whole idea of the shipping when it went to containers, the cost of shipping something from China to the West Coast of America dropped drastically. Ships carry an awful lot, the water floats them across, and they just have to–the only energy that’s used is to get over the friction of the water that they go through.

Even many years ago I was in Bolivia discussing with an AID guy, Bolivia is very poor, what can they do? Well they have the mountains but then they have a jungle sloping down to the Amazon where they could grow rice, very good agricultural land, and why can’t they give that to Lima or to La Paz, Lima and Peru where they’re importing rice. The problem was that the Chinese can grow it in the Yangtze Valley, float it down the river to Shanghai, put it on a boat, and ship it and deliver it to Callao, Lima’s port, cheaper than the Bolivians who are right next door to Peru can truck it over – the Andes sort of go up and down and up again–and down again and they have to ship it–to get to the coast they have to ship it over two peaks of mountains on lousy roads, and trucking is just very inefficient. It’s cheaper to get the thing from 15,000 miles away up in Sichuan than to get it next door from the Amazon slopes of Bolivia, so shipping costs is very important.

For white collar jobs it’s telecommunication. Now–we used to say let’s let the low, the cheap labor manufacturing jobs go to China but now China and India we’re in–its immediate contact by telecommunications so the white collar jobs are going there. The engineering is going to India, the accounting is going to India, the call centers are going to India, and other jobs are going to China.

This–what happens to population I think, in the long term view, and long terms means 25 or 50 years, I’m not talking 1000 years, probably the one most important thing which will determine the future of the U.S. economy is what happens to population in China and India, and you can include Indonesia and the rest of Asia. As long as they have an incredible number of people willing to work for incredibly–needing to work for incredibly low wages, we can’t compete with them.

There is no economic reason why an American should earn $40 a day or something like that, plus benefits, and that’s a low wage for an American. Whereas, a third of China the per capita income is about $1 a day for the lowest third of China and that means the worker makes $2 or $3 a day. There’s no way that we can earn, without benefits, that we can earn $40 or $80 depending on what you calculate and other people in the other world are earning $3, so jobs are going to continue to go to China; not only from the United States. They are leaving Mexico. I told you the story in Thailand, the jewelry business in Thailand that moved to China, that there’s just this vast, vast sea of people who are desperate to work for basically $2 a day.

A further thing happening, there are now a few 100 million people floating around the cities, migrant laborers trying to get jobs, and now with the current economic climate, being thrown out of jobs, but Chinese agriculture is incredibly inefficient. As I told you, the average farm size there is 0.1 acre in China and that’s just economically unsustainable. The average farm size in the world is–in Japan is 400 acres I think. No, I’m sorry in the world 400, in the U.S., an economic U.S. farm is like thousands of acres of big farms.

We’re talking about that, eventually China is going to have to compete in the agricultural world on an even footing with the rest of the world, which means their farms are going to have to combine. That’s already happening. People are voluntarily sort of pooling their land, having big things–enough of the land to be–to make it worth them to buy a tractor and so forth, so this economic rationalization of agriculture is happening. Think of the numbers there, you have 800 million peasants with 0.1 acre each. When you combine it even to 100 acre farm, which is still a small farm worldwide that means you combined 1000 farms into one.

In the modern world 100 acres is probably farmed by one or two people, so you go from 1000 families living on 0.1 acre each to maybe two families living on 100 acres of a combined farm. That means that something like 99% of the population of the countryside has to get jobs somewhere else. If you have 800 million peasants, almost 800 million new people are waiting for these economic changes to come onto the modern job market, and so there are a vast number of people waiting, that are now competing with us and every other industrial advanced country, and who will continue to compete with us.

The Chinese government is well aware, of course, of all this stuff. In October last year, previously I–they don’t really own their land and they still don’t, but they what they call a land reform and the plan allows farmers for the first time to lease or transfer their land use rights to someone else. Basically the Chinese are now allowed to sell their farm, which will ease–now they have to have very complicated collective arrangements where everybody is sort of still there, but once you can basically sell or alienate your land in some way, than you can totally leave the land and go into the cities. The government has started encouraging this kind of push.

