Demography isn’t destiny. If population size was history’s major determinant, China might have conquered Europe in the 15th century, and Britain certainly would not have conquered India in the 18th.
Nor is population growth always a good thing, particularly in the absence of gains in productivity that keep a rapidly procreating people from starving. Yet population decline is rarely good news. The rise of Britain and then the US to positions of global dominance in the 19th and 20th centuries was in each case associated with rapid population growth. The slowing of that growth is not a cause for celebration.
Last week, I had the pleasure of attending the annual gathering of the Aspen Economic Strategy Group, the little brother of the longer-running Aspen Strategy Group. I went there expecting at least one enjoyable punch-up between the Federal Reserve’s critics and its current leadership. I was not disappointed. But the main event turned out to be a series of disquieting papers on US demographic trends and their implications. These turn out to be a big deal — and at first sight a rather bad one.
The rate of population growth in the US has been falling for nearly two decades. The resident population grew by only 0.1% in 2021, the slowest peacetime rate the country has ever experienced, and far below the roughly 1% annual growth rate recorded between the 1970s and the onset of the financial crisis in 2008. This slowdown is the result of three forces: rising mortality, declining fertility and falling net international migration.
The first of these is the least surprising. As is well known, the US has fared relatively badly during the Covid-19 pandemic, with more than a million deaths. Also familiar, but in many ways more shocking, are the data on “deaths of despair” gathered by Princeton University economists Anne Case and Angus Deaton, which include the devastating toll of opioid overdoses.
Less obvious is the decline in fertility. As Melissa Kearney of the University of Maryland and Phillip Levine of Wellesley College point out in a new paper for AESG:
Between 1980 and 2007, the general fertility rate (defined as the number of annual live births per 1,000 women of childbearing age …) fluctuated within a narrow range of roughly 65 to 70.3. Since then, it has plummeted, falling to 56.6 in 2021. The decline in the general fertility rate implies a decline in the current period total fertility rate (TFR) … [which] calculates expected lifetime births by assuming that women will follow current age-specific birth rates over their childbearing years. This measure is key to population growth. The U.S. TFR declined from 2.12 in 2007 to around 1.65 in 2020 and 2021, the lowest levels ever recorded. Since 2007 it has been consistently below the replacement level of 2.1.
Put simply, if the average woman has fewer than two children, then (other things being equal) the population is bound to decline. Strikingly, the decline in fertility has occurred across nearly all child-bearing ages, ethnic groups and education levels.
Kearney and Levine explore all the various theories that have been put forward to explain this baby bust and demolish most of them. For example, if it were just “the economy, stupid,” fertility would have recovered as the economy slowly picked up after the financial crisis. As for the theory that women are limiting family size because of anxieties about climate change, “the states in which Google searches for climate change have increased more are not the states in which births have fallen the most.”
Rather, the authors argue, couples are choosing to have smaller families because of changing priorities (e.g., women want more from their careers) and changing attitudes toward parenting, which have made child-rearing more expensive and time-consuming than it was a generation ago.
Kearney and Levine also argue, looking at the experience of other countries, that “pro-natalist policies, such as expanded child tax credits or more generous childcare subsidies, might at best have a modest effect on the aggregate U.S. fertility rate, and … are unlikely to improve it to replacement level.” The same applies to the state-level measures to restrict access to abortion in the wake of the Supreme Court’s ruling in Dobbs v. Jackson Women’s Health Organization, which overturned Roe v. Wade.
In other words, the baby bust isn’t about to end. And that’s probably not good because “a prolonged U.S. total fertility rate this low … would lead to slower population growth, which could in turn cause slower economic growth and present fiscal challenges.” Among these challenges are those facing the Social Security Administration, which is banking on an increase in fertility to keep its actuarial deficit manageable.
But what about immigration, a driver of North American population growth since the 1600s? The news here is not much better because (contrary to what you might think from watching Fox News) immigration, too, is down.
