Demography, Development, and Destiny
I like watching Korean dramas. It’s not only about the good acting and excellent production values. In general, K-dramas reflect Asian values, celebrating love of family. In contrast, Western shows tend to ignore or denigrate family. In the US TV comedy, Big Bang Theory, for example, the parents are targets of ridicule and butts of jokes.
Class consciousness runs through many Korean shows, perhaps reflective of the sharp class divisions in Korean society. Netflix’ Korean monster hit, Squid Game, dramatizes this point in a horrifyingly violent way.
However, most Korean dramas are feel-good romantic shows, with the poor but intelligent working-class heroine marrying the rich chaebol chairman’s son.
That’s the fairy tale ending part. The reality, however, is that many Korean men and women delay marriage and even if they do tie the knot, decide not to have children.
The latest report shows that South Korea’s natural fertility rate, already the lowest in the world, has dropped to 0.84 in 2020 and is expected to fall further to 0.7 in 2024. For context, Japan, a society of octogenarians and nonagenarians, has a fertility rate of 1.4 and the US has a fertility rate of 1.73. (The replacement fertility rate to stabilize a population is about 2.1). South Korea can therefore claim to be the fastest ageing society in the world.
Its population is expected to shrink from 51 million to about 27 million by the end of the century.
Therefore, despite what you see in Korean dramas, South Korea faces a grim future. The iron law of demographics will dictate its destiny. Schools will close for want of school children. The pool of young men for the Korean military will shrink dramatically, endangering its military preparedness and national security. There will be no young people to support an aging society. Presently, South Korea has the distinction of having the highest suicide rate among the elderly.
However, South Korea is no outlier. China’s working age population is shrinking and despite the mandates of the Communist party leadership, birth rates continue to decline. The latest census shows births just equal deaths. With a fertility rate of about 1.2 and falling, China is expected to have negative population growth in a few years, putting its superpower ambitions in jeopardy.
Our neighbor, Thailand, can boast of a successful — perhaps too successful — population control program, so that its working age population will shrink from 71% of the population to 61% in 2060. The average age in Thailand is 40 and growing older. How it can break out of the middle-income trap with a fast-ageing population is the biggest economic challenge of Thailand.
I’ve never been a fan of population control to promote development. (No, I’m not Opus Dei.) While I believe that the woman should be given reproductive choices for her own health and that of her family, I don’t believe that the government should control family sizes.
For one thing, the demand for children will naturally decline with higher incomes and urbanization. There’s no need for government population control.
For another thing, I believe that rapid population growth as the cause of poverty was a Western idea propagated mainly by the Rockefeller Foundation in the early 1950s as a counter-narrative to the Third World theory of underdevelopment. Telling poor people that they procreate too much was a way to blame them for their condition. (You can hear the snickers from upper class people saying that the poor do nothing but procreate at night.)
The Philippines, therefore, is luckier in that it has a large, young population. The average age is 24. This is a source of vitality and competitive strength.
It’s true though that government’s fiscal resources will have to be spread to more people. But then, there’s no reason why the government can’t be more efficient in delivering services. Do you know, for example, that the government spends twice as much as the private sector in producing a college graduate? If we only have affordable and accessible internet, it may even be possible to give our young people quality education from schools like Harvard at a fraction of the cost. (But the Senate just sat on the Open Access bill which could have ushered in better and more affordable broadband.)
For me, the population control argument is a way to avoid making structural reforms.
Take, for example, the fact that 30% of the children are malnourished. Do we blame their mothers for giving birth to them only to see them malnourished? Or should we point our fingers at our failed agricultural policies with its emphasis on protectionism and land fragmentation and distribution rather than on modernization and productivity improvement?
Population is a source of development, rather than a drag to it, as countries like China, Thailand, and even the US, with fears of secular stagnation arising from ageing populations, are discovering to their chagrin. If you marry capital with labor, you will have increased output. Not only that, but the marginal productivity of capital is also very high in the early stages of development, when moving from agriculture to labor-intensive industrialization.
A quarter of our labor force are idle or partially idle (unemployment and underemployment is about 20 to 25%). If you just give them access to capital via employment, you will see huge and dramatic increases in output.
But that’s not happening. Why? For several reasons. We tell foreign capital to stay away. We allow monopolies to form, and they have no interest in reinvesting their capital. We scare capital away when the government doesn’t adhere to contracts or keeps changing the rules. We make farming inhospitable to mechanization and capital by celebrating the status quo of fragmented farmlands. We make labor expensive with all sorts of regulations when it’s capital that’s scarce.
Population mobility is another source of growth and development. Move people or incentivize them to move away from low productivity sectors to higher productivity sectors and you will see dramatic gains in national output. In China, the Great Migration of 300 million people from the rural areas to urban centers resulted in years of double-digit economic growth.
Here, in the Philippines, we have been encouraging people to move overseas because they can be productive there while they are forced to be idle here. While this has resulted in increased remittances, this has come at great social cost. The irony is that we import goods, some of which have been produced by our kababayans (countrymen), because we make capital inhospitable here. Moreover, a good number of those who move out are some of our most skilled, e.g., nurses and IT programmers, so Filipino enterprises lose out in the global talent race.
Incidentally, we restrict population mobility, and therefore development, when we don’t allow Agrarian Reform beneficiaries to sell or lease their lands within 10 years or when they have debts with the Land Bank. Essentially, the government ties them down to the land doing low-productivity farming.
Also, joining the regional free trade organization, RCEP (Regional Comprehensive Economic Partnership) wherein 10 ASEAN nations, together with China, Japan, South Korea, Australia, and New Zealand are signatories, will be a boon to our economy because we have a large young English-speaking labor force. The other members of RCEP have graying populations or shrinking labor forces. Therefore, it will be natural for investors to put up labor-intensive factories here to produce for those markets. The Senate should ratify the treaty as soon as possible, lest we lose out again to Vietnam and other countries which have already ratified it.
The story of Philippine population then is a cause for optimism rather than a cause for pessimism. However, it’s also a story of constrained potential with self-imposed defeatist policies characterized by protectionism and anti-capitalism.
Calixto V. Chikiamco is a member of the board of IDEA (Institute for Development and Econometric Analysis).
