Tuesday, September 02, 2008

Eurostat on European populations in 2060

I wanted to call attention to the recent results of Eurostat's metadata projection of the projected population changes of the European Union's twenty-seven member-states as well as Norway and Switzerland between now and 2060. (My thanks go to the The Financial Times's Tony Barber's post.) The Eurostat report Ageing characterises the demographic perspectives of the European societies" provides a detailed exploration of these changes. Table 1, describing some of the most notable of these changes, is below.

There have been all kinds of reactions to this news in individual nations. Let's start with the smaller member-states. Observers in the Czech Republic pointed out that the Eurostat data presuming a decline from 10 to 9 million underestimate immigration and births, with some arguing that the population could instead rise to 13 million by 2060. People in the Republic of Ireland are reacting to the news that, with an estimated 2060 population of 6.7 million, the island of Ireland would have regained its pre-Famine population of eight million. News that the population of Estonia might decline by one-sixth to 1.1 million have been greeted with concern, along with the news that Bulgaria's population is projected to fall by 29%, as have news that Romania will certainly see rapid and perhaps economically unsustainable population aging as the population falls by 4.5 million.

The changes among the largest European Union states are perhaps especially noteworthy for their influence on the balances of economic and perhaps political power, Britain's projected growth to 77 million people, giving it the largest national population in Europe, is fitting into national concern over "uncontrolled" immigration, while metropolitan France's expected growth to nearly 72 million--not, it should be noted, out of line with 2005 projections charting a French population of 75 million by 2050--coexists with a Gemran population projected to fall to less than 71 million and a Spain projected to grow to just short of 52 million people. Italy's population is projected to remain stable at 59 million, but quite frankly the numbers look cooked--is a natural decrease of 12.0 million really going to be almost entirely balanced out by an immigration of 11.8 million? Who knows, perhaps it is the recent rivalry with Spain at work. Poland, at present the sixth EU member-state by population at 38 million is projected to see a fall to 31 million. Barber is quite right to note that all these changes will of necessity influence the development of Europe.

It is hard to believe that such massive changes, which Eurostat says will take place in spite of immigration into the EU, would not have a big impact on the distribution of power in the EU. For example, the Lisbon treaty - which, of course, may never come into force - recognises Germany’s present pre-eminence by allocating Germany more European Parliament members than any other country. But that arrangement surely could not last if Eurostat’s forecast were to prove accurate.

As for Poland, its leaders cited its population size last year as an argument for more weight in the EU’s institutions. But if its population were to shrink as much as Eurostat predicts, it would be difficult to make the case that Poland deserves the same influence as, say, Spain.

Meanwhile, the UK would find itself in the remarkable position of being the largest country in an organisation that it has never seemed entirely sure it wants to be part of. Of course, the secession of Scotland (with just over 5m people now) from the UK would make a difference.

One glaring omission from the Eurostat report is Turkey, an official candidate for EU membership. Hostility to Turkey’s bid in countries such as Austria and France stems partly from the objection that Turkey is already so big (more than 70m people) that its admission would fundamentally change the EU’s nature. But I see that, according to a recent United Nations Population Fund forecast, Turkey will keep on growing and have over 100m people by 2050.

Everyone, everywhere, is concerned about population aging, much more rapid in some countries--Bulgaria and Romania stand out particularly--than in others.

It should be noted that as we've seen with Spain, these projections can change radically if you account for the possibility of large-scale migration described in the report's Table 12.

Maybe the populations of high-income places like the Czech Republic, Slovenia or Estonia will grow as Ukrainians, Vietnamese, and others move to pleasantly high-income societies. Maybe France will open its dors to la francophonie while Spain will shut its doors. Maybe the populations of Romania and Bulgaria will decline even more quickly than projected as their economies get caught in downward spirals. Who knows for certain how fine details will evolve over the next 52 years? All that I'm willing to say is that for now, thi projection provides a useful starting point for discussions about population trends in their national and European contexts.

Monday, September 01, 2008

"Murderous identities and population paranoia"

Over at Himal South Asian, Mohan Rao's article "Murderous identities and population paranoia" explores the uses and misuses of popular demography in the wider world and particularly in India, host to a very large and diverse population. Indian Muslims, a population marked by period fertility rates higher than the average for Hindus and consequently a higher rate of population growth--over the 1991-2001 period, the Muslim population grew by 30% while the Hindu population grew by 20%--are the subject opf theories not wildly different from Eurabia claiming that Muslims will outreproduce Hindus and take over the country.

Although the population argument is seen to lend itself to a variety of prejudiced political projects across the world, the 20th century has also witnessed ‘communalisation of demography’ in the Subcontinent. In India, this has helped propel the discursive power of the communal myths (and outright lies) that surround the population question – or what some have termed ‘saffron demography’, an idea that carried particular weight in the election in Gujarat soon after the 2002 anti-Muslim carnage. Ethnic nationalism, combined with various fundamentalisms, gives saffron demography a particularly vicious punch. Of course, the communalisation of the population question is not unique to India. Present within Southasia (and many parts of the rest of the world), it seeks to legitimise offensive policies against minorities in order to build political consensus across newly created political majorities, fixed around ascribed identities that are all too often manufactured. Such a proposition is useful not just in manufacturing these majorities, but also in instilling fear, which is seen to bear political dividends.

There is an offensive slogan currently in use in North India, which is a play on a popular population control slogan of yesteryear – Hum do hamare do; woh paanch, unke pachees, which crudely translates as ‘We [Hindus] are two and have two children; they [Muslims] are five and have 25 children’. The suggestion is simple and beguilingly appealing, but also deeply flawed. The reference is, of course, to the fact that Hindus are not allowed by civil law to have more than one wife, while Muslims in India can have four. What this does not reveal is that data clearly shows that unlawful bigamous or polygamous marriages are more prevalent among Hindus than among Muslims. For example, as per the available data, the percentage incidence of what are called polygynous marriages (in which a man has more than one wife) is 5.8 among Hindus, while it is 5.73 among Muslims. What this also overlooks is that, assuming a situation of relatively equal males and females, a Muslim man with four wives would actually contribute less to population growth than if each of the wives were to be married to different men. Another oversight is that Muslims, like Hindus, are not a monolithic, homogenous community. Muslims in Kerala or Tamil Nadu, indeed in South India in general, typically have smaller families than Hindus in states such as Uttar Pradesh and Bihar in North India. Clearly, then, religion is not the main issue at play.

In response to a recent series of articles in the Indian press attempting to debunk myths about high Muslim population growth rates, this writer received a barrage of vehemently critical letters. Some suggested a change of name and conversion to Islam; others argued that he was an enemy both of Hindus and of India in general, and that he should go to Pakistan. Some others offered some bizarre facts to ‘refute’ what was being said. There was a long letter, enclosing two papers presented at international conferences for non-resident Indians, arguing that Muslims seek, through population growth, to overrun Europe. The correspondent was a retired inspector-general of police, a member of what seems to be a front organisation of the Rashtriya Swayamsevak Sangh (RSS) named the Patriotic Front. What is remarkable among these people is that facts are relatively unimportant; they are useful only if they further prejudice.

Although I'd quibble with some of his arguments on the role on demographics in determining wider political and cultural trends, the article's quite worth reading.

Economic Growth and the Demographic Dividend in Chile

By Claus Vistesen

There are many perspectives through which to look at economic development and growth. Geography, institutions or perhaps just plain good old physical capital accumulation are all important parameters. This small piece suggests a further metric and attempts to frame the argument with Chile as a case study.

Specfifically, this note explains the process known as the demographic dividend and conceptualizes it in a Chilean context. The analysis shows how Chile during the last two decades has benefited from the dividend proxied by the increasingly favorable trend in overall age structure of the society. By some measures Chile’s demographic dividend is thus ending during these very years. Yet, by adapting a slightly broader definition of the optimal working age and subsequent productivity profile, it appears that Chile still finds itself in the proverbial sweet spot and will continue to do so for the next decade. Coupled with the favorable windfall from copper exports and the subsequent transformation of this into an unprecedented net wealth position of Chile’s public accounts, the economy looks on a very solid footing to face whatever travails that might come next.