“Annual net inflows of migrants have fallen since 2016,” Tara Watson of Williams College argues in her forthcoming AESG paper, “and the foreign-born population has stagnated over recent years. While annual net immigration to the United States … exceeded 1 million people less than a decade ago, that number has fallen steeply: the U.S. Census reports net migration in 2019 of 477,000 people, and only 247,000 in 2020.”
The decline is due partly to “Trump-era policy decisions and rhetoric ... and COVID restrictions,” but also to a more gradual breakdown in the various channels of legal immigration.
Fact: “As of May 2022, the applications currently being processed from most countries for unmarried adult children of US citizens, the highest priority non-immediate relative group, had first been submitted before December 2014.”
Fact: The maximum number of employment-based applications accepted was set at 140,000 a year in 1990. The per-country caps also date back to 1990. “As a result, there are currently more than 700,000 Indian would-be immigrants who have secured employer sponsorship but remain waiting in the queue for admission.”
Fact: “The backlog of pending green-card and other permanent adjustment-of-status applications grew from 3 million in 2013 to 8.4 million in 2022. … Similar backlogs exist in temporary visa processing, with nearly half a million people waiting for a visa appointment … Approximately 1.6 million cases also await adjudication in immigration court, triple the 2016 number.”
To call the US immigration system “broken” is an understatement. On this evidence, it is a smoking wreck. Yet no significant legislative change has been achieved since 1996, despite repeated, abortive efforts to find bipartisan consensus. And Americans favor decreasing immigration further over increasing it by 38% to 27%, according to Gallup.
Again, this is not good news for the economy. As they tend to come to the US seeking work, Watson notes, “the foreign-born tend to participate in the labor force at a higher rate than do native-born Americans.” Though unskilled US-born workers probably do lose out to competing immigrant labor, on the whole, “immigrant inflows produce positive or null impacts on the average U.S. worker’s wages … Immigrant workers even make many U.S. workers more productive by allowing for more specialization.”
More importantly, immigrants are disproportionately innovative and entrepreneurial. “Immigrant inventors represent 23% of all granted patents, and these patents are of higher economic value on average than those granted to U.S.-born inventors. … First-generation immigrants create about a quarter of all new firms in the United States. … 45% of Fortune 500 companies were founded by immigrants or their children.”
Declining fertility, an aging (and somewhat unhealthy) population, and a dearth of skilled immigrants: Together these trends can only worsen the already severe fiscal problems that afflict the US.
As is well known, the rising costs of Social Security and Medicare relative to GDP — made worse by increasing health-care costs — have been a key driver of the deficits that have characterized the federal budget this century. No one should underestimate the magnitude of the problems that lie ahead in the absence of fiscal balance. The Congressional Budget Office projects that net interest payments on the federal debt will rise from 1.6% of GDP today to 8.2% by 2050.
I came away from sunny Aspen a lot gloomier about this country’s prospects than when I arrived. Not only do we have the worst inflation since the final phase of the 1968-82 “great inflation.” More profoundly, the demographic trends are not our friends. And it verges on superstition to expect a major improvement in productivity growth to come to our rescue, especially when measures of business dynamism (such as new firm creation and labor reallocation) are also trending down.
Does all this mean that the “declinists” are right after all, and our best years are behind us? Is it only a matter of time before we all admit that the “post-American world” has arrived, and the “Chinese Century” has begun? Should we just throw in the towel and let China have Taiwan?
Well, no. Because if you think we’ve got problems, I can assure you that those of America’s principal rival are worse. Much worse. And, unlike our problems, China’s do not have the solution that obviously exists for the US — namely immigration reform of the sort that has already been achieved elsewhere in the Anglosphere.
In the latest edition of its World Population Prospects, the United Nations Department of Economic Affairs offers various possible scenarios for countries’ populations. In the case of the US, both the low-fertility projection and the zero-migration projection see a decline in population by the end of the century of around 16%, from the current 336.5 million to around 280 million. But that is not the UN’s base case. In its medium-fertility variant, the US population rises 17% to 394 million by 2100. In a high-fertility scenario, it rises to 541 million.
