Managing a falling population can get complicated.
China’s population declined last year, for the first time since the mass deaths associated with Mao Zedong’s disastrous Great Leap Forward in the 1960s. Or maybe it would be more accurate to say that China has announced that its population declined. 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?”
In any case, it’s clear that China’s population is or soon will be at a peak; the best bet is probably that population has been falling for several years. But why consider this a problem? After all, in the 1960s and 1970s, many people worried that the world was facing a crisis of overpopulation, with China one of the biggest sources of that pressure. And the Chinese government itself tried to limit population growth with its famous one-child policy.
So why isn’t population decline good news, an indication that China and the world in general will have fewer people placing demands on the resources of a finite planet?
The answer is that a declining population creates two major problems for economic management. These problems aren’t insoluble, given intellectual clarity and political will. But will China rise to the challenge? That’s far from clear.
The first problem is that a declining population is also an aging population — and in every society I can think of we depend on younger people to support older people. In the United States the three big social programs are Social Security, Medicare and Medicaid; the first two are explicitly targeted at seniors, and even the third spends most of its money on older Americans and the disabled.
In each case, the funding for these programs ultimately depends on taxes paid by working-age adults, and concerns about America’s long-term fiscal future arise largely from a rising old-age dependency ratio — that is, a rising ratio of seniors to those of working age.