A Good Run

As can be observed below, Chile did indeed lose a substantial amount of output surrounding the Latin American debt crisis in the 1980s as well as the Asian currency crisis in 1997. Yet, and although Chile’s economy did not emerge unscathed from the past three decades of emerging market crises, the economy still managed to recover in terms of output. [1]

Chile's growth performance depicted by the chart is interesting in so far as it shows us the period that some scholars have dubbed Chile's Golden Age (Gallego and Loayza, 2002) due to the extended period of high growth rates. Between 1984 and 1998 Chile's growth rate in output per capita averaged 5.15% a year with a volatility of 2.64% p.a. This compares with an average growth rate in output per capita between 1998 and 2008(f) of 2.61% and a subsequent volatility of 1.73%. The 1985-1998 figures are remarkable and thus deserve some explanation.

According to Gallego and Loayza (2002) Chile's impressive growth performance primarily comes down to improvements in total factor productivity induced by increased investment in human capital and the development of a sound and coherent institutional setup. As such, and not unlike other growth accounting exercises the authors initially find that TFP accounts for the biggest share of output growth alongside the usual suspects of capital accumulation and growth in the labour force, the latter which is (in)famously coined as synonomous with population growth in the neo-classical growth model

The empirical approach is rather straight forward in terms of methodology, and is closely related to the tenets of endogenous growth theory as well as of course Mankiw, Romer and Weil's (1992) seminal findings that investment in human capital be considered an important part of capital accumulation. Formally, the authors first estimate a cross-section regression framework (GMM) based on a, more or less, standard neo-classical growth model augmented with human capital (schooling rates and life expectancy). The authors also include; government consumption to GDP, financial market development, terms of trade shocks, trade openess, and a black market premium. They find that this model account for 43% of the growth observed in Chile.

Unsatisfied with this result, the authors imbue the model with a number of variables whose origin in the growth theory framework are inspired by the tenets of endogenous growth theory. These variables include proxies for the political system, governance, public services and infrastructure, and with these, the new model moves reaches a coefficient of determination of 73%.

In line with endogenous growth theory the authors consequently find that this initial "residual" best be explained by improvements in the institutional edifice of Chile's economy. As a result and although the notorious convergence effect will tend to lead to lower overall growth rates in period t0 than in period t-1, the authors suggest that Chile focus further on institutional improvements to foster growth in the future.

Far be it from me to take issue with these results. However, in the following I propose another way to look at the past and future growth performance of Chile. It is important to understand that the two approaches are not mutually exclusive but ultimately directs the attention to a different set of governing mechanisms when it comes to economic growth.

A Demographic Dividend?

In one of their many papers on the subject David E. Bloom and David Canning (see Demographic Challenges, Fiscal Sustainability and Economic Growth, PGDA Working Paper no. 8) provide a useful historical sweep of the different approaches to demographic changes and their significance on the economic edifice. From the Malthusian epoch to a more optimist view on the benefits of vibrant population dynamics (see e.g. Simon Kuznets, Julian Simon, and Ester Boserup) and on to what Bloom and Canning coin as the “neutralists” [3] , the perspective on the importance of demographics has certainly changed a lot.

One crucial lesson to draw from the historical prism of demographic discourses is that the demographic transition is a far more complicated process than a mere transition in population growth rates as well as one of sectoral shifts in the economy. Lee (2003) consequently shows how the demographic transition also fundamentally changes the age structure of society whereas others such as Malmberg and Sommerstad (2000) and Hugh (2006) have suggested that the demographic transition be re-thought all together. Common for these contributions is the shifts in age structure, the complex mechanisms which govern these changes, and their subsequent effect and operationalization on the macroeconomic edifice.

Bloom, Canning and their fellow scholars on the PGDA at Harvard, [4] have furthermore showed how age structure makes a much more solid demographic yard stick, for gauging economic trends, than merely looking at population growth and absolute size of the population. This, I think, is the ultimate lesson to derive from decades worth of thinking on demographic processes. I would essentially divide the lesson into two irrefutable points. One is that age structure matters much more than population growth and that a simple metric such as median age can give us a tremendous amount of information on an economy's given and future growth path. The second points is simply that the demographic transition is not, by a long shot, over. In fact, nobody knows when it will end.

It is within this framework that the process known as the demographic dividend enters, and not surprisingly, it is all about age structure and how economies who go through the demographic transition at some point will find themselves with above average conditions for growth as the working age as well as productive share of the population is maximized. In terms of median age and as a crude benchmark, we can say that those economies with median ages between 25-35 are situated in or close to the optimal age structure for economic growth. Nothing comes for free however, and it is crucial to point out that the demographic dividend provides an opportunity rather than a sure benefit. For example, it seems that Eastern Europe and Russia, by and large, have gone through their demographic dividends without experiencing the corresponding win-win situation in which favorable growth conditions coincides with advances in terms of institutional quality and political stability.

The demographic dividend operates through two interconnected mechanisms in the form of falling fertility and declining infant mortality. In most countries, falling mortality as the economy moves through the demographic transition has been accompanied, with a lag, by falling fertility Bloom and Canning (2006). If we add a steady increase in life expectancy to proxy the general improvement in the health of the population these interconnected processes endow an economy with a period of, let us say, 15-20 years in which the young and working cohorts of the society are relatively big compared to the dependent cohorts. The former are often defined as the cohorts aged <20-25 [5] years and for the latter's part >65. As for quantitative importance, Bloom and Canning (2004) have shown this to have a positive effect on per capita output as well as they have famously shown how one third of the East Asian Tiger economies’ impressive growth spurt in the latter part of the 20th century can be explained by the demographic dividend.

More generally Bloom & Canning et al. (2007) have also demonstrated, through cross sectional regression data, how age structure can significantly improve the forecast of economies' growth rate relative to world GDP.

Chile’s Demographic Dividend

If large parts of East Asia have already had their demographic dividend what about Chile then. Is Chile about to receive, or more aptly; is she in the middle of her demographic dividend?

As can readily be seen, Chile almost displays a textbook case of economic development. In this way, infant mortality has fallen back sharply since the middle of the 1970s as well as life expectancy has increased. Outside the immediate realms of economics, biologists and health economists speak of the process known as the epidemiological transition to explain the progression of the change in (and drivers of) variables such as mortality, life expectancy, and other public health metrics.

The reduction of, and subsequently the current level of, infant mortality in Chile rivals that of many developed economies. According to Albala and Vio (1995) Chile managed to reduce infant mortality by 82% between 1970 and 1992 and Jimenez and Romero (2007) further shows how provisions of services to counter perinatal risks and acute respirator distress have helped Chile to reach an impressive infant mortality rate of 8.9 infants per 1000 thousands in 2000.

With respect to life expectancy Albala and Vio (1995) describe how the mortality rate of people aged 65 and more decreased 73% between 1970 and 1992 . Especially, a reduction in the mortality from cardiovascular causes is highlighted. In a more recent paper Albala, Vio et al. (2002) also latch on to increasing risk posed by a transition from a prevalence of infectious diseases to on in which chronic diseases ascend in importance. The usual suspects here would be an increase in obesity as a result of malnutrition through the consumption of high-fat/high-carbohydrate energy-dense foods and a decrease in physical activity. Chronic diseases which spring from such developments would then be e.g. type 2 diabetes and cardiovascular diseases. Evidence of this development appears in the context of school children; from 1987 to 2000 the prevalance of obesity among first grade school children rose more than 100% for both boys and girls.

Much debate has and will be devoted to the extent that such adverse developments from economic development could, at some point, break the curve in terms of life expectancy. At this point however, it seems as if advances in healt care services and the subsequent improvements in old age life expectancy are enough to keep the curve ticking upwars.

Returning to the question of demographic dividend in Chile, the trend of the decline in infant mortality exhibits the expected negative concave relationship as per function of the fact that the value cannot fall below 0. In order to build a simple model framework and by applying the logic expressed through theory above, we can construct a rudimentary econometric model to formalize the argumet.

