The great wonder of over-population is that people actually believe in it. Less developed countries (LDCs) are suffering from over-population, goes the common mantra. If they wish to advance economically, people in parts of Africa, Asia and Latin America must be content with fewer children. In fact, LDCs have not too many people, but too few. Overpopulation is a myth, and a silly myth at that. Just look at the real world. 50 years ago, Hong Kong, Singapore and South Korea were underdeveloped spots with significant unemployment problems and practically no natural resources. Now they are thriving and affluent, with no obvious resource problem in sight. This is in spite of some of the highest population densities in the world. In contrast, Africa and Latin America are among the most sparsely populated areas on the entire globe, and endowed with the greatest natural wealth.

The population control lobby

Unfortunately, if the overpopulation theory is not backed up by reason and evidence, it is supported by plenty of cash. At least since the 1974 Kissinger Report of the United States government, billions of dollars have been poured into funding any kind of activity that supports the population control message, ranging from academic publications to media programs, films and even popular music. Population control thwarts development and advances US economic interests.

Piles of money come from the US State Department's Agency for International Development (USAID), the UN Fund for Population Activities (UNFPA) and the World Bank. They also channel funds to private organisations like the International Planned Parenthood Federation, Pathfinder, and the Population Council. Their policy goals – abortion, contraception, lower fertility rates – are masked by euphemistic language, including "family planning" and "reproductive health."

Nothing wrong with planning and health, but plenty wrong with legalising and funding the killing of innocent children yet unborn. Occasional forced sterilisations in rural areas are a dismal reality, too.

These methods are well known. But there is a more subtle form of population control. It is called pension policy and arguably it is even more effective.

Old-age security and pensions

What do pensions have to do with population control? A lot, actually. As several economists have shown, the establishment of public pay-as-you-go (PAYGO) pension schemes is among the main reasons for the rapid decline in birth rates during the 20th century. Cultural reasons played a role in that development, but public pensions sealed the coffin.

What a public PAYGO scheme does is to transfer money from current workers to current grannies. This is something that families and extended families have done for millennia. In the modern welfare state, the government has quite simply replaced the traditional family. The family is no longer necessary. Besides, compulsory pension payments penalise those who have more children, because they must finance the contributory base of future pensions. Having few or no children gives a cheaper free ride.

In Europe or the US low fertility rates may have been an unintended consequence of benign welfare policies. However, one countries is known to have used pensions deliberately in its anti-family battle: the People's Republic of China. In the early 1980s, China self-consciously instituted formal pension schemes in rural areas so as to fortify its infamous one-child policy. Ironically, the Chinese pension system is now a big mess, and rural areas continue to be the strongest rebels against the one-child policy. Large families are essential to their economy and social security.

That is also true of other LDCs, especially in Africa. Despite a forceful push for contraception and abortions, these countries take pride in high total fertility rates and population growth. External technologies only go so far, because people in LDCs are just too keen to have kids.

They want large families, because it is economically rational. Raising children has short-term costs but long-term benefits. In LDCs, children start earning soon and will do so for years to come. Most importantly, children are the prime source of social insurance and old-age security for the vast majority. In most LDCs, more than 90 per cent of the population has no formal pension coverage. As the population economist Julian Simon once put it, Westerners who think poor people cannot make rational fertility choices are simply ignorant, arrogant or both.

Anti-family World Bank

This is what the World Bank wants to change. As long as 20 years ago, the Bank's 1984 World Development Report explicitly stated that social and old-age security is a major reason why people have large families in LDCs. If the Bank wished to see a permanent reduction in birth rates, it must alter the socio-economic conditions.

The World Bank has now devoted substantial resources to this end. In the past 10 years, it has become the single most influential player in global pension reforms. It is pushing for wider pension coverage and for providing tools for long-term pension policies in a wide range of countries.

Of course, not everything the World Bank does is evil or harmful. Indeed, its contributions to pension reforms have often been very valuable. There is just one defect: the approach of the Bank undermines the family.

More specifically, what the World Bank proposes for governments is a three-pillar model of old-age security. It comprises a public PAYGO system, a mandatory savings system, and voluntary savings. In this model, families play no role. This is rather surprising, given that the extended family is the only source of social and old-age security for about 90 per cent of individuals in LDCs. This was noticed by the Bank's Independent Evaluation Group which criticised the pension reform agenda for failing to understand and respect the ordinary socio-economic conditions of LDCs.

It could be just an accident. There is no doubt that many individuals at the World Bank have the best intentions in the world and are genuinely concerned about poverty in LDCs. At the same time, the Bank's track record on the global low-fertility agenda is beyond doubt.

Towards a pro-family future

A different, pro-family approach is needed. It will not seek to replace the existing and well-functioning family-based system of social insurance. It will instead build on and reinforce those social structures and customs that work. It will also help people to save, not by forcing people to participate in unreliable public schemes, but by providing the necessary legal and institutional framework.

The experience so far with formal pension schemes in LDCs has been dismal. In many countries they have been associated with mismanagement, corruption and fraud. In India, the public sector scheme is running a massive implicit debt. In Nigeria, various groups have suffered hardship and poverty as the government has failed to pay their promised pensions. There is no need to extend such systems further. In fact, countries would be better off without them.

The World Bank is now promoting compulsory savings schemes as an alternative to governmental schemes. Unfortunately, this is a recipe for disaster. Savings schemes can only work in an environment of developed financial markets and most LDCs lack the institutional capacity to cope with them. The risk of bubbles and unstable markets is a minor concern in comparison with a bigger one: whenever there is a large pile of money sitting somewhere, one can expect troubles ahead.

The cause of these troubles is the same as the cause of general poverty in LDCs. This is what reforms should target. These people do not need grandiose Western-style schemes that do not work. They need an environment that fosters initiative, enterprise and private wealth accumulation. They need more trade and less government, more private property and fewer public programs. When these are achieved, LDCs will have higher incomes and better old-age security – not by having fewer children but by having more of them.

Smaller families will not help these countries, because the greatest economic resource in the world is man, his creativity and ingenuity in the face of life's challenges. This resource is yearning to be set free.

Oskari Juurikkala is a research fellow at the Institute of Economic Affairs, UK, and legal counsel of Magnus Minerals, Finland. This article was written as part of the IEA Empowerment Through Savings program. Contact him at oskari.juurikkala@gmail.com.