In China there is an old parable about an eight-year old son in a poor family who wants his parents to sleep well…
Given the time of year, there was the constant buzz of mosquitoes in the air, the all-too-familiar bites and slapping as the hungry bloodsuckers landed for their feast, but the family could not afford mosquito netting. So to assist his parents, the boy sat shirtless all night, trying to draw the mosquitoes to his bare skin so his parents could rest easier.
One day the father awoke before the son could put his shirt back on. He saw the welts and knew what had happened.
The story spread through the village and was eventually reported to the authorities, who were so impressed by the boy’s devotion they granted him a scholarship to the academy. They also gave the family mosquito netting.
This story is one of 24 Filial Exemplars in China. They’re like our own Grimm Fairy Tales. In each Exemplar, the children sacrifice for members of the older generations.
The reason I’m telling you about them is because the Chinese government recently updated these 24 stories…
The government replaced displays of devotion by drawing mosquitoes away with suggestions to take your aging parents on vacation, or buy them health insurance.
The government did not go down this path because they want to encourage family unity. It did it for more selfish – a.k.a. survival – reasons.
You see, without the support of the children, the Chinese government cannot possibly support the parents. The numbers are simply overwhelming…
In 1982 there were 85 million Chinese people over the age of 60 (5% of the population). At the same time, there were 342 million kids under the age of 14 (33% of the population).
In 2010 the number of 60-plus-year-olds had grown to 85 million, or 8.8% of the population, while the number of children had fallen to 222 million, or 17% of the population.
This was all on purpose. The Chinese One-Child Policy is well known, and it worked. The economy was able to shoot higher, fed by a huge generation of workers (15-64 year-olds), without the economic drag of children.
But now the dark side of this policy is coming back to haunt the Chinese. Not only are there many fewer children to support aging parents, but those children have often moved hundreds of miles away to pursue work. The aging population in China is largely on its own, and the government has scant resources to help them.
In a time of slowing economies around the world, China has kept its economic engine on track by fueling internal growth through capital spending.
As exports have slowed due to falling demand in the euro zone, the U.S., and elsewhere, the Chinese government has continued funding internal projects. The nation has built thousands of miles of roads, numerous dams, power plants and skyscrapers. While the natural forces turning the wheels of progress are in play, they are certainly getting a very large helping hand from the government.
This has left little in terms of resources to be set aside for the growing demands of the elderly in the years to come. The national healthcare system in China has recently been revamped, but it is not generous… and is arguably insufficient.
As for national retirement, the funding is laughable because local politicians have raided the coffers. This leaves the ever-dwindling ranks of children on the hook to care for their parents, no matter how far away they are.
This connection became even stronger – in a legal sense – when the Chinese government made it possible for aging parents to sue their children for better care.
The problem is the rest of the world is not simply a spectator to this fight. The Chinese economy consumes large amounts of natural resources purchased around the world as it builds products for export and engages in local capital spending. At the same time, much has been made about the explosion in spending that will happen when Chinese middle class consumers break open their piggy banks and start chasing the Western dream of ever-rising consumption.
What if both of these trends hit the brick wall of demographics?
What if much of the resources currently earmarked for internal expansion to keep the factories humming and workers whistling have to be devoted to caring for the elderly?
What if the saved resources of middle class families have to be spent on a nursing home for Grandpa instead of another car?
Yes, these types of spending do still feed the economy, but not in the same way. While supporting an aging group that is expected to top ¼ billion people by 2050 is morally and philosophically correct, it does not lead to an increase in the tools of production or greater exports.
It can lead to a global slowdown in commodity markets as the great Chinese machine shifts to a lower gear. This would reverberate around the globe, hitting Australia first, then branching out to the Pacific Rim nations and finally reaching Latin America.
The Chinese miracle economy was no miracle. In some ways – like the One-Child Policy – it was a choice. In other ways it was happenstance – opening their economy coincided with a debt-fueled consumption boom in the West.
Regardless, the phenomenal growth can no longer resist the law of gravity. The laborers unencumbered by children gave the country an advantage for many years. Now they have to be given care and comfort.
And in some way, we’re all going to pay for it.
P.S. We experienced a technical problem yesterday so you may not have received your Tuesday issue of Survive & Prosper. You can read yesterday’s issue, in which Harry talked about what our future looks like and what you should do to prepare, here. It’s definitely one you don’t want to miss. We appreciate your patience and understanding, and apologize for any inconvenience this might have caused.
Ahead of the Curve with Adam O’Dell
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