What they’ll do now, with the economic collapse, I don’t know. It’s–we have a long way to go before the population issue in China is settled and our fate and all of the developed world depends very much on what happens in China.

Just to finish, the Chinese have–the achievement of China is just mind boggling. that In a half a century they took people from an extremely poor country, devastated by over 100 years of war, and now it’s becoming one of the first ranked countries in the world. Before this all started, no one would have thought this was possible. If you can read the literature of that time, China was hopeless.

With respect to fertility, which you’ll see is a very important part of the whole story of economic success, their decline, the rapidity of their decline to get a country like China to drop its fertility in ten years is just an amazing achievement; just incredible.

Chapter 4. Economic Motivations for Fertility [00:34:17]

Now, we want to get onto this next question that a student asked last time. When I was saying the Chinese–remember the Chinese started this population thing for economic reasons. They said–our economy is going along, we’re increasing, like I said, agricultural production what was it 2.5% a year, which was very good – but population is growing 2.3% a year, so we’re not helping the people. It was very overtly stated that the one-child policy was to improve China’s economy. They wanted to improve the standard of living of the people.

At the time, when they started this policy, the standard of living in China was very low, and I don’t have to tell you that. Healthcare was very–was certainly better than it had been but still a very low level. Education was not widely available below the very early primary grades in China. Basically, as the Chinese perceived it themselves, and as they talked about it quite a bit, their children were growing up unhealthy and uneducated. When the Chinese talk about economic development, it’s not only manufacturing more stuff which they basically are not too interested in, they ship it to America. They were primarily interested in what they called the quality of the people.

They thought their population was not of the quality that they wanted, and quality means health and education. They wanted–their children were growing up not healthy and not educated, and they like everyone in the world, realizes that uneducated, sick children, and sick adults don’t–are not very productive. Western economists, for a long time, considered capitalist–physical capital your factories and machines that you have and the idea of human-capital is fairly recent and has now come massively into vogue in the West. That one of the most important determinants of the wealth of a country, why is one country rich and one country poor is not resources, is not your physical capital base, but your human capital base. Partly we’ve learned that from the Chinese. I mean we learned it ourselves but also the Chinese examples were very good example of this.

Just to give you an example of what happens when people don’t have education, in this particular case biological education, is a story from again the year 2000–again not that many years back. This is from Du who was a local official in a small village. He said, “One day there were hundreds of people lined up at the entrance of our village, I thought it must be a vegetable market or a movie coming in. It turned out to be blood selling. I felt so terrified because there was no sterilization equipment at all.”

This village official had some education, he understood about sterilization and he had seen these blood campaigns before, no sterilization. “Villagers just tell the traffickers their blood type, if they know it, if not they make it up. The villagers just tell the traffickers their blood type and then lie die on the ground to offer blood.” What is the result of this? A vast AIDS epidemic in these rural villages that were doing this, because they use the same needle to repeatedly take blood from person after person, they line up on the ground and they stick one needle, take the blood.

Needles are so expensive, the apparatus for collecting it is expensive, and so they reuse the same needle. Of course when you use the same needle from person to person the odds are if one person gets it the next ones are going to get it, but actually the transmission rate by blood to blood contact by a needle is something like 1 in 200, it’s not terribly efficient. What do they do with the blood? They collect blood from everybody, then instead of keeping it individually, which is expensive, they dump it into a big vat, they pool it, they take it to the city, they extract the components that they want which is the gamma globulin, the clotting factor, and a few other components and then they have a lot of blood left.

What do they do? They go back to the village and re-inject the blood, the remaining blood into the people. Now you don’t just have a needle stick, you’ve got a pint of someone else–of a mixed blood of everyone in the village going into your veins, and now for sure if anyone in the village has AIDS you’re going to be infected with it.