Consequently, we let the lagged change (one year) [6] in the infant mortality rate predict the change, in year 0, of the fertility rate. Given the properties of the time series in question, and the theoretical framework above we would expect a positive but also a concave relationship since both variables are bound by the fact that they cannot fall below 0. In general terms, this model clearly assumes that the process of decline in fertility throughout the demographic transition is infinitely simpler than it really is. The crucial point here is that while the decline in infant mortality may be able to explain the decline in fertility on a certain part of the curve it cannot, and may in fact see its sign reverse, as we move further towards replacement level fertility and beyond. One could even with reasonable claim ask whether in fact the decline in fertility towards replacement levels is driven by infant mortality reductions alone. Nevertheless, the model estimated looks as follows where both variables are in changes.

Which leads to the following estimation:

The visual inspection of the model can furthermore be derived from the graph below.

In general, the model is far from solid but it manages to get the message across in the sense that it links the decline in fertility to the lagged decline in infant mortality [7] . The key thing to remember is the implicit and theoretical concave relationship cited above; a relationship also confirmed by the scatter plot.

The interesting thing about Chile here is that, according to standard demographic theory, the demographic transition should, by and large, end now as fertility trends towards replacement level. Not a lot of serious scholars would believe that however and we can thus expect fertility to decline below replacement level (see e.g. Wolfgang Lutz here). The extent to which it does not, Chile would clearly constitute something of a remarkable case. This is also why policy makers would be wise to consider implementing steps to avoid fertility dropping into lowest-low territory [8] , since what we know with almost certainty is that the demographic transition does not stop once infant mortality hits near rock bottom.

This point also highlights the idea that while the demographic dividend presents a window of opportunity so does the backdrop represent a penalty. This point is crucially related to the fact that only very few economies (e.g. the US and perhaps also France) have been able to stay at, or return to, replacement levels of fertility. In most other cases, fertility seems set bound to fall further and the only real metric to gauge is the speed by which this occurs. In an emerging market context the evidence is worrying to the extent that many economies have seen their fertility rates crash completely over the course of less than a decade. The next 5-10 years in Chilean, and indeed Latin American context, will be extremely interesting to watch in this regard.

Given the fact that Chile's fertility level is already approaching replacement level, the model cited above has, in all likelihood, run its course. What will likely cause Chile's fertility rate to fall below replacement level requires an entirely different set of explanatory variables and also theoretical edifice. Key trends would for example include an elaboration of the quantum and tempo effect of fertility in a context of rapid economic development and changing social norms.

To summarize the argument in a Chilean context, the ultimate data series to gauge, in the context of the demographic dividend would be age structure and the effect from the processes described above.

As per usual, beauty is in the eye of the beholder since depending on which definition you ascribe to the optimal age structure, Chile could be said to be in and out of the demographic dividend. The truth probably is that Chile is in the twilight hours of its demographics dividend. However, with a median age of about 30 years Chile still enjoys, and will continue to do so in the immediate future, the benefits of an age structure conductive to balanced economic growth.

One important point to note here is that the 25-44 bracket peaked sometime in the middle of the 1990s. Much evidence suggests though that it is a bit untimely to make the cut at the 44 year old age group, since many people are perhaps not far from their productive peak between 44 and 64. On the other, the peak of the 25-44 age bracket may still constitute an upper level of economic capacity if viewed as the ability and propensity to sustain housing booms, large negative external balances etc.


Chile still has ,and will continue to enjoy for the immediate future ,a favorable age structure for harboring economic growth and dynamism. Favorable is in this context defined through the spectrum of the demographic dividend and the subsequent increase in, and high proportion of, working age people to total population. Depending on fall in fertility, the demographic dividend is definitely tapering off at this point. If experience from East Asia is anything to go by Chile as well as its Latin American peers are now set to enter a new phase of the the demographic transition in which fertility steadily moves below and beyond replacement levels. The speed here is crucial. If it happens slowly, Chile can expect to posses a relatively balanced age structure in the decades to come but if the decline is swift and lingering the effect could be otherwise.

This small piece has also touched upon the way we conceptualize economic growth and development. I would not want to discount methods such as the one deployed in Gallego and Loayza (2002). However, I have suggested that a different perspective is a also considered. I would, in particular, emphasise this in the context of the future drivers of economic growth. Nobody can disagree with the impetus to move forward on strong institutional settings. Yet, economic development is not only accompanied by a demographic dividend but also, arguably, a demographic penalty which occurs as the effect of the dividend recedes and the decline in fertility continues. This would be where concepts such as the quantum and tempo effect of fertility comes in. it is also where policy makers would be wise to consider that a relentless strive to reach the apex of the value chain will also bring with it a deficit in terms of the proper quantity/quality mix of human capital.

List of References

Albala, Cecilia; Vio, Fernando; Kain, Juliana and Uauy, Ricardo (2002) - Nutrition transition in Chile: determinants and consequences, Institute of Nutrition and Food Technology (INTA), University of Chile

Albala, Cecilia and Vio, Fernando (1995) - Epidemiological transition in Latin America: The case of Chile, Institute of Nutrition and Food Technology (INTA), University of Chile

Bloom, D and Williamson, J (1998) Demographic transitions and economic miracles in emerging Asia. World Bank Economic Review. 12(3) 419-456.

Bloom DE et al. (2007) - Does Age Structure Forecast Economic Growth? PGDA Working Paper no. 20.

Bloom, DE & David Canning (2006) – Demographic Challenges, Fiscal Sustainability and Economic Growth, PGDA Working Paper no. 8.

Bloom, DE and Canning, D (2004) - Global demographic change: dimensions and economic significance, In Global demographic change: economic impacts and policy challenges (proceedings of a symposium, sponsored by the Federal Reserve Bank of Kansas City Jackson Hole)

Gallego, Francisco & Loayza, Norman (2002) - The Golden Period for Growth in Chile: Explanations and Forecasts, Working Paper, Central Bank of Chile no. 146

Hugh, Edward (2006) - Rethinking the Demographic Transition (can be downloaded by request)

Jiménez, Jorge and Inés Roméro, Maria (2007) - Reducing Infant Mortality In Chile: Success In Two Phases, Health Affairs, 26, no. 2 (2007): 458-465

Lee, Ronald (2003) - The demographic Transition: Three Centuries of Fundamental Change, Journal of Economic Perspectives, 17 (fall 2003), pp. 167-190

Malmberg, Bo & Lena Sommestad (2000) - Four Phases of the Demographic Transition, Implications for Economic and Social Development in Sweden, Working Paper 2000:6, Institutet for Framtidstudier

N. Gregory, Mankiw; Romer, David, and David N., Weil (1992) - A Contribution to the Empirics of Economic Growth, Quarterly Journal of Economics, vol. 107.

Kuznets, S (1967) Population and economic growth, in Proceedings of the American Philosophical Society, III (3).

Simon, J (1981) the ultimate resource. New Jersey: Princeton University Press.

[1] Although Chile did not recover from the Asian currency crisis to pre 1997 levels.

[2] Bloom & Canning (2006) – Demographic Challenges, Fiscal Sustainability and Economic Growth, PGDA Working Paper no. 8.

[3] Basically, this would be the modern institutional paradigm that has emerged within the economic growth/development discourse (see e.g. Daron Acemoglu, Dani Rodrik and Amartya Sen).

[4] See numerous contributions here: http://www.hsph.harvard.edu/pgda/working.htm

[5] I would argue that this is the right threshold (unlike the <15>

[6] The time series are in changes to correct for non- stationarity. As for the lag, the optimal number of lags could be more rigorously verified on the basis of theory and the statistical properties of the time series in question (VAR)

[7] Although, as can also be observed in the graphs, it cannot predict sudden reversals in fertility trends; i.e. these would essentially be treated as exogenous shocks to this model.

[8] A TFR of <1.5

Tuesday, August 19, 2008

The Georgian Mess

The ongoing war in Georgia, being an ethnic conflict that, most unlike the Yugoslav wars of the 1990s--featured great-power military intervention right from the start, and as a result has attracted a very large amount of international attention from the word go. Google News Canada returns in excess of 39 thousand hits to a simple search using the keywords "Russia" and "Georgia." This latest spurt of interethnic war is only the latest in the long-standing conflicts South Caucasus region including the states of Georgia, Armenia and Azerbaijan, with the wars of Armenians versus Azerbaijani and of Georgians versus Ossetians and Abkhazians, but it's one that will be very serious for Georgia's economic future.

