Avoiding aging before becoming rich

Chinese leaders have finally seen the light, as the late prime minister Lee Kuan Yew of Singapore did 20 years ago. Population control can be counterproductive, leading to the rapid aging of society and a scarcity of human resources. Married couples in China are no longer limited to one child. Although the official policy still limits the number of children per family to only two, I am sure there will be greater flexibility because from the experiences of countries that aggressively promoted a contraceptive mentality among women, the majority of couples will still prefer one or no child at all.

In fact, as early as 2013, the rules were already relaxed to allow a second child for couples in which one partner is a single child. In a column written by Didi Kirsten Tatlow for the International New York Times (11/5/15), Dr. Fuxian Yi, a Chinese-American scientist at the University of Wisconsin, was quoted as predicting that in about two years, the state in China will be forced to abandon family planning altogether. In his book “Big Country With an Empty Nest,” Yi wrote: “The 2013 change did not achieve what the government hoped it would achieve …  They wanted an additional two million babies… But in 2014 just ‘tens of thousands’ of additional children were born.” Reversing fertility rates is the hardest thing to do by official decree. In the last 20 years, only France has succeeded in bringing back its fertility rate to replacement level.

The demographic winter haunting practically all developed countries today could have been avoided if world leaders had not been deceived by the prophecy of doom of an American scientist some 40 years ago. As commodity prices fall to historically low levels during the ongoing world economic crisis, the scaremongers who have been advocating population control are reliving the embarrassment of Paul Ehrlich, the original “population bomb” alarmist. As the prestigious Financial Times (FT) commented in an editorial (9/1/15), falling prices show that the world is not running out of resources. The FT reminded its readers about the celebrated wager between Ehrlich and economist Julian Simon in 1980: “…[T]he economist Julian Simon challenged doom mongering biologist Paul Ehrlich to a bet that the prices of any five metals would be lower in 10 years’ time. He won, and made his point: over the long run, technological progress means commodity prices are likely to fall in real terms.”

Simon could have been thinking of the Philippines when he wrote a book titled “The Ultimate Resource,” referring to human beings. If the Philippines is now the darling of investors from all over the world, the main reason is that our country is enjoying what is known as the demographic dividend which endows us with a young, growing and English-speaking population. If we examine the engines of growth of the Philippines, which is considered one of the highest in the region, they are all people-related: remittances from overseas Filipino workers, earnings of BPO/KPO enterprises, and a boom in consumption capitalizing on a large domestic market. More people mean more supply of competitively cost personnel and, at the same time, a large domestic market that makes the country basically immune to the ups and downs of the export market.

The FT editorial also punches holes in a theory that became popular starting in the early 2000s: that there are decades-long “super-cycles” in commodity prices which are expected to go up and up indefinitely into the future.  Fear of these “super-cycles” motivated leaders in the Western world to strongly advise emerging markets to introduce birth control as a national policy. The Philippines was not spared this erroneous, if well-intentioned, advice, with some US officials putting pressure on the present administration to pass the Reproductive Health Law.

Well, the truth is out: “With oil down about 57 percent from its peak last June and copper and iron ore down about 50 and 70 percent, respectively, from their peaks in early 2011, it has become clear that the ‘super-cycle’ story was profoundly misleading… The past five years have dealt a fatal blow to the popularized version of the super-cycle theory: that inexorably rising demand in emerging economies and constrained supplies of many commodities would inevitably put prices on a rising trend. With China apparently facing a future of slower growth than in the past two decades, and probably a shift away from resource-heavy investment spending towards consumption, the assumptions of strong long-term demand growth have been called into question.”

Thirty-five years later after the famous “population bomb” debate, Ehrlich’s pessimistic views appear even more unscientific. He was thoroughly wrong in assuming that rising prices were rooted in expectations of scarcity and that global population growth would have devastating consequences.

Appearing ever more scientific is the sanguine view of Simon that natural resources were for all practical purposes inexhaustible. He opined that, given freedom of private or individual economic initiative, market signals will always lead to increased supply and/or lower demand. I hope that those who will be elected in May 2016 will learn once and for all this lesson from both theory and history.

Bernardo M. Villegas (bernardo.villegas@uap.asia) is senior vice president of the University of Asia and the Pacific.