Du continued, “The villagers become crazy about selling blood because they are so poor and life is so hard. Many had built their houses by selling blood. Some will even bribe traffickers to be able to sell more than once a day.” The traffickers are interested in giving them back blood because then they’ll make more blood, they can sell more blood again, but the people want to sell more than a pint in each day, so they kind of lie and fake because they’re so poor. The officials estimate something like 600,000 HIV cases, that’s probably nowhere near correct.

The blood collections, starting in the 1990s, were protected by corrupt officials. This was of course against public policy, but it may have infected a million people, this blood selling in Henan Province, especially and virtually all of them poor peasants who sold the blood to make money. That gives you an idea again of the status of education of the population and why human capital is so very important, because you’re collecting blood to sell to hospitals, which will improve the health of presumably of some people who receive the blood, but not if they get AIDS. While you’re helping a few people with transfusions you’re infecting millions of people with AIDS so you’re making things totally worse.

Does cutting your population–so China had the idea, not alone, that if they reduce their population growth rate their economy will improve. Is this true? Most economists, at the time, would certainly have said no. That’s a Malthusian idea that population–that economic development is limited by population growth and people thought that the industrial revolution had sort of gotten rid of Malthus, Malthus was irrelevant. Marx, as I mentioned last time, hated Malthus. Marx was totally opposed and so a lot of the world’s opinion was that no, population growth was not detrimental to the economy.

In fact, they believed that population growth was good for an economy because it increased the market, and everybody wants to increase the market, and you can get efficiencies of scale for all kinds of reasons, a growing population was considered to be a wonderful thing. Businessmen, especially in the capitalist economies, love population growth because the population of the United States, for instance, is now growing at 1% a year, which is less than it had been, it had been 1.5% or so. The economic growth rate is about 3%, at best in a very good year, in a good year it’s 3%.

Population growth at 1% or 1.5%, if your total economy is growing at 2% or 3%, population growth is half the increase in gross national product and that means it’s half of company profits. When you have General Motors, it was counting every year on population growing and being able to sell more automobiles. That was basically the idea that population growth was not a bad thing.

In 1958 two American demographer economists had a different idea. They looked at the developing countries, which had enormous population and very high growth rates and they weren’t doing so well. What’s with this theory? They should be doing wonderfully, they should be improving tremendously, and they came up with a different understanding of the relationship between population and economics. This is based on some very simply economics. That economic development requires investment. If you want to produce something you’ve got to build a factory and that takes money.

Where does that money come from? That comes from someone else saving. Someone earns some money, by his labor or by whatever, earns some money; he can either spend that right away or he can put it in the bank and then the bank will invest it for him, or he can put it into stocks or something like that. Investment in a country, within some kind of economy, investment requires savings. One person has to save so another can spend it as an investment, they borrow that. That’s the key idea in everything that follows.

What Coale and Hoover realized is that if you have–if a family has a lot of children, if all the workers are married and have a lot of children, all of their income goes for food, clothing, and shelter to support the children. They can’t save any money. If a country has no savings, they don’t have any money to invest, they don’t make any economic progress. This had a big political effect, this theory. It seems so simple and so obvious but it–apparently they had good empirical support, they studied Mexico and a couple of other countries, and showed that this really seemed to be the case.

Well at that time the third world was–the population explosion was happening, they were desperately poor, and so there were two groups. One, conservatives were at that time worried about the Cold War. America was locked in the Cold War with communists and China, Russia, but especially Russia was our big enemy at the time. We saw that all these desperately poor countries, the governments were not–their current economic and political systems were not giving them what they want. They were poor and getting poorer as they perceived it, and they were trying out all kinds of different political solutions, some of which were leftist.

In America, there was a big push by conservatives, by the anti-communists, to do something about the third world to save them from communism. Meanwhile, the liberals were less involved in this us versus them kind of controversy, but they saw all these poor people in the world and wanted to help all the poor people, so they thought we should do something about all these poor people, and the answer was economic development. Economic development was universally approved in America by everyone, as either benevolent act by someone who considered themselves liberal or by a self-serving anti-communist act by someone who considered himself a conservative.