(please click on image for better viewing)

The South Caucasus forms an interesting region in Europe insofar as fertility is concerned, as revealed by the Vienna Institute of Demography's European Demographic Data Sheet 2008 (sources here PDF format)which provides data on the populations of the three different South Caucasus states. Georgia stands out somewhat among its Caucasian peers. Selected information from Georgia, the other South Caucasus states and on their neighbours Turkey and Russia, is provided in the table below.

Some interesting trends appear--Azerbaijanis seem to behave rather like their Turkish counterparts--but one that does stand out is the extent to which Georgians have advanced beyond their South Caucasus peers further down the stages of the demographic transition. This isn't new: Georgia was to be found advancing ahead of Armenia and Azerbaijan and joining the Slavic republics of the Soviet Union in the movement towards post-transitional fertility patterns and low fertility at least as early as the 1950s--one source suggests that as of 1950, Georgia's TFR was around 3, while Armenia's was close to ~4.5, and Azerbaijan's ~5.5.

The aging of populations is a natural phenomenon around the world, and even in the most fortunate polities the management of this aging consumes quite a few resources. Georgia is not one of those fortunate polities, as the World Bank points out in its 2007 survey of gross national income per capita (PDF format). Edward's writings back in 2006 on Serbia's serious demographic issues and their likely impact on Serbia's economy were quite accurate, but Serbia is starting from a much higher point than Georgia.

(please click on image for better viewing)

Economic gaps with Russia existed before. As noted here, Georgia fell, along with Moldavia and Armenia, into a group of lower-middle income republics, well ahead of southern Central Asia but well behind Russia and the Baltic States. After the Soviet collapse, suffering internal disintegration and the shock of isolation from the wider Soviet economic space that Georgia was affiliated with, Georgia suffered a steep collapse. Timothy Heleniak observed that in the conflict-ridden post-independence South Caucasus, first Russians, almost half of the South Caucasus' population, left, followed by large chunks of the general population. With growing--and stable--21st century economic gaps like the ones shown above, it's no wonder that this mass labour migration has occurred. Fiona Hill described the current state of affairs in a recent lecture, "Eurasia on the Move: The Regional Implications of Mass Labor Migration from Central Asia to Russia".

According to Hill, Russia has experienced positive net migration since 1991, with the majority of immigrants arriving from other Soviet successor states. Ethnic Russians migrating to their titular homeland from other Soviet republics comprised nearly 60 percent of total immigration to Russia between 1989 and 2002. However, Hill noted that these numbers reflect only legal migration. She argued that significant numbers of non-Russian labor migrants have come to Russia from the Caucasus and Central Asia, often illegally. As many as 2 million Azerbaijanis, 1 million Armenians, 650,000 Tajiks, 500,000 Georgians and Kyrgyz, and 100,000 Uzbeks may be working in the Russian Federation.

High levels of immigration have affected Russia in a number of ways--many of which, Hill argued, have been very beneficial to the country. She noted that the Russian economy has more than doubled since 1999 and that domestic demand has increased significantly. Immigrant entrepreneurs provide Russian consumers with cheap goods (primarily from Asia and the Middle East), which is particularly important in Siberia and the Far East, where transportation costs make goods from European Russia prohibitively expensive. In addition, "cheap labor is filling a void inside Russia itself--the whole of the lower-paying sectors in the Russian economy are increasingly being filled by migrants from elsewhere in the CIS," she said.

Immigration has also helped to ameliorate the consequences of Russia’s demographic decline, Hill argued. Russia could face serious labor shortages in all fields due to out-migration of skilled workers, high death rates among working age people, low birth rates, and a high percentage of the population above retirement age. However, according to Hill, immigrants have compensated for three-fourths of Russia’s natural population decrease between 1992 and 2003. The majority of immigrants are of working age, and although many are employed in low-skill sectors of the economy, migrants from the CIS also include a large number of university graduates.

Hill contended that labor migration to Russia has also had a stabilizing effect in the Eurasian region as a whole: "Russia’s biggest contribution to the security of this very vulnerable region over the past decade has not been through its military presence--or security pacts, but has been specifically through absorbing the surplus labor from the Caucasus and Central Asian states, providing markets for their goods, and transferring funds in the form of remittances." Russia’s labor market has provided an outlet for hundreds of thousands of people who would be unemployed in Central Asia and the Caucasus, and remittances from migrants working in Russia have become a major component of the economies of many former Soviet states--as much as 25 percent of GDP in Georgia and 18 percent in Tajikistan.

As essential as these labour diasporas might be for the migrant-sending nations, not only are their affairs complicated by the hostility of some Russians towards Caucasians of all ethnicities and Muslims (including Russian citizens) and by the formulation of immigration policies that make life relatively difficult for these diasporas. Osmanova, Vartanian and Bulghadarian wrote in their 2007 IWPR article "Caucasian Migrants’ Struggle in Russia", Armenians and Azerbaijanis found it easy enough to evade Russian restrictions on the employment of foreigners in marketplaces. Georgians found it much more difficult, thanks to very bad Russian-Georgian relations.

Pro-government parliamentarian Giga Bokeria has said that neither the government nor parliament in Georgia will take any steps to ease the problems of Georgians wishing to work in Russia.

According to the World Bank, remittances from Russia constitute five per cent of Georgia’s GDP. The real figures are certainly higher as much of the money is sent in roundabout fashion.

There are an estimated one million Georgians living in Russia. In addition, around 90,000 Georgians go to Russia each year for seasonal work. Typically, these workers come from the provinces of Georgia, have no higher education and are aged between 25 and 35.

They are the ones worst affected by the transport blockade on Georgia imposed by Russia last autumn.

In May, Federal Migration Service deputy head Vyacheslav Postavnin, appeared to utter a veiled threat towards Georgia, saying, "When it comes to attracting labour migrants it is always better to give the priority to those countries with which Russia has good relations, including trading and economic relations, where there is a positive attitude."

Further complicating things for the Georgians working in Russia is the possibility that Georgia's large diaspora is not only politically active but possibly also aligned against Saakashvili: Might the President have been trying to weaken pro-Russian factions by weakening their economic base? God only knows.

What is certain is that, as Mzia Shelia noted in her 2006 "Population Aging in Georgia Under conditions of Economic Crisis" (PDF format), a Georgia facing a rapidly aging and shrinking population is going to face challenges of an almost existential nature.

It is significant that demographic burden didn’t increase in the noted period; presumably it was caused by reduction of average life expectance. In the same period aging process developed more profoundly in rural areas than in urban ones. All the regions of the country have aged considerably. At the present time in Georgia not a single region or ethnic group is demographically young. Age structures were deformed most of all among Russians, Ukrainians, Ossetians and Greeks. The level of longevity has declined too with which Georgia had always been a distinguished country.

Due to the economic and political crisis in the 1990s, Georgia retreated from the evolutionary way of its demographic development and at present starkly different model of demographic aging has been formed. Under weak economic conditions all social, economic, psychological and moral problems associated with population aging were brought out much severely. For example, in parallel with the growth of pension expenses incurred by high level of aging, retirement-age increase becomes more and more actual issue. It should be noted that in Georgia where according to the official statistics the unemployment level is 15.1 percent, retirement age increase cannot give the same results as it can give in developed countries. In our opinion and as it attested by studies, the rise of retirement age for the country which is under conditions of economic crisis will lead to the further increase of unemployment, acceleration of emigration processes, "brain drain" and decline in the country’s intellectual potential in the long run. It will intensify social tension even further; intergenerational relations will become acute. All the above will deepen economic crisis.

There's no easy way for Georgia to catch up economically. Gylfason and Hochreiter this month have attributed Georgia's wealth gap relative to Estonia to underinvestment in the economy generally and in education, a lack of technological sophistication, and isolation (Turkey can't play the same role for Georgia that Finland played for Estonia, and Russia most certainly won't). The thing is, Estonia of all of the countries of post-Communist Europe is going to come the closest to replacement-level fertility at the end of the day because it really is a post-Communist Nordic country in quite a few dimensions including the demographic, but Georgia's more likely to fit into the typical Mediterranean (and Black Sea?) framework of sustained below-replacement fertility. Without immigration, it's bound to suffer rapid aging. Add in emigration--if not to Russia then to Turkey, another neighbouring regional superpower with a large and dynamic economy and historical connections to the country--and Georgia's rapid marginalization is secured.

