Demography is the Key to Europe's Sluggish Economy

Europe's relatively dismal economic picture is typically framed in terms of European Central Bank policies (its lack of "quantitative easing" to stimulate growth) and debt in Greece, among other things. But as readers of my book know, the aging population creates a set of significant economic problems that must be confronted or the economy will go into the toilet. This is the point made in a NYTimes Op-Ed today by Arthur C. Brooks, President of the American Enterprise Institute, building on research by their in-house demographer, Nicholas Eberstadt. Brooks's conclusion is one with which I concur (even if I don't necessarily agree with everything that comes out of the American Enterprise Institute):

It is true that good monetary and fiscal policies are important. But the deeper problems in Europe will not be solved by the European Central Bank. No matter what the money supply and public spending levels, a country or continent will be in decline if it rejects the culture of family, turns its back on work, and closes itself to strivers from the outside.

These are exactly the things I was discussing a few days ago with respect to population decline in Japan. As a continent, Europe has not yet teetered into depopulation, but it is on the precipice. Indeed, Eastern Europe is already in negative territory, according to UN demographers. Low fertility and ambivalence, if not hostility, toward immigrants are key elements. But the key, in my mind, is a factor that Brooks did not discuss--the status of women. Brooks interprets France's replacement-level fertility (Europe's highest) as follows:

France has risen to exactly two children per woman in 2012, from 1.95 in 1980, an increase largely attributed to a system of government payments to parents, not a change in the culture of family life. Is there anything more dystopian than the notion that population decline can be slowed only when states bribe their citizens to reproduce?

This is not an accurate representation of French policy. Yes, mother's do receive a subsidy, but the more important aspects of French policy are state-sponsored day care and the legal right that women have to resume their place in the labor force after childbirth, when the children turn three and can go into publicly-funded École Maternelle (nursery school). Making it easier for women to combine children and a job is why France's birth rate is as high as it is, and it is the same reason that puts Sweden right behind France in this regard. In both countries, however, the same socialist spirit that has helped women have children and work has encouraged an earlier-than-desired retirement age. As I pointed out in my most popular blog post of 2014, working long and saving is the key to a successful old age, whether we are talking about an individual or a nation as a whole.

Note that I'll be discussing these issues, especially as they relate to Japan, on NPR affiliate station KPCC in Los Angeles, tomorrow (7 January). http://www.scpr.org/programs/airtalk/2015/01/07/41011/japan-s-shrinking-population-highlights-greater-gl/

Feed the World by Eating Less Meat

I recently discussed an article reminding us how much food we need to produce over the next 40 years to feed an average population of nearly 9 billion during that time. In Chapter 11 I note that one way to accomplish this task is for humans to reverse the trend toward eating more meat per person. This does not have to mean being vegetarian (although that would actually be best), rather it means limiting the meat intake. Last week's Economist had a genuinely scary story about the rise in pork consumption in China--calling it "a danger to the world."

Until the 1980s farms as large as Mr Ouyang’s were unknown: 95% of Chinese pigs came from smallholdings with fewer than five animals. Today just 20% come from these backyard farms, says Mindi Schneider of the International Institute of Social Studies in The Hague. Some industrial facilities, often owned by the state or by multinationals, produce as many as 100,000 swine a year. These are born and live for ever on slatted metal beds; most never see direct sunlight; very few ever get to breed. The pigs themselves have changed physically, too. Three foreign breeds now account for 95% of them; to preserve its own kinds, China has a national gene bank (basically a giant freezer of pig semen) and a network of indigenous-pig menageries. Nevertheless, scores of ancient variants may soon die out. 

But China’s pigs are far from the only victims of their popularity. Demand for them worries the Communist Party, underpins what will soon be the world’s biggest economy and threatens Amazon rain forests. 

The Communist Party prizes self-sufficiency in food. Most of the pigs China eats are indeed home-grown. But each kilogram of pork requires 6kg of feed, usually processed soy or corn. Given the scarcity of water and land in China, it cannot feed its pigs as well as its people. The upshot is that Chinese swine, which previously ate household scraps, increasingly rely on imported feed. 

