(Part 2)
Is the problem with China the fact that population has begun to decline because of a very low fertility rate that is a direct result of the inhuman birth control practices associated with the one-child policy under Mao Zedung? In fact, in 2025, China registered the lowest number of births since records began, the fourth consecutive year of population decline as policy makers frantically grapple with a demographic crisis. Strictly speaking, there should be no problem if population is declining in the second-most populous country the world (India just surpassed the population of China a few years ago). Even if China’s population should drop from 1.4 billion to 1 billion in the next few decades, it would still be one of the largest in the world (ignoring recent speculations that the Chinese government is doctoring its population figures and overstating them). The real problem is the aging population. If among 1 billion people, 40% or more are over 60 years old, any country would be in serious trouble. Taking care of 400 million aging citizens is no joke. There will not be enough young people to take care of them. There will also be a tremendous financial burden on health, pension and insurance systems. Because of fertility rates below replacement in practically all the developed and even some developing nations (like China or Thailand), population aging is becoming one of the powerful forces reshaping the global economy. Aging is not just a demographic issue — it affects growth, public finance, labor markets, geopolitics and even innovation and entrepreneurship. The most obvious impact of aging is the shrinking workforce that has a direct impact on economic growth unless there is a corresponding increase in productivity.
A McKinsey report investigating the economic impact of declines in birth rates found that the UK, Germany, Japan and the US would all have to see productivity rise at double the pace seen over the past decade to maintain the same growth in living standards witnessed since the 1990s. The report follows similar warnings by the Paris-based OECD, which reported that declining birth rates were putting the “prosperity of future generations at risk,” and urged governments to prepare for a “low-fertility future.” McKinsey calculated that in western Europe, the decline in the proportion of people of working age could dent GDP per capita over the next quarter century by an average of $10,000 per person. In Asia, Japan is not the only country facing the same bleak future. The “tiger economies” of the past like South Korea, Taiwan, Hong Kong and Singapore are facing even the worst prospects.
Most rich and middle-income countries now have fertility rates below the replacement of 2.1 babies per woman. As a result, the working-age population is shrinking economic dynamos like Japan, China, South Korea, Spain and Italy. The more hapless countries are the ones that are already aging before becoming rich, like China, Thailand and Brazil. These countries are facing aging without having European-level incomes. They face serious economic problems: they have fewer workers and more retirees. Their shrinking workforce must support more pensioners, more healthcare costs and more long-term care. This creates a very heavy tax burden and not to mention physical stress on the young.
Fewer workers result in less production, less entrepreneurship, less innovation and slower GDP growth. Pension systems become unsustainable since most pension systems work on a pay-as-you-go basis. Today’s workers pay for today’s retirees. When workers decline and retirees increase, the system goes bankrupt unless taxes rise, benefits are cut or retirement age is increased. There are serious consequences of rapid aging. With more elderly people, there will be more who will be living alone, with no children to care for them and more subject to increasing depression and suicide. The healthcare system is overburdened since older people use hospitals more and require expensive long-term care. This strains national budgets and individual family finances.
A recent report that appeared in the Financial Times by Joe Leahy ad Wenjie Ding describes a tragicomic situation attributed to aging in China. An app called “Are You Dead?” that checks up on people living alone has become the most paid Apple Store download in China. The app, called Sile Me in Chinese, requires users to “check in” by pressing a button. If they fail to do so for two consecutive days, the app sends a message to an emergency contact. A major reason why this app has gone viral is that a rising number of elderly people are being isolated in their homes without relatives nearby to care for them. People are literally dying alone.
At the national level, there are serious macroeconomic consequences of the failure to tackle the costs of aging. Rating companies have been warning that recent interest-rate hikes have increased the impact of higher pensions and healthcare costs. As interest rates soar in response to the biggest surge in inflation for a generation, Moody’s, S&P and Fitch have all warned that worsening demographics are hitting government credit ratings. In addition, downgrades are likely without sweeping reforms, threatening to create a vicious circle of higher fiscal burdens and rising borrowing costs. It is estimated that, in the absence of reforms to aging-related fiscal policies, the typical government would run a deficit of 9.1% of GDP by 2060, a huge increase from 2.4% in 2025. Analysts say that central and southern European countries have among the worst demographic profiles, while singling out Germany, whose population is aging at one of the fastest rates in the world.
Aging will also put more pressure on health services. The number of people becoming seriously ill or dying prematurely from conditions such as high blood pressure and obesity has risen since 2000, underlining the huge challenge diseases linked to aging and lifestyle pose to overstretched health services. In an international forum on the Super Aging Challenge held in Japan in December 2022, it was reported that the aging of the world’s population has brought about an increase in cancer, dementia and other noninfectious diseases world-wide, giving rise to the problem of increased treatment cost. To reduce such burden, the pharmaceutical industry was working not only on the development of new drugs but also on the building of towns friendly to people with dementia, and the development of cancer-treatment support applications.
Another dimension cited by Jeremy Grantham in an opinion piece titled “The severe cost of the world’s baby bust” (Financial Times, March 14, 2021) is the impact of the environmental toxicants on the body’s hormonal system. According to him, the most frightening aspect of the baby bust is that it is not occurring entirely by choice. He admits that social changes like female empowerment and economic constraints contribute to the falling birth rate. He points out, however, that the actual capacity of human beings today to have children is in steep decline, as evidenced by a shocking decline in sperm count since 1970 and an equally rapid increase in age-adjusted miscarriage cases. In his opinion as a specialist in reproductive medicine, the most likely cause of this endocrine disruption is the highjacking of the human body’s hormonal system by environment toxicants.
Infertility is beginning to rise rapidly and, combined with the increasing age at which women in developed countries are having children, there is greater difficulty conceiving. The tens of thousands of artificial organic compounds used in everyday life are surely contributing to these effects. The detrimental health effects of some of these compounds, like bisphenol A, phthalates, and perfluorinated compounds are already well known. As was the case for leaded petrol and lead paint, we are poisoning ourselves and our environment. Together with changes in human behavior as regards marrying and choosing to have children, these pollutants in our environment are leading to a global baby bust of unprecedented proportions. As Elon Musk repeats almost ad nauseam, the whole world is headed towards an aging crisis whose implications are still gravely underestimated.
(To be continued.)
Bernardo M. Villegas has a Ph.D. in Economics from Harvard, is professor emeritus at the University of Asia and the Pacific, and a visiting professor at the IESE Business School in Barcelona, Spain. He was a member of the 1986 Constitutional Commission.