If this fate can be avoided at all, Georgia needs good leaders. It doesn't have them now: Misha Glenny was right to write recently in The New Statesmen that Georgia's triggering the recent war was "a disastrous political miscalculation, even in an era that is increasingly defined by spectacularly poor judgement." The author of a 2002 report from the office of the Public Defender of Georgia looks to have been right to argue that the Georgian state's manifold failures are responsible for the exit of many thousands of people from the Georgian nation-state. The damages of this war have imposed huge costs on the country. If Georgia can only continue to offer its young people poverty and war, why should they stay?

Saturday, July 26, 2008

Demography and culture: French Canada's fall and Québec's isolation

Over the past few months, Statistics Canada has been releasing data sets and analysis from the 2006 Census. Statistics Canada released information on language use, immigration and citizenship, and inter-provincial migration. The textual analyses at Statistics Canada's website are good, but the interactive map created by the Canadian Press and hosted at CBC.ca is wonderful. Of note is the continuing fall in Francophone numbers and proportions outside of Québec and New Brunswick.

What happened? It's important to note that the belief in a French Canadian revanche des berceaux, of a nationalism-driven birth rate under British occupation that saw every family produce large numbers of children, is a legend. The disparity between Ontarian and Québec (and fertility fertility rates emerged after 1870, when Ontario moved in the direction of a demographic regime characterized by sharply falling death and infant mortality rates in tandem with falling birth rates, while Québec--more conservative, more rural--lagged behind. For a long while, this was enough to keep the Francophone proportion of Canada's population stable at roughly 30%. But then the 1960s hit.

Between 1850 and 1950, owing to a high fertility rate among French Canadian women, the proportion of Francophones in the Canadian population held at 30%. The fertility of the Francophones then dropped below the Canadian average toward the mid-1960s, contributing to a decrease in the proportion of the total Canadian population speaking French as a mother tongue -- from 29% in 1951 to 25% in 1986. Between 1926 and 1960, the fertility rate of women in Quebec moved closer to that of other Canadian women. In effect, the ratio of the fertility rate of Quebec women to other Canadian women dropped from 1.45 in 1926 to 1.30 around 1940 and 1.15 around 1950. Between 1960 and 1970, fertility declined very rapidly. The total fertility rate of women in Quebec dropped from 3.9 to 2.1; the fertility of other Canadian women declined but not so markedly, from 4.0 to 2.5. By 1974, fertility in Quebec had declined to 1.8 children/woman, and by 1986 the fertility rate had fallen still further to 1.4, while that of other Canadian women held at between 1.7 and 1.8. The fertility rate was 20% lower in Quebec in 1986 than in the other provinces. These differences in fertility between Québec and the rest of Canada have significantly affected the demographic situation. Census data have shown that the completed fertility of Francophones was 80% higher than that of Anglophones for women born at the turn of the century, but this gap narrowed rapidly over the years and disappeared for women born between 1931-36.

These differences also affected Francophone populations outside of Québec, as the same source notes, with Francophone TFRs outside of Québec falling not only below the levels of non-Francophone TFRs ("[i]n Ontario [in 1986], the total fertility rate for Francophones was 1.54, compared to 1.61 for Anglophones and 1.75 for the other groups"). The fertility of Québec--perhaps a reasonably good proxy for Francophone Canada as a whole--is not the lowest-low fertility of Italy, and it might well have only anticipated trends in English Canada. Even so, the province of Québec is going to have to deal with relatively low if not negative population growth and relatively rapid aging, further complicated by issues with immigration, as evidenced by the loud debate on the topic of how best to integrate immigrants. (The old endogamy of the pre-1960s period is most certainly gone, even if the problem of dealing with Others remains, as with other peoples and cultures.)

Survival will be an unsurmountable challenge for most Francophone minorities outside of Québec. In most of the rest of Canada, Francophones form significant minorities (and, occasionally, majorities) only in the "bilingual belt" stretching more-or-less along the Québec border. Can this be changed? It's questionable. Francophones outside of Québec once exhibited higher TFRs than Francophones inside Québec, but this situation has reversed itself. In the 1996-2001 period, there was a significant amount of Francophone out-migration to Ontario, New Brunswick, and Alberta, suggesting a certain potential for the revitalization of those communities, but again Francophones in Ontario and Alberta form only a small portion of the population, while the stable Francophone community of New Brunswick has often been a net exporter of population to Québec. Without any remarkable demographic event--a Francophone baby boom,. mass immigrations from Francophone Europe and Africa, et cetera--non-Francophones won't have any particular reason to view French as particularly relevant to their lives. Journalist Chantal Hébert was right to point out in a December 2007 article for The Toronto Star that "French still an abstraction in much of Canada": "[O]utside Quebec, Francophones make up only 4 per cent of the population. With French an abstraction in so many parts of Canada, the motivation to learn it as a second language is decreasing. Because most Anglophones learn French at school, the peak bilingualism rate for Anglophones outside Quebec occurs in the 15 to 19 age range. Over the past decade, it has slipped from 16.3 per cent to 13 per cent. The census also shows the retention rate of Anglophones who have learned the language is slipping." Even in 2001, Statistics Canada discovered that overall, "43.4% of Francophones reported that they were bilingual, compared with 9.0% of Anglophones." For those Francophones living outside of Québec, living in an overwhelmingly non-Francophone society with few if any barriers to intermarriage, these pressures create a perfect environment for language shift. It's not surprising that there was an overall decline in the numbers of Francophones outside of Québec. As Gilles Grenier put it in his paper "Linguistic and Economic Characteristics of Francophone Minorities in Canada: A Comparison of Ontario and New Brunswick" (Journal of Multilingual and Multicultural Development (18.8): 1997), in mixed environments

A lot still needs to be learned about what exactly determines assimilation, but it is clear that the fact that Anglophones and Francophones are more mixed together than they used to, mainly because the Canadian society has become more urbanised and communication systems more developed, leads to a more widespread use of the common majority language. If Francophones in Quebec and in New Brunswick have been able to maintain their language, it is because there is a geographical separation between them and the other communities. This does not mean that those Francophones do not use English for some of their economic activities, but at least French is still the dominant language in their own communities. One major reason of the assimilation in Ontario is that there are less and less towns and villages where the majority of the population is French.(299).

This last sentence is critical, since mass language shift from French to English is not unique in the history of North American Francophones. Starting in the late 19th century, relative economic underdevelopment propelled a tremendous migration of Francophones out from their traditional settlement areas along the St. Lawrence River and the Gulf of St. Lawrence to adjacent parts of the continent. Large and thriving communities of Franco-Americans (concentrated in New England, particularly in that region's industrial cities) and Franco-Ontarians (concentrated in northern and eastern areas adjacent to Québec) formed at this time, encouraging some to believe in the idea of a greater Québec encompassing those communities. That vision failed, as the Franco-American community was whittled away through immigration restrictions and acculturation to the Anglophone culture surrounding them. Franco-Ontarians, who with few exceptions like in Anglophone-majority communities relatively isolated from Québec, may be about to follow. And no, the Francophones who are tourists in Maine or long-term residents in Florida don't make up the same sorts of communities. What the long-term effects of a Québec isolated in its language from most of the rest of Canada and attached to a wider Francophone world and (through a traditional Ameriphilia) to the United States will be on a Canada faced with its own regional challenges, I leave to my readers to speculate.

Why is all this particularly relevant to readers of Demography Matters? Shifting population balances are central to our work here. The shrinkage of working-age populations as aging proceeds is something that we've looked at, just as we have taken a look at the effects of emigration on the long-term futures of different countries, just as we have taken a look at unbalanced sex ratios. The transformation of populations via cultural or linguistic shifts is just as surely an issue of note. How's Catalan faring in the Generalitat and the Balearics and Valencia, in the context of Spain's recent immigration boom, and if badly, could this lead to anti-immigration sentiment or legislation? Is the proportion of first-language Russophones in Latvia shrinking significantly, and if so could this lead to a cautious liberalization of immigration legislation? Will Russia try to make good on its promises to the Russophones of the former Soviet Union? Just what is going on with Spanish in the United States and what does this suggest about Hispanics? Et cetera, et cetera, et cetera.