Ms Schneider reckons that more than half of the world’s feed crops will soon be eaten by Chinese pigs. Already in 2010 China’s soy imports accounted for more than 50% of the total global soy market. From a low base, grain imports are rising fast as well: the US Grains Council, a trade body, predicts that by 2022 China will need to import 19m-32m tonnes of corn. That equates to between a fifth and a third of the world’s entire trade in corn today.

So, that gets us back to the story of why people want to buy agricultural land. The land grab is not about feeding the world--it is about making money selling animal food to rich customers. 

Can We Feed the World in the Future?

This week's Economist has a story on the value of land and its relationship to our ability to grow enough food to feed future populations. The article starts off this way:

IN THE next 40 years, humans will need to produce more food than they did in the previous 10,000 put together. But with sprawling cities gobbling up arable land, agricultural productivity gains decreasing, and demand for biofuels increasing, supply is not keeping up with demand. Clever farmers, scientists and entrepreneurs are bursting with ideas. But they need money to make this jump.

Financiers more often found buying and selling companies have cottoned on to the opportunity. Farm gates have traditionally been closed to capital markets: nine in ten farms are held by families. But demography is forcing a shift: the average age of farmers in Europe, America and New Zealand is now in the late fifties. They often have no successor, because offspring do not want to farm or cannot afford to buy out family members. In addition, adopting new technologies and farming at ever-greater scale require the sort of capital few farmers have, even after years of bumper crop prices.

So, demography is key here in two ways--population pressure on the food supply, and the aging of farmers in the more developed countries. But what about that blockbuster first sentence? Is it really true that "in the next 40 years, humans will need to produce more food than they did in the previous 10,000 put together."? Before making my own back of the envelope calculations, I checked the comments on the story to see if anyone had questioned this claim. No one had--all who commented apparently accepted it is as fact. 

The calculation is pretty straightforward: average population per year times average calories per day times days per year times the number of years in question:

For the next 40 years, the average projected population by the UN Population Division is 8.7 billion per year. In Table 11.3 of the 12th edition I provide data from the FAO showing that the average food consumption in the world is about 2,830 calories per day. Assuming those numbers, we get a demand figure of 3.6E+17 for the next 40 years. For the past 10,000 years we obviously know less. Looking at Figure 2.2 in the 12th edition we can make a rough calculation that the average world population over the past 10,000 years was 100 million (going from 4 million in -8000 to 7.3 billion in 2014). Even if we assume a desperation level diet of 1,500 calories per day year per person, that produces a demand figure of 5.5E+17--well above the figure for the next 40 years. So, I'm not sure where the numbers come from for that beginning sentence. At the same time, this does not diminish the task at hand, and it is my guess that investors buying land for the purpose of making money, rather than growing food, is not likely to end well.

I note that the Economist Group is hosting a conference on "Feeding the World 2015" in Amsterdam in February. Perhaps we will have more insight after that.

Can Women Save Japan?

Thanks to Justin Stoler for pointing me to a story on NPR yesterday highlighting Japan's drop in population size last year:

The figures released by the country's health ministry showed that the estimated number of people who died in 2014 was 1,269,000, about 1,000 above the previous year. The number of births was 1,001,000, down about 29,000 from 2013. The total population declined by a record 268,000. 

Japan's aging and shrinking population has been a concern since the 1970s, when the number of newborn babies hit more than 2 million annually. The figure dropped below 1.5 million in 1984 and below 1.1 million in 2005...Those 65 and over are expected to make up nearly 40 percent of the population in 2060. That could mean tough economic times for the world's No. 3 economy.

Japan was the first Asian nation to industrialize--starting back in the 19th century--and it used the demographic dividend of a rapid drop in the birth rate after its military defeat in WWII to become a world economic superpower. But fertility has been below replacement level since the mid-1970s because traditional attitudes make it very difficult for women to have a family and a career, and women have often chosen the latter over the former. As today's NYTimes reports, Prime Minister Shinzo Abe is trying to change this by, among other things, making day care more available for working mothers. 

