China's insane one-child policy is crumbling
Peter Zhang
What goes around comes around is only a colourful way of saying that actions have consequences. Unfortunately, fate has little to do with justice, meaning that it is usually the innocent that pay for the mistakes of the powerful.
An example was the absurd Maoist policy in the 1960s of ridding the countryside of grain-eating birds. Mobilised like a gigantic army, thousands upon thousands of peasants advanced in lines across the countryside banging pots and pans, driving before them sparrows, crows, etc, until the creatures dropped with exhaustion only to be beaten to death.
Truckload after truckload of dead birds were carted away while smiling peasants (peasants were always smiling in those days: it was the healthy thing to do) continued with this brilliant piece of pest control.
Having rid the countryside of counter-revolutionary birds, a colossal army of countless insects (probably under the control of the CIA) rose up and laid waste the peasants' crops. With no birds or artificial pesticides to stop them some of the Lord's most humble creatures destroyed Mao's grand economic plan.
Of course, the peasants starved while the Great Helmsman ate his fill and cavorted with his peasant concubines. And so it ever was in China. The moral of this tragic tale is not that the poor and the helpless suffer at the feet of the powerful, nor is it the absurd green idea that nature knows best.
The real moral is the enormous dangers of centralised control. It was not multinational corporations who visited this tragedy on China but an arrogant tyrant and his lieutenants who thought they knew best.
Unfortunately, Mao's tyranny and arrogance lived on in the dreadful form of the barbaric one-child policy. It too has similarities to Mao's campaign to rid the countryside of birds. Only now are some of those turtle eggs in Beijing finally waking up to the fact that the policy is creating enormous imbalances in the population as nature relentlessly imposes its will on the country.
Three forces are now changing the composition of the population with potentially dire political and economic consequences. They are: 1) fertility dropping below the replacement level, 2) a quickly aging population and 3) a male population that exceeds the female population with the gap still rapidly growing.
It has been estimated that these trends will mean that about 25 per cent of the population will be more than 60 in about 30 years.
China's problem in the future will not be too many people but not enough! With insufficient capital and an aged population the social and economic stress could be enormous.
Beijing decided to control population growth while working families performed the function of providing sufficient social security. But this required enough young hands to create a large enough surplus to care for the elderly.
Those young hands are shrinking in relative terms. Of course, the situation would probably have time to right itself if China's capital structure was large enough to raise productivity to a level that would remove the burden of an aging population.
That possibility, as far as I know, is not even being seriously considered by the regime, despite the population's high savings rate. Savings merely become cash balances in the absence of effective market institutions to allocate them. And this, in my opinion, is still largely the case in China. Higher taxes are no solution because the problem is insufficient production, not revenue.
What is not generally recognised is that China's fertility rate was already falling before the one-child policy was implemented. So why the policy? Because central planned states have no negative feedback mechanisms.
Everything must go according to the plan, even when it is brazenly obvious that it is not working. These plans are the political equivalent of a political perpetual motion machine that continues to operate until it just falls to pieces, by which time enormous damage has been done.
Well, you might ask, if that is so how did the one-child policy create any imbalances? The answer is tragically simple. Apart from aggravating the fertility trend the policy made girls the main victims.
They were sacrificed in favour of boys. An official confided to me that figures indicate a situation where there are 1.2 or more men for each woman is emerging. That means millions of lonely men with no wives, families or pensions. These facts are beginning to persuade some officials that the one-child policy should be completely abandoned.
What China really needs is genuine economic growth. If the capital structure was expanding, in accordance with the social rate of time preference, at a rate that on average raised real incomes by 10 per cent a year they would more than quadruple in 30 years.
The real danger is that having ditched central planning Beijing will implement Keynesian policies. I believe that would only guarantee another tragedy.
BrookesNews.Com
Monday 15 November 2004