Well, once the Coale/Hoover paper came out and people started realizing the–what was considered to be the obvious at that time, it was very clear that family planning programs had to be a part of economic development. That these countries just–with these booming populations and there were televisions full of stories of India, and how it was starving people in India. China was kind of closed to us at that time, but India was open, but a desperate situation that was in India and India had quite leftist governments and was India going to go communist, etc. Both sides of the–the whole political spectrum believed in economic aid to the developing world and family planning aid.

It turns out that George Bush, the senior, the first George Bush President, when he was a congressman was one of the sponsors of the very first family planning bill, not only for domestic family planning but also the international aid for family planning. This was not a debatable issue, everybody agreed with it, and it was really due to this economic thesis by Coale and Hoover. You’ve read some of Ansley Coale’s stuff already.

Chapter 5. Population Growth and Relationship with GDP [00:46:52]

Now, however, the economists keep working, the scholars keep going–what they did is they looked cross nationally and tried to figure out, is it really true that population growth rate would affect GDP, the growth of gross domestic product per capita, it’s basically per capita income. What did they find when they got all the countries they could find in the world? Here’s the growth rate and here’s per capita economic growth. What’s the pattern? Zero, there is no pattern here, so it looks like that this–it was meaningless. That in fact the Coale/Hoover hypothesis was wrong, and however nice the theory seemed, you just couldn’t get empirical evidence for it.

That was terribly important, again a reversal, now the Reagan Administration comes in and on the basis of information like that says, economic population control is no benefit to an economy’s growth, and we, as conservatives, are opposed to government intervention in the private lives of people, so we’re opposed to–we’re not going to give out the–anywhere near the level of family planning aid that we used to. The United States went from a big leader in funding family planning programs in the rest of the world to trying to discourage it. We didn’t drop to zero, there were still programs that we funded and they were very good by AID, but we were the main discourager in the world, we didn’t like this whole idea.

What came up as–in opposition to this, and there was a big World Congress about population and development in Bucharest, Romania at the time, and the kind of data that came out in this period is they–they came out with the idea that the way to get–that it is good to have fertility down for a lot of reasons but the way to do it, that the causality, the Coale/Hoover causality is a reduction in population growth will lead to economic development, that the idea of the reverse causality that an increase in economic development will lead to a decrease in fertility.

The slogan that came out of this Bucharest meeting of all the world leaders, is that development was the best contraceptive, that if you wanted to lower birth rates, what you had to focus on was economic development. And that became the mantra for the world and the developing countries bought into that.

It was very interesting because just at that time Romania, the host of this meeting, was having the most extreme family planning program ever, but in the opposite direction. They, at that time, it was a Soviet block country that was doing poorly economically, their birth rate was very low, their mechanism of birth control was abortion; 4 out of 5 pregnancies were terminated by abortions in Romania. For every one child-birth, there were four abortions.

Romania, not for economic reasons, but for nationalist reasons, they wanted a bigger stronger Romania so they clamped down tremendously. Abortion completely de-legalized, you couldn’t get contraceptives anymore, and the end result was that the birth rate temporarily fell [rose] but then the women established networks of illegal abortion and gradually the birth rate rose because they didn’t have any means, but very rapidly within a year or a two they established illegal abortion networks and the birth rate came down.

It never came down to its original level and there’s actually a fairly big total effect of their policy. It was just the political chicanery going on that here, Ceausescu, who was running Romania as a very strong communist dictator, was doing a very strong pronatalist family policy, but saying no, the opposite won’t work; you have to go through economic development.

Then people went to work on that theory and here’s the data, that in this period of time, these are the countries with slow economic growth and their population growth rate was about 2.7% and here’s the ones with fast economic growth rate and their–fast economic growth and they’re the same in terms of population growth. Here’s your look some years later and you have the same story, those with slow economic growth, those with fast economic growth have the same population growth. It is not true that development itself acts as a contraceptive.