Demography matters, and so do the underlying cultural issues that not only help define demographics but influence the ways in which we think of those shifts. In Canada, English Canadians and French Canadians have dealt with each other substantially in relation to their demographics ("Are the French having too many children?" "Are the English trying to overwhelm us with immigrants?"), managing to stifle until relatively recently serious discussion about what's actually going on. If you think that this was about Eurabia, well, yes, it is in part about that, but it is more importantly about the need to come up with examples from the past and the present of underdiscussed and often misdiscussed issues sine, after all, Demography Matters.

What happened to Flemish France, what's going on with the Tibetans, and what's happening to the ethnic Poles in the former Soviet Union? Come back here to find out.

Tuesday, July 08, 2008

Investing in Human Capital - Quantity or Quality?

A mail from a friend today alerted me to this fine op-ed in the IHT by Philip Bowring. Bowring's main point is quite neat even if of course the ultimate conclusion to re-write the practices of national accounting may be a bit far-fetched. Bowring's starting point is the economies of East Asia which, I am sure my readers will, agree have performed quite well in the 1990s and 2000s with the important intermezzo of the Asian currency crisis in 1997. In fact, one could argue that with the crisis in 1997 East Asian economies embarked on an even further solidified path of growth driven by investment and accumulation of capital and, we should never forget, foreign exchange reserves. You see, this was part of the scheme at the offset in the sense that these economies would not risk to go hat in hand to the IMF the next time crisis loomed at the doorstep. This is not about the Asian currency crisis and its aftermath per se but if you want more I have a synopsis up here.

Philip Bowring starts off with the simple point that although East Asian economies in general have been doing very well on the investment front with respect to physical capital (and according to many thequality of human capital) they have not been able to halt the demographic transition which to a considerable degree has eroded the quantity foundation of these economies' human capital. In this way and as if guided by an invisible force, these economies have also transcended into lowest low (TFR < 1.5) and in fact some economies are hovering around the "single child per women" mark. This makes Mr. Bowring wonder whether in fact the economic experience of these economies are so stellar as we are lead to believe.

South Korea, Hong Kong, Taiwan and Singapore have over 40 years averaged roughly the highest consistent economic growth rates in the world. All but Korea have steadily accumulated massive surplus savings and foreign reserves. But change the national accounting principles behind these rosy numbers and a different picture emerges, one that the societies concerned have barely begun to grapple with. In one vital respect these countries (soon to be joined by China) collectively may have the worst record of investment in the future since homo sapiens evolved: Investment in the next generation.

They have the lowest fertility rates in the world. Hong Kong is at the bottom (excluding births to non-residents), with around 1.0 births per woman of child-bearing age (the replacement rate is 2.1). Taiwan, Singapore and Macau come in at 1.1, while South Korea, at 1.2. is on par with Europe's lowest, Belarus. None of these economies has had replacement-rate fertility levels since the late 1980s.


Imagine if these four economies had invested less in infrastructure and reserves and more in people. They would now most likely have much lower foreign-exchange reserves, but they would not be facing a situation in which their work forces - unless replaced by immigrants - will decline dramatically within 20 years as the population over 65 continues to grow. The payback for years of what may well have been the misallocation of resources is not far in the future.


Almost all developed and many developing countries now face demographic challenges from a reverse in the high fertility rates of the past. There are no easy solutions. But by changing national accounting principles to make child-rearing a priority, attitudes toward it might change too.

Bowring's piece poses a lot of intertwined questions which I cannot dwell by here. One would be whether the cultural edifice of Neo-Confucianism is particularly 'adept' in fostering lowest-low fertility (or high household saving rates perhaps?). In this note I shall neatly bypass this question. However one crucial question which emerges from Bowring's piece is whether economists are adequately defining investment in human capital? Now, Bowring's suggestion to change national accounting practices does not, at a first glance, make sense. It would hardly be possible to make a credible short term/high frequency measure of investment and accumulation (say, quarterly) in quality (e.g. education) and quantity (e.g. some form of fertility gauge) of human capital. Yet national accounting is not the only tool economist use to describe the growth of economies. Consequently, when looking at growth in the longer term economists refer to the collective sub-discipline of growth theory or more specifically neo-classical growth theory.

Within the context of neo-classical growth theory the contributions are multiple and I won't even try to provide an overview. Mankiw, Phelps and Romer's Growth of Nations is an excellent starting point for the intermediate scholar.

Without cutting further corners my main gripe with the growth theory framework is that economists traditionally (and this is especially the case in the context of the whole growth theory framework) tend to separate quantity and quality of human capital in a quite unsatisfactory manner. You see, according to growth theory it is a well known dictum that more people leads to lower growth in the illusive steady state. The point here would be that we are getting more people for the same capital and productivity level and thus more people to share the same sized pie. Yet, human capital does matter. As such, Mankiw et al. famously showed that investment in (i.e. accumulation of human capital) is highly conductive of economic growth. This would then mean that investment in education be considered a highly fruitful policy; I hardly think anyone will disagree here. This point also forms a strong link to Bowring's perspective of East Asia since, apart from choosing export orientation over import substitution, these economies were praised for their high saving rates not least in the context of a strong focus on education and especially high enrollment in basic education. At the time they were thus bathing in the spotlight on the expense of their developing economy siblings in Latin America.

The two points made above on human capital basically shore up at the following main point in the context of growth theory.

Few people of high quality (education) is the way to go!

However, it is pretty clear I think that this is not true. At least, there seems to be quite strong evidence that not only quality matters but also quantity. Moreover, if everybody goes for the low quantity high quality option it will create strong negative externalities. In fact, the quantity/quality nexus of human capital is much more complicated with respect to feedback loops than the current standing theory assumes. Basically, the whole model seems to break down once we get into the situation of lowest-low fertility. Especially in this regard would be the concept of steady state which becomes very difficult to sustain in an empirical context in the sense that it becomes a proverbial moving target.

It is within this somewhat wonkish framework that Bowring's point suddenly makes sense. What he suggests is thus that in stead of focusing solely on the quality of human capital we should also look at the quantity. What he is in fact latching on to is the very finely tuned linkage between the two. The point is simply here that when economies emphasise education (quality of human capital) and especially of women as a natural part of the development process they would be wise in also focusing on quantity measures since, as other economists so famously showed, there is a tradeoff between quantity and quality in child rearing. Add to this the tempo (birth postponement) effect of fertility which comes from pushing the whole life course framework of women as they enter the labour market and you end up with a bad policy if taken too far. Moreover, evidence suggests that once the decision is made to go aggressively for quality without making sure that quantity is kept stable it is very difficult (if not impossible) to bend the stick back again.

This is what many Asian countries now confront I feel.

It's Both Actually ...

In many ways, this should not be too difficult to understand but often the debate gets completely loop sided because people focus on population growth rather than population structure. Moreover, once population structure is incorporated into the growth theory framework the goings get quite tough in terms of mathematical model complexity. Yet, as the main conclusions of the neo-classical framework persist the critique remains the same.

Interestingly, this is also why Bowring's comparison of human capital investment (the quantity) with investment in infrastructure is only as good as it goes. Roads can be built within a reasonable time frame (well, if you have the workers that is) but human capital is another matter. Basically, the decisions you take today will only matter in some 20-30 years time and the decisions you took decades ago are only making their presence felt now. This is what path dependency is all about really and also what policy makers in countries such as India, Turkey, Brazil, Morocco (I think it is too late for China) etc. would be wise to consider; both for their own good and the rest of us . The lesson here is then that while no-one can disagree in putting aside investments for the quality of human capital as well as working to get women integrated into the labour force one would be wise to also consider the quantitative perspective.

German and Japanese Populations Continue to Decline in 2007

Hello Everyone,

This is really a post to apologise to all our readers for a rather lengthy absence. This blog is far from dead, and we have simply been busy with other matters, possibly for a lot longer than we realised. Anyway Claus is now back up with a new post, and while I am here I would just mention the fact that....


Germany lost about 97,000 inhabitants in 2007. According to recent data from the Federal Statistics Office, births were up by 1.8% and deaths increased slightly by 0.7%, whereas marriages were down by 1.3%.

There were in fact 685,000 live births registered, that was 12,000 births or 1.8% more than in 2006. Thus the number of births thus increased for the first time since 1997. In 1996 and 1997, the number of births rose slightly, but this was an exception to an otherwise downward trend since 1991.

