Last week Paul Krugman posted an opinion piece in The New York Times entitled The Problem(s) With China’s Population Drop. In the article, Krugman begins by pointing out that there are some discrepancies in knowing if what the Chinese say is true or not. He says "Many observers are skeptical about Chinese data; I’ve been at conferences when China released, say, new data on economic growth, and many people responded by asking not “Why was growth 7.3 percent?” but rather “Why did the Chinese government decide to say that it was 7.3 percent?”
As the article continues, Krugman talks about the issues that arise in China's population decline, despite overpopulation being a prevalent topic in the 1960s and 70s. With this fear, the Chinese government enacted the now-famous one-child policy, which was a catalyst for the two major issues facing the Chinese economy.
One of the first major issues is that the Chinese population is aging. The problem arising from this is that the dependency ratio on government aid is skyrocketing, with relatively small younger generations having to back this up by working and paying taxes. This is also an issue that we are seeing in the United States as well.
Another issue is that due to the aging population, the overall spending curve is shifted to the right drastically. This is done in order to keep the Chinese at the Full-Employment point. Doing this hinders the amount of spending that can be set aside for investments.
Despite this issue though the Chinese government has been able to stabilize this issue by creating extremely high rates of investment, which has allowed them to grow from being "a poor, developing nation into an economic superpower in just a few decades."
https://www.nytimes.com/2023/01/17/opinion/china-population-economy.html
5 comments:
Age has become a big problem worldwide as "boomers"transferred their money out of retirement accounts and are consuming. This massive transfer of wealth has hurt markets as market caps across many companies and sectors have dropped tremendously. The again global population will have bad effects over the next couple years as firms will look to outsource that work to machinery as technology is advancing and less people are entering the labor force than exiting.
We are in a time where age and living styles are changing drastically which impacts the economy. Not only are the 'boomers' going into retirement and creating loss of workforce employees. This next generation some aren't wanting children which will greatly impact the future of the economic development. Overall, age and living styles are changing and therefore the economy will have to change in order to support the populations.
China's one child policy is also to blame for the population drop. Even though that rule is no longer in effect, they still have low birthrates. It would be interesting if the government decides to introduce some kind of incentive (since we know people respond to incentives) to encourage the Chinese to have more kids.
Hello Kaylee,
Today in the U.S. we are seeing a large increase in the aging population. This is due to the large number of baby boomers that are now retiring and or seeking retirement homes. Both of these necessities for aging people involve government aid such as social security and the money needed to build more retirement homes and the expenses that come with labor, capital, and maintenance.
However, it is important to note that the population that is most likely to spend the most amount of money is the aging population such as the people in the U.S. and China that you are describing. These people are large contributors to the economy and have spending habits that benefit the overall economy. With that being said it may be seen as a benefit to have these large groups of aging populations. However, a setback would be less labor in the workforce which increases the unemployment rate. Typically meaning that wages increase as well, following an increase in prices.
Overall, really good post Kaylee.
-Ryan Stefancin
Another grave issue created by the enactment of China's one child policy and the subsequent aging population is the fact that the labor force available for secondary sector production-based jobs is rapidly decreasing, which may have far-reaching negative implications for the Chinese economy, which had been primarily built upon secondary sector production since the Deng Xiaoping era.
This demographic shift may definitely be a factor in the Chinese economy's shift towards the tertiary and quaternary sectors, which tend to be much less labor intensive than primary and secondary sector economies.
Post a Comment