In December 1988, the leaders of China and
India met for the first time in nearly three decades. The summit, which came after years of tense
border disputes, marked a turning point towards friendlier relations. It was a time of hope. A China in transition. The range of possibilities, then, was wide,
and as the millennium came to a close, all eyes were on the future of the continent. Amidst this optimism, China’s leader, Deng
Xiaoping, was skeptical. Despite what people have predicted, he cautioned,
there was no guarantee of an “Asian Century”. Nevermind that he coined this term with hesitation,
the concept of an “Asian Century” would soon take on a life of its own thanks to a
pattern of successes: There was its relatively stronger performance
during the 2008 financial crisis, the rapid growth of its “Four Tigers”
— Hong Kong, Singapore, South Korea, and Taiwan,
And, of course, its explosive population and middle class. The basic premise was that, as Asia’s supply
chains integrated, its navies modernized, and trade dominated, this momentum would shift
the global center of gravity to The East. This notion — increasingly rephrased as
the “Rise of China” — escaped the fringes, entered the public consciousness, and was
thoroughly beat into all of our heads. Though likely to evoke different emotions,
its truthfulness was no longer controversial. And then, no longer even interesting. A cliché. It’s not hard to see why. It contextualizes and attaches an enviable
momentousness to the present moment in time. In just two words, it neatly encapsulates
three centuries of history into that of Europe, America, and now, Asia. It seems to confirm what we already know,
in a way that suggests a larger trend, a narrative. At the same time, the nebulousness of what
it implies in concrete terms helped it evade scrutiny and take on several independent meanings. After years, now, decades, of snowballing
predictions, optimistic models, bestselling books, and emotive profiles designed to stoke
fear, After 10,000 repetitions of the “Next Superpower”,
“Great Power Rivalry”, “China’s Grand Strategy”, and “the Remaking of the World
Order”, This once very simple idea has lost all sight
of reality. Like an overvalued startup, unchecked hyperbole
has driven its mental market share way out of proportion. Beneath the mountains of wishful thinking
and grandiose predictions, there is merit, make no mistake. But it's time for a return to the fundamentals. A reckoning is long overdue. This is part one. We begin with the challenge to China’s supremacy
which underpins all others. One so insidious that it can only be solved,
by its very nature, over the course of decades. China will soon run out of people. Sponsored by CuriosityStream and Nebula — where
you can watch the extended version of this video. The absolute size of a population says a lot
about it. In the broadest of strokes, a big country
buys more things, giving it greater leverage. A tiny country, on the other hand, will more
likely rely on its neighbors. None of this is revolutionary. Which is to say there’s a good reason that,
when we talk about the ‘size’ of a country in relation to its global significance, we’re
usually referring not to its square footage but number of unique humans. The problem is that this number can also be
just as misleading as it is useful. When we compare population sizes, we mentally
take for granted a “typical nation”. We imagine, in other words, a similar proportion
of doctors, students, seniors, babies, and plumbers — a reasonable shorthand for 90%
of conversations. This, however, is one of the remaining 10. Big, uniquely-consequential countries get
that way by adopting big, uniquely-consequential policies, which means this single number just
won’t cut it. Ideally, we could visualize each individual
person, along with their education, occupation, and household size — things which, on average,
are known to affect their nation as a whole. But, in the absence of some revolution in
infographics, demographers have settled on the next best thing, realizing that just one
number is remarkably accurate at predicting your ‘contribution’ to the country — age. To show this, a “Population Pyramid” splits
a country into age cohorts. The longer the rectangle, the larger that
share of the population. The magic thing about age is that while sure,
the precise boundaries of things like ‘retirement’ and ‘adulthood’ may differ slightly between
countries, cohort behavior is tied to a set of universal, biological facts which transcend
culture. Now, let’s add some detail to be more scientific,
and see what those looks like. I promise this is going somewhere. The first group are Seniors. With only their savings remaining, retirees
are low spenders, have little room for risk and, thanks to their prudence, are of the
least interest to most marketers. The second group are the Producers — and,
economically, the only one that matters. During our thirties and forties, we reach
the peak of our earning potential, and put all that money into stocks, retirement funds,
and expensive vacations. Another name for this group might be the “Greats”. Nearly all of the world’s Nobel Prize Winners
and great inventors were in this age bracket. The average age of top startup founders is
45. These individuals have an outsized influence
on the world, and thus, even a small change in their size ripples throughout the nation. Next are the borrowers — students, fresh
graduates, and the drivers of demand for loans. Finally, and most useless of them all, are
babies — little money eating machines which — conveniently — wait several decades
before offering anything of value. Alright, now that we’ve defined each cohort,
we can begin to see why their relative size is where the magic happens. While there may not be a single most optimal
shape, there are certainly more and less desirable shapes, economically speaking. And each kind of imbalance will lead to a
different kind of problem or benefit. To show this, let’s imagine the unrealistic
