Monday, November 04, 2019

What Do Old People Fight Over?

While history is a great guidepost to the future, there are inflection points where “today” really is unique period of time.

Demographics remain an underappreciated variable in national security, but is growing in importance as the global decoupling of regional trends and the resulting stresses on the international system are hard to ignore.

Unsustainable demographics and the migrations they are causing in Sub-Saharan Africa are one trend, but the world has seen this pattern before. Migrating ethnic groups generating conflict is THE oldest theme in human history, but today there is something new; the graying of the developed world.

We all love to fret about China’s return to the world stage economically and militarily. Volumes of work try to find a benchmark with the rise of Imperial Germany, Japan, or even the USA – but these are all imperfect in a myriad of ways – but the largest block to making them an effective benchmark is in demographics.

Via The Economist;
The pressure on China is mounting. The coming year will see an inauspicious milestone. The median age of Chinese citizens will overtake that of Americans in 2020, according to UN projections (see chart). Yet China is still far poorer, its median income barely a quarter of America’s. A much-discussed fear—that China will get old before it gets rich—is no longer a theoretical possibility but fast becoming reality.

According to UN projections, during the next 25 years the percentage of China’s population over the age of 65 will more than double, from 12% to 25%. By contrast America is on track to take nearly a century, and Europe to take more than 60 years, to make the same shift. China’s pace is similar to Japan’s and a touch slower than South Korea’s, but both those countries began ageing rapidly when they were roughly three times as wealthy per person.

Seen in one light, the greying of China is successful development. A Chinese person born in 1960 could expect to live 44 years, a shorter span than a Ghanaian born the same year. Life expectancy for Chinese babies born today is 76 years, just short of that in America. But it is also a consequence of China’s notorious population-control strategy. In 1973, when the government started limiting births, Chinese women averaged 4.6 children each. Today they have only 1.6, and some scholars say even that estimate is too high.

The economic impact is being felt in two main ways. The most obvious is the need to look after all the old people. Pension payouts to retired people overtook contributions by workers in 2014. According to the Chinese Academy of Social Sciences, the national pension fund could run out of money by 2035. The finance ministry is taking small steps to shore the system up: in September it transferred 10% of its stakes in four giant state-owned financial firms to the fund. But far more is needed. Government spending on pensions and health care is about a tenth of GDP, just over half the level usual in older, wealthier countries, which themselves will have to spend more as they get even older.

The second impact is on growth. Some Chinese economists—notably Justin Lin of Peking University—maintain that ageing need not slow the country down, in part thanks to technological advances. But another camp, led by Cai Fang of the Chinese Academy of Social Sciences, has been winning the argument so far. A shrinking labour pool is pushing up wages and, as firms spend more on technology to replace workers, pushing down returns on capital investment. The upshot, Mr Cai calculates, is that China’s potential growth rate has fallen to about 6.2%—almost exactly where it is today. The labour shortage is hitting not just companies but entire cities. From Xi’an in the north to Shenzhen in the south, municipalities have made it easier for university graduates to move in, hoping thereby to attract skilled young workers.
Never before has a rising power had the headwind of an elderly population matrix. Young nations have different mindsets and priorities than aging nations. Nations are just collectives of people and more often than not reflect their concerns.

What are the concerns of old people relative to young people? Two areas come to mind; fear of poverty and fear of getting sick without help.

Young people think of status, setting a path for future success, and providing a better future for their children. They take more risks for potential long term gains.

Older people are more risk adverse and have a much shorter horizon of concern.

Does a nation with too few young people willingly send hundreds of thousands of them to their death in a war for … what exactly?
On October 1st China celebrated the 70th anniversary of the People’s Republic. By the centenary in 2049, Mr Xi has vowed, China will have developed to the point that its strength is plain for the world to see. But as Ren Zeping, a prominent economist, tartly noted in a recent report, the median age in China in 2050 will be nearly 50, compared with 42 in America and just 38 in India. That, he wrote, raised a question: “Can we rely on this kind of demographic structure to achieve national rejuvenation?”

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