The number of deaths was down in 2006, but then increased again slightly in 2007 - from 822,000 to 827,000 (+6,000 or +0.7%). The number of deaths declined continuously from 1994 to 2001 but started an upward trend in 2002, 2003 and 2005.
In 2007, the number of deaths thus exceeded births by about 142,000. In the previous year, the birth deficit was 7,000 more.

According to provisional results, Germany had about 82,218,000 inhabitants on 31 December 2007. That was 97,000 inhabitants or 0.1% less than at the end of 2006 (82,315,000).


The Japanese government reported at the end of May that the number of children (all individuals under the age of 15 years old) had fallen to approximately 17,400,000. According to Japanese government estimates, if this trend continues, Japan is on course to lose somewhere between 26% and 31% of its total population.

There were 17,250,000 children aged 14 or under in Japan as of April 1, down by 130,000 from a year earlier, according to an annual survey by the Internal Affairs Ministry which was released to coincide with the May 5 Children's Day national holiday. Japan's population has been shrinking since 2005.

The number of Japanese children in the age group dropped by 0.7 percent from a year earlier. Children are now at a record low, constituting only 13.5 percent of the total population, down from 13.6 percent in April 2006.

Update 14 July 2008

Japan's population did in fact increase slightly in 2007, making for the first gain in three years, according to the latest estimates from the Ministry of Internal Affairs. The increase of 12,707 - which took Japan's total population to 127,066,178 as of March 31 2007 occurred entirely as a result of Japanese returning home from overseas and non-Japanese obtaining Japanese citizenship.

Wednesday, April 30, 2008

Fertility, Employment and Inflation in Thailand and Vietnam

"Thailand has even gone the extra mile to explore additional land for rice production," James Adams, World Bank Vice President for East Asia Pacific

The above quote is a reference (of course), to the current global shortage of rice for international trading purposes and to the sudden spike in rice prices (see a much fuller explanation of the whole issue in this companion post). James Adams is simply highlighting one possible step that can be taken, if not towards a complete solution, then at least along the road to an amelioration of what is likely to become - in some of the world's poorer regions - a very acute crisis indeed. But the issue of rice prices (and indeed of the whole structural rise in food and energy prices) is a complex one, and a lot of seperate factors come into play. Land use is simply one of these.

In Thailand’s Than-En village, Phantipa Chongrak, 38 sold her last four-tonne, unprocessed harvest in January for $235 per tonne, half what rice is selling for now in her area. But Ms Phantipa, who owns 1.9 hectares of land, has now bet big on higher rice prices – renting an additional 5.6 hectares to cultivate an unusual out-of-season rice crop, an investment of about Bt150,000 ($4,730, €3,020, £2,380).

Hoping to profit from the soaring price levels, plenty of other Thai farmers have done the same, with Thai agricultural officials predicting an extra 1.6m tonne harvest in June. But that has left Ms Phantipa anxious about her expensive gamble. “I’m thinking and worried that in the next two months the price will be down,” she says.

Obviously the decision procedure facing farmers like Phantipa Chongrak is a complex one. To some extent they need to bet that the rise in prices is going to be more or less permanent (which it may well be) but they will almost certainly be doing this on the basis of very "imperfect information" since they do not have their disposal the sophistocated models and information which international economists can resort to (and god knows, we have a significant enough tendency to get things wrong).

It has been estimated that the price increases may lead Thai farmers to cultivate up to 16,000 hectares (39,520 acres) of previously idle land this year, and , in addition, many growers plan to plant an extra crop.

Rice growers and their families constitute a third of Thailand's 65 million population, and those who own their own land earn an average of 12,837 baht ($404) a month, compared with 33,088 for a Bangkok family, according to data from the National Statistics Office. Thai rice exports were up 36 percent from a year earlier in the first four months of this year, and the country may supply 45 percent of world exports in 2008, compared with 31 percent last year, according to the Commerce Ministry.

Before the shortage, Thailand estimated it would produce about 20 million metric tons of milled rice this year and export about 9.5 million metric tons. The additional cultivation that is now envisaged may increase output by 660,000 metric tons - enough, for example, to supply Mexico's annual imports.

But there are problems. Apart from the unpredicatability of future short term movements in prices, water is also an issue. Thai farmers normally plant in two crops: the main one around mid-year and the second near year's end. Now, they're planting at least three times, which means dipping into water typically saved for the dry season that starts in November. The Royal Irrigation Department said in April that reservoirs were at 64 percent of capacity, down from 71 percent a year earlier. It also warned against planting a third crop in two northern provinces, citing limited water reserves. Paddies have been guzzling 20 percent more water than normal so far this year, according to Theera Wongsamut, director general of the irrigation department.

And there is also growing indebtedness among Thai rice farmers. The state Bank for Agriculture and Agricultural Cooperatives expects lending to rise 25 percent to 250 billion baht this year on increased demand from rice planters, according to bank President Thiraphong Tangthirasunan. Farmers are borrowing the money to buy equipment like water pumps since they are planting more while the water supply is limited. They are also busily buying fertilizer, seed and pesticides, and trading-in buffaloes for mechanized plows.

So James Adams is right, many in Thailand are preparing to go that extra mile (and let's just hope for there sake that they don't need to "erect one bridge too many" to cover it).

Structural Issues in the Global Agricultural Labour Market

As I say the totality of issues which are being raised by the recent rise in food and energy costs constitute a very complex problem indeed, and in these posts I do not pretend to be able to address all of them. Indeed the question I am raising here is really a very simple one: there is no doubt that globally we have the land surface available to increase agricultural output substantially - even if we should be aware that presently unused land is unlikely to be of the same quality as the land which is being currently put to use (otherwise it is hard to see why it is not currently producing). We also have the technological resources to increase agricultural productivity in a way which enables us not only to feed the additional global population we are facing, but even to meet the needs presented by the rapid rise in living standards which is also taking place in the emerging economies.

We have both of these things (land, technology), but do we have the people we need to put them to work? Or better put - since obviously with those extra billions who are about to come on line across the planet we could hardly be said to be short of people - do we have the right people in the right places? That is to say, do we have the people where we want them, and with the levels of skill and education (you know, to use the technology effectively) that we need? Since if we don't we have what economists have traditionally called a "bottleneck problem", but this time we have it on an unprecedented (global) scale, a scale where the traditional economic remedies (labour market mobility and flexibility) tend to meet with a very high level of cultural resistance.

To take the most simple example, when we start talking about recovering currently unused agricultural land (that extra mile, remember), we might like to stop to think why it stopped being used in the first place. One obvious reason is that it wasn't sufficiently productive at the then prevailing prices, and this will often be true. But another reason would be that growing urbanisation and declining rural populations have simply meant that some land became fallow for demographic reasons (namely that there were not sufficient people willing to stay and work it, at least at the wages which were then being offered), which brings us straight back to my principal point - where and how are we going to find and persuade the people who could work the land to do so. Even the best designed plans - which always look ever so easy and attracive on paper - all too often come to founder on harsh and complex "on the ground" (no pun intended) realities. And if the solution here passes through raising rural wages and rural living standards, then remember that those of us who live in highly urbanised and developed societies may well notice this, in the form of higher prices, continuing inflation in food and energy, and indeed very possibly in a sustained period of what economists like to call "stagfaltion". That is, what we are talking about here isn't exactly small beer.

Migrant Dependence in Thailand

Turning now to a specific example, in the Thai case this whole "where does the labour come from" question is no idle one since fertility - including rural fertility - is now well below replacement level and still falling, and every year less and less young Thais are available to enter the labour market. So basically if the Thais want to work extra land they will need to find the human resources with which to do it.

One option, evidently, is immigration, and the tragic death by suffocation of 54 migrant workers from Myanmar who were being transported into Southern Thailand in an enclosed container truck earlier this month certainly drew the attention of the world's press to existence of this phenomenon in Thailand and to the level of dependence which the current expansion in the Thai economy now has on imported migrant labour. So it isn't only capital which is flowing strongly into Thailand at this point (the astute reader will recall that in fact the Thaksin government actually fell shortly after taking the decision to try to stop too much capital entering the country), labour is also streaming in to allow it to be effectively put to work.