extremes: If 90% of a country were babies, we’d have
a national babysitter shortage, lots of crying, and not much else. If 90% were aged between 30-60, it’d be
amazingly productive — punching well above its weight class, with no dependents to care
for. But, fast forward 20 years and it would all
come crashing down as they all retired at the same time and waited for social security
which there’d be no one left to pay for. Expect total social collapse. Now, none of this is to discount the role
of culture, political system, physical environment, or any other factor, for that matter. All of these things play a role — but think
of them as a few of the necessary ingredients — the egg, sugar, and butter to demography’s
flour. Without the ingredient of functional government,
you can’t bake the cookie. But no matter how effective the government,
how strong the military, or influential the economy, none of it is sufficient if you’re
missing the final key ingredient: the right population. Another way of saying this is that, by looking
only at the shape of a country’s population — without any absolute numbers or extra
information— we can already get a sense of its range of possible futures. We can tell, for example, that this super-fast-growing
country has a massive opportunity. If it industrializes fast enough, it could
harness this large working-age cohort with few dependents, to modernize and raise the
standard of living. If those in power fail to manage that transition,
the larger population will only mean more starvation, more disease, and less land. This is Nigeria. Likewise, we can conclude that this one has
just experienced decades of miraculous growth, but will soon, and very quickly, age, shrinking
considerably in the process. How the government responds will determine
whether this is merely disastrous or truly catastrophic. This is China. Its past forty years of celebrated growth
— the basis for predictions of China’s rise, the source of general optimism, the
trend which many assume will continue — coincides with this hump in the pyramid — which represents
tens of millions of extra people in their prime working years. Everything that made China what it is today
has relied on a large, young, and productive workforce. Now, that workforce is about to succumb to
biology just as every other generation has in every other country, ever. Graphs describing China tend to take this
shape, but demographers know better. They know that this has only been a temporary,
transitional state on the road to industrialization. It even has a name. It’s called a “Demographic dividend”. During this time, life expectancy is still
catching up, meaning there are few retirees. At the same time, fewer babies are being born
as women receive access to education. For these few years — and only these few
years — the country in transition has all the manpower in the world, which, when well-coordinated,
translates to exceptional economic growth. There’s a painful flipside, however. What looks like a ‘dividend’ will eventually
feel more like a loan. The scary thing about retirement is that it
happens all at once. While income tends to rise steadily throughout
your career, it doesn’t much fade away at 65. One day, you retire, and that day, your income
falls to 0. Which is to say, in a few years, these workers
will retire, moving the pyramid upward, and leaving the country’s future to this shrinking
base. And it will happen all at once. Remember: This ‘little’ hump was behind
the last few decades of growth, and this ‘little’ dip represents its future. China’s working-age cohort grew from 58%
of the country in 1978 to 74% in 2010. But in less than twenty years, the UN predicts
that number will be roughly back where it was in ‘78. By then, China will have twice as many seniors
as children under 15. And at the end of this century, its total
population will be cut in half. You might think that, having worked during
this growth phase, China’s elders will be well prepared for retirement. But its per capita wealth remains low, on
the level of Mexico, the Maldives, and Kazakhstan. That means this mass of retirees won’t just
contribute less to the economy, but will also require immense financial support — the
kind China’s fractured pension and healthcare system isn’t remotely prepared for. Put simply:
All of China’s recent progress has been bought on credit, and it’s finally coming
time to repay. Now, why, you might ask, can’t Chinese people
simply have more babies? If families were once larger, why can’t
they just return that way? Recall, however, that because of the 20-year
gap between a baby born today and its first real contribution to society, the damage is
already done. Demography plays out over the course of generations,
and today’s smaller baby cohort will mean even fewer babies when they reach adulthood. But fine, setting aside that this problem
can only be solved in a minimum of two decades even if the solution were known and implemented
tomorrow, remember what we’re talking about. It’s easy to get lost in the language of
‘generations’ and ‘cohorts’ — demography can unfortunately be dehumanizing — and,
in the process, lose sight of what ‘fertility’ really means: the very complex decision of
adults to have children. Some of this choice is beyond the reach of
government. Perceptions of parenthood, tradition, and
family are, first and foremost, formed based on one’s own family. Unfortunately for China, the One-Child Policy
has set the cultural expectation firmly at one. And one just isn’t enough. Assuming it takes two people to make a baby,
together they need at least two just to replace themselves, plus a small fraction more to
account for early deaths. That means a country needs a “Total Fertility
Rate” — the number of children the average woman will have in her lifetime — of 2.1
— just to sustain its current population. China’s is currently 1.6 — if you believe
the government. If you don’t believe the average Chinese
