By Dean Baker
I ridiculed the NYT and Washington Post last week for telling us that China, the world’s most populous country, is in danger of running out of people. Using a tool that seems relatively scarce in Washington policy discussions, arithmetic, I showed that China’s gains in productivity will dwarf the effects of a falling ratio of workers to retirees. To put it simply, with each worker being far more productive, China will be able to enjoy a society in which both workers and retirees enjoy much higher living standards 20 years out than they do today.
I was hoping that we would not see another of these China population crisis stories for a while. I was wrong. A few days later, Ross Douthat used his NYT column to tell us how “Communist cruelty and western folly built an underpopulation bomb.” Douthat tells us:
“Like the United States and most developed countries, China has a birthrate that is well below replacement level. Unlike most developed countries, China is growing old without first having grown rich.”
This is a master statement of illogic. Yes, China is poorer than the U.S. and other wealthy countries, but there are two simple points that make Douthat complaint look incredibly silly.
First, we would want to look at rates of growth, not just levels. If we look at I.M.F. projections, China’s per capita income is projected to grow at rate of just under 5.5 percent annually for the next four years. If it continues this pace of growth for the next twenty years, when today’s too small birth cohort is entering the workforce, its per capita GDP will have nearly tripled. That would make it $64,200 per person, about 7.0 percent higher than the U.S. is today. In other words, China would be rich.
But maybe the 5.5 percent growth rate is too much to assume will be sustained for twenty years. Let’s cut it in half to 2.8 percent annually. In that case, China’s per capita income would grow by a bit more than 73 percent over the next two decades, making it $38,400 in twenty years. That is more than one-third less than the current per capita GDP in the U.S., but it’s only slightly belowwhere Japan and Korea are today, two countries who Douthat apparently feels comfortable in saying have grown rich. It’s also roughly where the U.S. economy was in 1994, a year when most of us would have thought we were relatively rich by world standards.
But this is actually the less important problem with Douthat’s complaint. In 2020, China is considerably poorer than the United States. This means that its people on average have fewer cars, smaller housing units, and in other ways have lower material living standards than people in the United States.
Is this a crisis? Most people in China probably would not call it a crisis, since they are doing hugely better than they did twenty years ago and kids enjoy much higher living standards than their parents.
Now suppose that over the next two decades living standards increase somewhat less rapidly than they would otherwise because there is a falling ratio of workers to retirees. Is there any reason to think this would mean some sort of crisis in China because both its workers and retirees have lower living standards than people in the United States?
It’s very hard to see that story. In other words, this crisis of growing old before it grows rich is an absurdity on its face. There is no reason for anyone to take it seriously.
It is also worth mentioning in this context that we do face this problem called “global warming.” In that context, we should be very happy that China’s population is not 50 percent larger today. That might make people like Ross Douthat very happy, but it would make it hugely more difficult to limit the damage caused by global warming.
This article originally appeared on Dean Baker’s Beat the Press blog.