By contrast, the UN offers no scenario in which China’s population does not decline. Best case, it falls by a fifth. Base case, it declines by 46%, to 771 million. Worst case it falls by nearly two thirds, to 494 million. (You will notice that would be below the end-of-century total for the US in the high-fertility scenario.)
As Nicholas Eberstadt and Peter Van Ness of the American Enterprise Institute have pointed out, this is major revision by the UN. Twenty years ago, the Population Prospects projected China’s population to rise from 1.28 billion in 2001 to 1.43 billion this year and then to keep rising to a peak of 1.45 billion in 2031. The 2031 peak was still there in the 2019 World Population Prospects. Now, according to the UN’s latest medium projection, the peak will be in just two years’ time and the 2050 population will be 100 million less than previously forecast.
The explanation is certainly not Covid, or any other source of increased mortality. The main reason for the change can be found in the most recent birth data published by China’s National Bureau of Statistics, which point to a “swan dive” in births since 2016, as Eberstadt and Van Ness put it. The paradox is that 2016 was the year the one-child policy — introduced by Deng Xiaoping in 1979 — was replaced by a two-child policy. The timing is indeed “curious — not to say counterintuitive.” So what is going on?
The Chinese government has stopped denying it has a demographic problem. Last month Yang Wenzhuang, the head of population for China’s National Health Commission, admitted that his country’s population would start to shrink before 2025, according to a report in the state-run Global Times. “This is an inevitable result of a long period of low fertility rate,” Huang Wenzheng of the Center for China and Globalization was quoted as saying. “It can be predicted that China’s birth rate will continue to shrink for more than a century.”
But even this admission understates the problem, according to Yi Fuxian of the University of Wisconsin at Madison, who has argued for years that we should not trust China’s official birth statistics. His book “Big Country with an Empty Nest” — which was banned in China when it was published in 2007 — predicted that the Chinese population would begin to shrink in 2017, not in the early 2030s. In 2019, Yi argued on the basis of vaccination and other data that China’s population had already begun to decline in 2018 (one year later than his estimate). Now he has been vindicated.
Earlier this summer, the Shanghai Police Department accidentally leaked the records of over 1 billion Chinese citizens. An anonymous hacker released a sample of about 750,000 of the stolen records. Yi’s analysis of this sample leads him to conclude “that post-1990 births continued to decline faster than I had predicted, and in fact did not peak in 2004 or 2011. That means China’s real population is not 1.41 billion (the official figure) and could be even smaller than my own estimate of 1.28 billion.”
Like many governments around the world, the Chinese government is trying to counter its baby bust. In May last year, the central government announced that all couples would be allowed to have up to three children, and launched a nationwide drive to boost the number of affordable nursery-care slots. According to the People’s Daily, new measures at the local level include tax deductions for expenses on children under age 3, fertility subsidies, extended maternity leave and favorable housing policies for couples with more than one child.
But such incentives are no more likely to be successful in China than they have been elsewhere in East Asia where similar plunges in fertility happened earlier (for example, Taiwan and South Korea). The root causes, as in the US, include the increasing educational and employment opportunities for women compared with the perceived costs of raising children. But in China the baby bust has other drivers.
First, marriage itself is out of fashion. According to a 2021 survey by the Communist Youth League, 44% of urban young women aged 18 to 26 say they don’t plan to marry, compared with 25% of urban young men. Asked for their reasons, 61% of respondents said it was “difficult to find the right person,” while 46% said that “the financial cost of marriage [was] too high,” and 34% said they didn’t have “the time and energy to get married.” Nearly a third said simply that they “did not believe in marriage.”
Such sentiments are understandable. Unlike in the US, where divorce has been in decline, in China it has surged in the past 20 years. All this helps explain the popularity of the Weibo hashtag “#WhyAren’tYouGettingMarried?” Pressuring their children to get hitched (a phenomenon known as “cuihun”) is what middle-aged Chinese parents do.