woman has 1.6 children in a country where the vast majority were, until recently, only
allowed to have one, then you might be tempted to believe someone like Yi Fuxian, a scientist
at the University of Wisconsin-Madison who estimates the true number at 1.18. To get a better sense of just how hard this
problem is, think of fertility rate as an ungainly machine controlled by 100 different
unlabeled levers. Policymakers know of at least a few levers
that will predictably lower the TFR, but once the machine has slowed, there’s neither
a clear way of getting it going again, nor any proof that it’s even possible at the
scale necessary. There is, on the other hand, precedent for
these attempts failing, even by proud and authoritarian Singapore. But before we pour salt on this demographic
wound, let’s be fair and start with the positive… For starters, Chinese workers are becoming
better educated, meaning it will take fewer workers to make the same economic contribution. And to the extent that automation replaces
labor, the need for a strong working-age population may diminish, leaving China with the same
old challenges faced by other automated countries. It would also be unfair not to mention that
China’s problem stems from a few strictly good developments: Women are choosing to have
fewer babies because they can, and seniors are living longer thanks to a rise in standards
of living. These richer, longer, more fulfilling lives
have value on their own. Now, a summary of the bad news: * There’s a lack of reliable data and reporting,
which means no one truly knows how bad the problem is. * The simultaneous rising life expectancy
means seniors will burden the economy for longer than ever. * China’s preference for male babies means
that between 2020 and 2060, there will be roughly 3 single men for every 2 single women. * There’s the impact of the Coronavirus
pandemic, whose slowing of fertility may simply hasten the inevitable, or permanently make
things worse — both scenarios bad. * Compounding the problem is the government’s
unwillingness to accept blame and reverse course. After 35 years of the One-Child Policy, there’s
a desperate need to justify its costly existence. As of 2015, most families are allowed only
two children, and even that change in policy has had little effect. * Finally, there’s the slow and invisible
nature of the problem. Consider the last time you saw a news headline
about declining births. Like climate change, there will always be
a more ‘urgent’ crisis that takes precedence. And because the effects of a demographic crisis
are felt over years, not days, those who highlight the problem will be labeled by many as melodramatic. In other words, the slowness of the problem
makes it harder, not easier, to mitigate. While these facts have been known for years,
only last year did we receive authoritative confirmation, in China’s 2020 Census, which
tallied 14.65 million births the previous year — the lowest level since 1961. With our fears confirmed, now, the question
turns to: Just how bad will the fallout be? Perhaps the closest comparison is the fate
of Japan — also once a fast-growing economy hailed as the “next superpower” and also
aging. With a median age of 48.6, Japan is the 2nd
oldest place on earth. Today, its share of the world’s manufacturing
exports has fallen from 12.5% to just 5.2. Japan did not fade into global irrelevance. It’s still a great power. But it never fulfilled what once seemed certain:
its rise to rival the U.S. as a superpower. And it never will. China’s ‘repayment’ of its demographic
loan will, at a minimum, place a severe strain on its economy. With this strain will likely come a sobering
reassessment of its rise. Demography alone cannot predict the future,
and it would be foolish to forecast specific social or political implications, but one
cannot help but wonder: What drastic things does a nation do in this
limited window of time before its power wanes? What does a generation of young people think
when they face far more challenging prospects than did their parents? And what culture develops in the absence of
any hope for marriage among 34 million men? Deng Xiaoping may have indeed been right when
he cautioned the “Asian Century” may never arrive. And we’re just getting started. China’s demographic crisis will soon seep
into its single biggest driver of growth: the illusive and out-of-control property market. Housing is China’s next reckoning — a
topic that deserves its own video — next time, in Part 2. In the meantime, you may have noticed that
the U.S. also has a TFR of 1.7 — well below replacement level. Does this mean it, too, is in for a similar
fall? Find out why or why not in the bonus section
which replaces this on Nebula. Nebula is the streaming site I helped create
to give a home to more experimental, long-form, and special videos, like Mustard’s beautifully-rendered
tribute to the F-117 Nighthawk, Rene Ritchie’s mini-documentary looking back at the introduction
of the iPhone, and much, much more. There are no ads, videos are available early,
and you can watch entirely exclusive original content. We’ve partnered with CuriosityStream — home
to great documentaries on technology, history, and science — like this one about the great
economist Milton Friedman — so that you can get it and Nebula for less than $15 a
year. Sign up with the link in the description and
watch the extended version of this video over on Nebula.
The real question is whether China can industrialize its huge rural population to mitigate this.
I have little doubt they'll find a solution. This strikes me almost as wishful thinking by people who want America to stay on top no matter what, even if I engage in that sometimes too
I fucking love Polymatter. Excited for the rest of this series.
The Video makes some very intresting points. I wonder if the U.S. will have a population reckoneing as well. Hopefully immigration can help mitigate the issue.
Inshallah
!ping CN-TW