How many times have we heard that not enough children are bad for the economy? True enough – but throughout history folks have cared more about faith, folk, and soil than any economy. Our ruling class has forgotten that. But maybe the general population has also forgotten, hence today’s birth dearth.
Another lesson forgotten: an economy should exist to serve the people, not the other way around. Years ago, Ross Perot tried to tell us that, but was practically laughed out of the US presidential race for doing so.
The lack of young people is changing the world economy. But it may change things in ways previously unforeseen. Some background:
Beginning in the 1980s, the global economy transitioned from an asset-based system to something more daring: a credit-based system, where everything hinges on debt financing, which enables much mischief. This led to the explosive growth of the Chinese economy.
In the 1980s the West was already in demographic decline, but there was nearly full employment, so no labour surplus. Less people meant higher wages, which is good for the common folk, but not good for the corporate bottom line. So to offset the economic effect of this demographic decline, there was China – with hordes of young people. They were poor young people who would work for peanuts.
The young workers of China (and other low-wage countries) meant corporate profits in the West. The youthful vigour of China and other third-world countries became the safety net for Western welfare states.
Along with outsourcing cheap labour abroad, Western globalists also imported cheap labour at home. This provided more workers, drove down wages, destroyed social cohesion, and was quite profitable for the ruling class. To sell the public on this ruinous scheme a whopper was begotten: “Diversity is our strength.” One dare not disagree – especially if one’s career has anything at all to do with big business, government and education.
As with any pyramid scheme, it was essential to find new “investors,” in this case more cheap labour, which is beginning to run out. China’s economy began transitioning from one primarily driven by cheap-labour exports to one fed by domestic consumption. So Chinese labour is not so cheap anymore because there is less of it (thanks to low fertility) and China’s standard of living has risen considerably.
The multitude of Chinese entering retirement cannot be replaced. In America, retiring Boomers will not be replaced. The birth dearth is taking its toll.
So Western globalists must look even further afield for cheap labour as China prospers (for now) while its ageing society will generate less revenue to provide for the elderly and lose its vigour. Just look at Japan.
The Western ruling class has made out extraordinarily well from China’s rise, while the American middle class is just about on life support. China, including its rising middle class, has done quite well by this arrangement. It was all based on debt financing, heavily dependent on cheap labour. More people are needed for the show to go on. And they are not being born.
So the colossal debt financing regimen cannot go on forever. Ultimately, it will result in the kind of “day of reckoning,” that Pat Buchanan predicted in the epigraph of his 2007 book of that name.
While Pat was talking primarily about foreign policy, he and the rest of us know that foreign policy and economic policy are but two horns of the same bull.
This unsustainable economic model – credit based (debt) rather than asset based – is slowly unravelling: too much debt, and not enough young people to service the debt and generate wealth. The only place on the planet with hordes of young people is sub-Saharan Africa. China is slowly but surely locking up the dark continent’s natural resources, broadening its global influence. Imperial overstretch restrains US influence there. For a multitude of reasons Africa has been resistant to economic development, and there are no indications that will change in the foreseeable future.
Endless credit expansion led to the 2008 meltdown where too-big-to-fail Lehman Brothers went down the tubes. The US has never fully recovered. Now one of the largest developers in China, Evergrande, is belly up with over US$300 billion in liabilities. This has rocked the ruling Communist Party to its roots and could well set off a 2008-type scenario in the Middle Kingdom. Already the financial markets are wobbling anew.
Thus the two largest economies on the planet, the US and China, are somewhat shaky at this point. Why? When you strip away everything else, the root cause is a shrinking labour pool, caused by below-replacement fertility. Thus debt financing is failing.
So the day of reckoning is nigh. China is in a much better position to withstand a global economic winter than the US. Yes, China has its problems, but China’s debt does not come anywhere near exceeding GDP and China is not saddled with non-revenue producing military assets throughout the globe. As history teaches us, troubled times are fraught with danger.
All of humanity’s brilliant geopolitical machinations, debt schemes and social engineering do not change the bottom line: Demography is Destiny.
You can’t fool Mother Nature.