Yet China has a further difficulty: the chronic imbalance in the population between men and women, a direct consequence of the selective abortion of female fetuses that the one-child policy made possible. In 2018, there were 5.9 million more boys than girls aged 0 to 4, and 112 men aged 15 to 29 for every 100 women in that age group. That imbalance is only going to widen in the next 10 years.
In short, America has a fertility problem, but China’s is already (since 1991) worse. America has an aging problem. But China’s will soon (from 2034) be worse.
Does this mean the Chinese challenge to American primacy will simply fade away? Not necessarily. Most of us have heard of “Singles’ Day,” which happens on Nov. 11. This Chinese celebration of singledom is now the largest e-commerce event in the world. Last year the combined sales of Alibaba Group Holding Co. and JD.com Inc. totaled $139 billion, a new record. But the actual name in Chinese is guanggunjie, which means “Bare-Branches Holiday.”
Guanggun is not internet slang but a term dating back at least as far as the Ming dynasty to describe an unmarried man who does not add more branches to the family tree. In imperial China, the guanggun were often seen as troublemakers, even potential rebels. Today, Western scholars such as Valerie Hudson and Andrea Den Boer see China’s surplus of young men as a potential source of domestic and international conflict. Taiwan, here they come.
You might think this just goes to show that Elon Musk was right yet again. In a conversation with Alibaba founder Jack Ma at the World Artificial Intelligence Conference in Shanghai in August 2019, he called the baby bust. “Most people think we have too many people on the planet,” Musk said, “but actually this is an outdated view. Assuming there is a benevolent future with AI, the biggest problem the world will face in 20 years will be population collapse … not explosion, collapse.”
“I absolutely agree with that,” Ma replied. “The population problem is going to be [a] huge challenge. 1.4 billion people in China sounds a lot, but I think next 20 years, we will see this thing will bring big trouble to China.” (You can see why he fell out of favor with President Xi Jinping.)
Yet the odd thing about this conversation was where Musk went next. “The common rebuttal is like, ‘Well what about immigration?’” he said. “I’m like, ‘From where?’”
That question rather strangely overlooks the continent where Musk was born: Africa. It is important to remember that, while the trends are shockingly bad for East Asia, the UN doesn’t foresee global population collapse in the next 60 years, never mind 20. The world’s total number of inhabitants is still expected, according to the UN’s medium-variant projection, to rise from 7.88 billion this year to 10 billion in 2059, not peaking until it reaches 10.43 billion in 2086. Of that projected increase, 95% will be in sub-Saharan Africa.
Even if Musk buys the UN’s more pessimistic low-fertility scenario, in which the world population starts to fall in 2054, the population of sub-Saharan Africa keeps going up. Why there would not, in either scenario, be mass migration from Africa to the rest of the world is unclear. Either Musk expects African fertility to fall much faster than most demographers, or he foresees a massive Malthusian calamity hitting the continent. Given the dire implications of climate change for much of Africa, that may well be what he has at the back of his mind.
But let’s leave the question of Africa’s ongoing baby boom for a future column. In most of the rest of the world, the baby busts are already here or are fast approaching. It’s just that some countries are more bust than others. Fix immigration, and the US pretty much unbusts itself. China doesn’t have that option for the simple reason that almost none of the world’s would-be migrants want to move there.
Demography isn’t destiny, it’s true. But compared with the kerfuffle over Taiwan, it’s not diddlysquat either.
More From This Writer at Bloomberg Opinion:
• The Four Mysteries of Pelosi’s Troublesome Taiwan Trip: Niall Ferguson
• The World’s Cascade of Disasters Is Not a Coincidence: Niall Ferguson
• The Fed Hasn’t Fixed Its Worst Blunder Since the 1970s: Niall Ferguson
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Niall Ferguson is a Bloomberg Opinion columnist. The Milbank Family Senior Fellow at the Hoover Institution at Stanford University and the founder of Greenmantle, an advisory firm, he is author, most recently, of “Doom: The Politics of Catastrophe.”
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