You look at it, you spin the data, the same data but differently, you look at those countries which have slow population growth which are these, and while it wasn’t–or fast population growth–and you ask, is that affecting GDP? And you’re not seeing a big effect here in this time frame. But you are seeing a big time effect in this time frame. Now something different is going on, here those countries with slow population growth are increasing economically, those countries with fast population growth are decreasing economically.

The funny thing about this graph, you say well it’s the same data, how can you come to opposite conclusions? It’s not, the same data spun differently. This is the population growth rate in 1965 to 1980 and then the economic situation 25 years later, 15 to 25 years later. So something it looks like from–This is not wildly conclusive data, but something about population growth, much later, has an effect on your economic growth. That’s what has now been figured out to be exactly the really important relationship between population growth and economic development.

You’ve seen this graph many, many times. This is the standard demographic transition where the mortality rate, the death rate falls first, then after some delay the birth rate falls and your population growth rate is this period when the birth rate is way above the death rate. Another aspect of that, here’s the same graph again up here, is that if you ask what does the share working look like? How many of these people are working? You have an idea called the ‘dependency ratio’ which is your number of workers, divided by your number of children and your number of old folks.

Well in developing countries the medical care is bad so you don’t have–you can almost ignore the old folks for quite a period of time, so basically the workers divided by the number of children. What happens during this period is that as the fertility rate falls what happens is you have a population–we’ve seen the population pyramid for that with a number of workers in the middle and then many more children than workers, half again as many children as workers, so each worker has to support–each person in working age has to support 1.5 or 2 children of children’s age.

Then you get this fantastic fertility drop, as we saw in places like China, where, in ten years, the fertility comes down, and what happened? This is the big population of people at that age, and there’s no children coming behind them. Kids are born, you have a very high population, kids are born, then all of a sudden the population stops having children basically, it drops tremendously, but you still have all these [already born] children born.

It takes 15, 20 years for them to get into working age, so once you drop your fertility you see no effect then because you still have to support all those children for the next 15, 20 years. It’s only after delay of 15 to 20 years that you have this huge number of people in working ages, very few children behind them, and the ratio of workers to dependents becomes very good. This is the–the people inside the snake. That’s a takeoff on another ‘you are here’ graph that I showed you of the population growth, anyway forget that.

Here is–you’ve seen this for China but here’s for all of East Asia, this is the death rate and the death rate is really basically down by 1970. I’ve showed you that for Egypt and all around the world that the mortality rate comes down fast and then doesn’t make an awful lot of progress since then. This is people aging, so this is where we are now, about 2009, so this stuff is all guessing about the future but basically since 1970 the death rate has been pretty constant but the birth rate comes down. This big drop in 1970s, again this is all of East Asia but primarily what you’re seeing is China’s big drop in the death rate, and so population growth narrows, narrows down to almost nothing. Presumably in the near future the death rate will climb above the birth rate.

Chapter 6. Demographic Dividend [00:57:05]

In looking at age structure, this is kind of a complicated graph, but they’re very cute. This is Sub-Saharan Africa as a comparison, this is an opposite situation. Here this is like a piece of a pyramid; this is your age group. Here you have very few old people, here you have–in 1950 this stripe is for the year 1950 very few oldsters, this is your working age population in here say from 20 to 60 or whatever numbers you want to put, and there’s more children in any age group than any of them. You’ve seen the population pyramid like that.

Now as time goes on, in a place like Sub-Saharan Africa that does not go through fertility transition is that this shape of more children than oldsters just continues 1975, 2000, 2025. You begin to see the–they hope again–This is where we are now; this is all guessing about the future. Up to now that shape of more children down here–stays unchanged and just the whole population gets bigger, you’ve seen that.

Now contrast that to East Asia, which in 1950 had what looked like Sub-Saharan Africa: many more children than people in working ages, and again very few real old folk. Then time goes on but then you start seeing funny things happen where–anyway up there follow the–anywhere from 1975 and 2000 to the left and you see now the number of children starts dipping. Up at the top it dips a lot and the bulge of children becomes a bulge in the working ages, so you may have a lot of people in working ages, very few children, no oldsters yet, so you don’t have anybody that you have to support.

