Monday, November 20, 2006

Japan Turns a Demographic Corner

The Washington Post has noted that Japan is now the first advanced country undergoing actual population decline as a result of years of plummeting fertility.

With good reason, I think, I tell my students that collapsing demographics are a substantial problem for most societies undergoing it. But Fred Hiatt, the author of the piece linked above, quotes Japanese government officials as saying it may all work out:

In theory, the government is dedicated to reforming this. In practice, its philosophy seems aptly represented by Deputy Chief Cabinet Secretary Hakubun Shimomura, who said this month, when pressed about long waiting lists for public nursery schools, that the problem would be solved if mothers would only "stay at home and raise their children."

When I asked Prime Minister Shinzo Abe last week about this comment, he diplomatically avoided contradicting Shimomura but said his aim is to provide choices so mothers can work or stay home as they see fit. But he also made clear that he is focused on the coping rather than the preventing: "Even considering the decline in the population, I am convinced Japan will be able to continue on a path of growth," he said.

The trick will be "innovation," Abe said, and economic reform. In fact, robots and other ways to improve productivity are one of four possible routes to economic growth despite an aging population. The others would be making better use of women; immigration, which has increased slightly but remains unpopular in this ethnically cohesive country; and keeping the elderly working longer. According to Naohiro Ogawa, a population expert at Nihon University, if every healthy elderly person worked, Japan's total economy in 2025 would be worth 791 trillion yen instead of the currently projected 619 trillion yen, an increase of 28 percent. Just raising the retirement age from 60 to 65 would produce a 12 percent increase.

Maybe. But who will start the companies that create the robots? Who will take the risks that create the wealth that allow the Japanese government taxpayers to take care of the elderly? Historically, this is a job for the young. Most of history’s great world-changing entrepreneurs get their start as young people. The young tend to be less risk-averse, and tend when they start their businesses to be in need of other young people who don’t mind the high-risk, deferred-gratification, 60-hours-a-week environment that is so essential to a successful startup. Lost in much of the discussion of whether or not declining populations can be managed is the role of the young in creating technological progress. I don’t doubt that Japanese technology can minimize the harm to its elderly from a declining population of working-age people available to take care of them. There are already machines available that bathe older people, because there are so few workers available. This is a classic example of the substitution of machines for labors when the latter is scarce. But who in Japan will create the future as children vanish?

It is probably true that Japan is in better shape than Europe, despite the lowest-low fertility of the former, because Japan is surrounded by vibrant economies rather than collapsing civilizations. Europe has the bad luck to be both unwilling to reproduce itself and surrounded by societies with incredibly high population growth rates combined with an inability to give these rapidly growing populations meaningful opportunity. And so the young and most ambitious among them migrate to Europe. Only Europe is not in a position to give them any opportunity either. Japan, at least, does not have this problem.

I am a demographic pessimist, who believes that the fertility trends in Europe and Japan (and many other countries for that matter) portend ill for human progress and for the continued vitality of societies undergoing them. One can see the signs of demographics driving history all around us. The Shiites in Lebanon have accrued so much power in the last 30 years because of demographics; much of the turmoil in the Balkans in the 1990s was driven by demographics; Francophone Québecois were unable to obtain independence in their 1991 referendum because they had had so few children in the previous 30 years. It seems that populations that shrink are populations that are doomed, but I must confess that we just don’t know; never in human history have we had societies that choose to shrink (as opposed to undergoing catastrophic population declines because of war or famine). Perhaps it will all work out. But I wouldn't bet on it.


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