In a country where juggling work and family has long been especially difficult, Mr. Abe has pledged to ease the way for women like Ms. Kitajima, with more state-funded child care and other measures to foster “a society where all women shine.” Tackling the nation’s shrinking population and declining labor force by encouraging working women is part of his broader effort to re-energize the economy, which is looking especially unsteady after Japan unexpectedly fell into a recession last quarter.

The article notes that these reforms face a lot of opposition in a society that is still very tied to the idea that men make the money and women make the babies. Indeed, clinging to traditional ideas of society is also the reason why Japan's demography is not influenced by immigration--foreigners are largely kept out in order to preserve the old racial/ethnic/cultural order. As Dr. Phil used to famously say: "How's that working for you?" 

What Was Hot in 2014?

As I do on New Year's Day each year, I have taken a look back at the most popular items in the past years. Who are the winners among the more than 300 that I posted in 2014, based on the number of hits on each one? Here they are:

1. By a wide margin, the biggest hit of 2014 was about the road to successful aging:
http://weekspopulation.blogspot.com/2014/10/work-long-and-save-key-to-aging.html

2. Migration lessons from the World Cup in Brazil came in second (I actually did a double-take remembering that the World Cup was this past year--a lot has happened since then):
http://weekspopulation.blogspot.com/2014/06/world-cup-offers-its-migration-lessons.html

3. Migration was also the topic of the third most popular post, although in this case it referenced the global migration flow maps put together by the Vienna Demographic Institute:
http://weekspopulation.blogspot.com/2014/03/visualizing-global-migration-flows.html

4. The rather sad story about the demographics of Puerto Rico was fourth on the list:
http://weekspopulation.blogspot.com/2014/02/the-dismal-demographics-of-puerto-rico.html

5. Aging was back in the spotlight for the fifth most popular post, which appeared on April 1st, but it was no April Fool's joke--it was about aging in Spain:
http://weekspopulation.blogspot.com/2014/04/playgrounds-for-elderly-spain-prepares.html

6. Only a few days later I posted a fairly lengthy piece on Russian demographics which are, in my opinion, important for our understanding of Putin's political maneuvering:
http://weekspopulation.blogspot.com/2014/04/russian-demographics-who-to-believe.html

7.  My link to the Population Reference Bureau's 2014 World Population Data Sheet was seventh on the list, and I'm glad to see that it is still very popular. In the old days, it was one of those things that I always had in my briefcase, and I always required students to buy--"never leave home without it!" Now, you can "carry" it with you on your mobile device.
http://weekspopulation.blogspot.com/2014/08/prbs-2014-world-population-data-sheet.html

8.  The number of Muslims in India was eighth most hit upon. You could win a lot of bets at bars, I'm guessing, by asking people which country in the world has the second greatest number of Muslims (you might even win most of the time if you asked who was #1 in the category):
http://weekspopulation.blogspot.com/2014/03/how-many-muslims-are-in-india.html

[Note--if you are into quizzes and have an iPhone or iPad, check out the PopQuizzes on my iPhone app--see above for the link, if you don't already have it]

9. I was in Copenhagen when I posted the ninth most popular item about the new surge out of Syria. Danes, like other Scandinavians, are very accepting people, although of course in a relatively small country there is only so much room for foreigners:
http://weekspopulation.blogspot.com/2014/09/new-surge-out-of-syria.html

10. The tenth most popular story takes us back to the Indian sub-continent, to news that fertility in Pakistan is not declining as quickly as most demographers had projected:
http://weekspopulation.blogspot.com/2014/01/pakistans-birth-rate-not-declining-as.html

While this is technically a look back, most of these stories will still be affecting us in 2015--as will the others that I have posted that didn't make the top ten list.

Happy New Year!