What happens is, you calculate this dependency ratio; this is the number of working age people to non-working age and look what happens in East Asia. Here’s the fertility decline, as soon as ten years have passed boom, boom, boom the ratio gets to be wonderful. Again we are–at this level we’re somewhere near the peak, the rest of this is guesswork off to the right of that line. The dependency ratio just gets better and better for East Asia and this has tremendous–this is what has tremendous economic consequences.

Here is the difference in the economic growth per year over–now this is a 25 year time period we’re not looking at a single year. It’s tremendously bigger than a place like Africa which has not reduced its fertility. We say this is based a lot on savings and you’ll have a reading about this that you won’t like because it’s somewhat complicated economics, but look at the savings rate in East Asia. It goes from 1955, way before any of this, 14% to 35%, it goes up like a factor of 2.5% or 3%; tremendous saving. Investment then, since you’re saving, you can have an incredible increase in investment which builds up your country economically.

Now the catch in this, that savings equals investment, you can also borrow money from abroad and so that’s what they call the current account balance, how much money you can attract from abroad to get developed. We, in the West, believe that it was Western capital that went into China, allowed them to build up and did wonderful things. But no, it was never huge, this was a 4.8–less than 5% was the current–now that’s a minus sign in front of it, that’s what they’re importing, but very rapidly by 1980 they start to be a net capital exporter.

That these poor countries have an excess of capital and they now export to us, so the development of China in particular, East Asia in general, is not as you would think a result of West–infusion of Western capital. I mean some of the early special cases Hong Kong and so forth clearly were, but the main part of China, they produced their own capital because the sequence of causality is fertility decline, you wait 15, 20 years all those kids grow up, there’s none behind them, they all become workers, you start–you don’t have children to support, you start saving, those savings become investments and you become one of the economic miracles or one of the tigers of the world.

Now until recently, this theory is about 10 or 15 years old, we’re gradually coming to understand this idea about the economics, and we start seeing something special about Asia. That, yes, this was important, but also the culture of Asia, the propensity to saving–the savings–when China was poor the savings were not fabulous, they are fabulous now, but they weren’t then, that’s a result of being rich. It was thought there was something special about East Asia and China, in particular, something cultural, and that when you did the econometrics you had to have one set of–you could use the same amount, you have one set of parameters for Asia and a completely different set for Africa, and another set for Europe when you don’t consider the demographic situation.

Once you put in the demographic situation we now know that the same model fits around the world, and it looks like that this dependency burden is the key thing. One of the things that first clued us into this was Ireland. Ireland, which is a totally different culture than China, had this–it was totally Catholic and they really believed that they used Catholicism as fighting–as a mode of fighting the British and so they had a very high birth rate and they didn’t have legal contraception. In 1980 the government legalized contraception.

Here’s the birth rate, just takes a drive and then after a little blip, continues downward. Again, it’s the government action of legalizing contraception and the Irish birth rate drops. The death rate, again, is slowly going down and then sort of not really going anywhere in this period and so the population growth rate decreases. Again, this is the same thing, you get the same effect that Ireland’s population looks like China, on a smaller scale, it’s not anywhere near as big as China, but again, you have an underdeveloped country looking thing. There was a lot more children than middle–than workers or old people and then this continues going up until you start getting this decline. Now in this modern period currently there’s a lot more workers than there are either children or old people so the dependency burden looks real good.

This is the graph of that. The purple curve on the bottom is Sub-Saharan Africa which again up–just consider what’s up to the line because everything else is guesswork. Look, here the black is East Asia and the green is Ireland, looks very, very similar. Guess what the result is, here’s where they legalized birth control, boom the economic growth rate just booms right up ten or so years later.

Now comparing–starting to compare this to India, here is China’s growth per capita. In 1960, China was poorer than India by a good bit, this is per capita income, the red is China, the blue is India, 1960 they’re poorer, 1970 they’re poorer, and 1980 they’re poorer. Wan, Xi, Shao, the later, longer, fewer, the fertility drop is in this period and it starts going and then China takes off and exceeds India. It’s not due to the communist government or a good government because the communist revolution is way out here and for a long time it was not doing any better than India, but the main event that happened then is the drop in fertility.

This shows you the difference in China’s fertility and India’s fertility, but here’s this Chinese drop starting in 1970s and India slowly catching up but it’s taking its time about it. This is the dependency burden, here again, the ratio of workers to non-workers really improving in China, not going anywhere particular in India.

\When you compare it to Sub-Saharan Africa–again so we’re comparing different parts of the world to show you the story–is the same. This is the birth rate, the black, and the death rate so a huge and continuing population; growth rate again up to the line, this is guesswork out here and here is–again you’ve seen this before, this is China’s–East Asia’s dependent ratio workers to children. This is Africa, there is a huge difference going on.

This is the situation–in Sub-Saharan Africa the working age population has gone up 2.6%. Even if you can keep all those people employed when the dependent population goes up 2.7% you’re not making any progress. Whereas in East Asia, still a significant dependent population, they haven’t stopped having children altogether, but the working age population is growing half again as fast as the dependent population, that difference is what one, makes you rich and two, makes you be rich enough to save and invest and develop your country. You’ve again seen this graph, the difference between East Asia and Africa.

That is the main idea that I wanted to get for you. I have to–by the way on your schedule this lecture was supposed to be given by David Bloom, who’s a professor at Harvard, and one of the guys who did a lot of this work. He wasn’t able to come so I used this–he came in the last time I gave this class and I used a lot of the slides that are David Bloom’s slides. He’s responsible for a fair chunk of this work.

The end of this story is that, again, we talked about when–a long time ago when I describe Algeria’s–how much Algeria has gotten their fertility down but their population is still growing and they haven’t been able to take advantage of a reduction in fertility. The same thing happens with these dependency burden issues, because you first have a lot more children than workers, than you stop having children, and that bulge grows and you get a lot more workers than children.

Then those workers start to age as the population decreases and levels out, so now you have the reverse situation of a small number of workers and a large number of old people. Always in dependency burden you should add and old people and as your fertility goes does, your number of children goes down, your number of oldsters goes up, so it’s not as bad–it’s not as extreme a change as possible. This would seem to be called–this is called the demographic dividend, or the demographic bonus, this phenomenon.

There’s a time period when you can make great economic progress and then your people get old and a lot of people believe that Japan is in that situation right now. They have a very low birth rate and the number of old people is rising, and whereas in the past, old people cost almost nothing because just a little bit of food, they didn’t eat much, but now with medical costs, old people require lots of money and in the past children were expensive, old people were cheap, now its reversed.

The things that children use, clothing comes from China, it’s very cheap, food is comparatively cheap around the world. I mean forget the last half year or something. Children used to be cheap–children used to be expensive; they’re now getting cheaper, old people are getting very expensive. Now the worry is that any country that goes through a slow demographic change and doesn’t arrange its economics and its politics to employ the people, because it doesn’t do you any good if you have a lot of workers if they don’t have any jobs.

Latin America, for instance, which is kind of an in between situation–was very protectionist, and nationalist, and I can tell you a story. Bolivia, next door to Peru, and had so much conflict with Peru that they didn’t want to form a common market with Peru and they’d rather buy plastic buckets from Brooklyn and rice from China than they would to trade with their next door neighbor.

The story is that the demographic situation seems to be one of the major initiators of these economic miracles that have been happening around the world but they can’t do it by themselves. There has to be the economic and political substructure to employ these people, to set them to work, and then a country gets rich and when it gets–once it gets rich it gets the capital that it can keep it going. That you now have enough money to invest and keep going even though you may have to spend a lot on the old folks, you may be rich enough to generate the excess wealth to do that.

Next time we’ll talk about economics and the family, this has been macro economics, how economics works on a whole region wide thing, but what its effect is on a family.

[end of transcript]

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