The migrants who died were following a route that tens of thousands of others from Myanmar had taken before them. They are drawn to Thailand to work in jobs described by locals as "dirty and dangerous" - the fisheries industry, construction sector and on rubber and palm oil plantations.

In fact migrant Myanmar labour has long formed a significant part of the workforce who make possible the construction of all those hotels and holiday complexes that now dot the beaches of Phang-nga and Phuket, the mainstays of Thailand's vibrant tourist industry. In the fisheries sector, the men are employed on the boats that go out to sea, while the women work in factories to process the catch.

True, the numbers are not at this point large by Western European and US standards, but they are strategically deployed across the economy. In 2007, Thai labor officials and NGOs estimated that there were some 2 million migrant workers in Thailand, 75% of whom came from Myanmar, while the rest came from Cambodia and Laos. Only 500,000 of these however were registered with the Thai Labor Department.

According to a recent report "The Contribution of Migrant Workers to Thailand" (Main finings online here) prepared for the International Labour Organization by Philip Martin of the University of California (Davis) total migrants in Thailand rose from about 700,000 in 1995 to 850,000 in 2000 and to 1,773,349 in 2005. They constituted 2.2 per cent of the labour force in 1995, 2.5 per cent in 2000, and 5 per cent in 2005.

In 1995 some 42 per cent of the migrants were registered. In 2000 this was up to 67 per cent, but by 2006 it had fallen back again to 26 per cent, with these large fluctuations in the ratios undoubtedly reflecting ambivalence on the part of the Thai authorities to the whole situation. They need the workers, but they don't really want them. How resonant this is of so many situations in so many other countries. Perhaps those who imagine that land can simply be rolled online as we need it (right along a nice simple neo classical production function) might like to think a little more deeply about these kind of issues.

In terms of activities involved, the ILO found that in 2005 the migrants they were able to identify were distributed roughly as follows : 720,000 in agriculture, 720,000 in industry, and 360,000 in services.

Philip Martin calculated - making the assumption that the migrants were as productive as their fellow Thai workers in each of the sectors where they work - that the total migrant contribution to output would be in the order of $11 billion (or about 6.2 per cent of Thailand’s GDP). Assuming they were somewhat less productive (say only 75% of Thai worker output) then their contribution would still be in the order of $8 billion (or 5 per cent of GDP). So we could estimate that migrants in Thailand now contribute anywhere from 7 to 10 per cent of the value added in industry, and 4 to 5 per cent of the value added in agriculture.

Really the picture we are seeing in one country after another across the globe is strikingly similar from this point of view. As countries fall below replacement fertility they increasingly come to depend on migrant labour to work in areas like agriculture, construction, low skilled industry and domestic work. Yet in Thailand, as in many equivalent western countries the new and much needed workers are often far from popular.

Thailand returned to civilian rule in January 2008, with Samak Sundaravej of the People Power Party replacing deposed prime minister Thaksin Shinawatra. The PPP campaigned on a populist platform aimed at reducing rural poverty, and said it would use its first six months in office to revive the economy before tackling controversial issues, including migration.

The military government that ruled between September 2006 and January 2007 had taken a hard line against migrants from neighboring countries, supporting five southern governors who banned migrants from talking on cell phones, riding motorbikes, or leaving their Thai housing between 8pm and 6am. However, faced with the inevitable it did prove to be just as flexible as governments elswhere at the end of the day and finally approved a plan to allow migrants who failed to re-register in 2007 to pay a fine (3,800 baht, $120) and register for two-year work and identity cards during January-February 2008.

As I have said most migrants in Thailand are employed in low paid unskilled jobs in construction, manufacturing, agriculture, fisheries and domestic service in northwestern and southern provinces. Relatively few jobs held by migrants are attractive to Thais and few migrants work in the areas of highest unemployment in Thailand's northeast. The apparent magnitude of migrants' contribution to Thai GDP and their sectoral concentration suggests that they will continue to contribute substantially to the country's economic development for the foreseeable future.

The Vietnamese Case

But turning now from a country which is below replacement fertility and importing migrants, to one which is below replacement and exporting them, let's examine the case of another of the world's leading rice exporters - Vietnam - which is in fact the third exporter globally after Thailand and India. As can been seen in the chart below, Vietnam has enjoyed very rapid economic growth in recent years, especially when measured in US dollar terms, and this economic growth has both raised living standards and expectations, and reduced productive land available for rice cultivation.

As I have been trying to argue, the issue of rice prices (and indeed of the whole structural rise in food and energy prices) is a complex one, and a lot of seperate factors come into play. Land use is simply one of these: Vietnam’s total paddy acreage has dropped from 4.3m hectares to 4m hectares in recent years, and part of the reason for this has been increasing pressure on land use from other areas like industrial development and housing. Of course, raising output is not incompatible with using less land, providing productivity rises fast enough, but this (as we will see later) is not always as easy as it sounds on paper. A second factor which is also important is inflation - and again as we will see, Vietnam is now suffering from a fierce bout of inflation - since rapid rises in the prices of some basic commodities can lead to hoarding in the expectation of future price increases, and the only way to halt this is to convince people that prices will stabilise, something which in the present climate is very hard to do indeed. Basically a combination of rapidly rising living standards and an increase in inventories for "hoarding" purposes can provide us with a large part of the explanation for why it is that despite the fact that Vietnam has now ceased to export rice the queues to be found in Ho Chi Minh city are currently longer than anything which has been seen since the height of the communist era.

But things are not, as we have been seeing (in, for example, this accompanying post on the roots of the problem) as simple as we - or classical economic theory - might like them to be, since many things are interconnected here, and in fact far from being able to simply breeze that extra mile that James Adams is rooting so hard for, Vietnamese farmers are currently losing thousands of dollars every year as a result of manpower and machinery shortages when it comes to harvesting the rice they would evidently like to grow.

Provinces in the Mekong Delta region continue to face a lack of workers to harvest crops.

At least this is the situation described in a recent survey carried out by Can Tho University, and the problem has now started to become an acute one since - owing to Vietnam's spectacular recent growth (see above chart) - potential young farmerworkers are leaving in droves for urban centres, industrial parks, export processing zones or points farther afield (external migration), in search of jobs which offer better pay, and given the collapse in Vietnamese fertility which has taken place since the late 1980s, there are now, in a fashion which is eerily similar to the pattern we have already been noting in China, fewer and fewer young workers about to enter the Vietnamese rural labour market, creating a potentially huge long term labour gap in areas like the Cuu Long (Mekong) Delta (Viet Nam’s biggest breadbasket).

For Vietnamese farmers, the sharp rise in rice prices comes amid rapid change in the rural landscape. Vietnamese rice farmers today are far more productive, and prosperous, than they were during the ill-fated, and long abandoned, drive to collectivise agriculture. But in the new drive for nationalisation, much prime paddy land is being converted to factories and housing.

According to Hanoi’s Institute of Policy and Strategy for Agriculture and Rural Development, Vietnam’s total paddy acreage has dropped from 4.3m hectares to 4m hectares in recent years, which has raised concerns about the country’s long-term food security. “We are warning against diverting [rice] paddy land to other uses,” says Duong Ngoc Thi, a senior official at the institute.

Of course increased investment in improved technology would help - a combine harvester operated by three people has the manpower equivalent of 100 farmers - but apart from finding the money to make this work, the techno-fix is not that simple since Vietnamese paddy fields are wet and muddy compared with the waterless fields which serve for other crops, and this makes it much harder for foreign-made, modern machines to work well in them.

Nonetheless an increase in investment would undoubtedly help the Vietnamese rice industry avoid so much of its potential crop each year, according to Nguyen Van Chien, an official from the Vietnamese Ministry of Agriculture, and agricultural mechanisation could help enhance the quality as well as the quantity of Vietnamese rice, boosting the country’s competitiveness for rice exports with its chief rival, Thailand. At present, Vietnamese rice sells for around $20 less per tonne than Thai rice.

Of course, it is important to bear in mind that despite the dramatic drop in fertility Vietnam's population is still rising fast. This is the so-called "momentum problem", since the last cohorts from the high fertility era are very numerous, and thus when they reach childbearing age will tend to produce a large number of children, even if the number each individual woman has is a lot less than previously. In addition we need to add-in the impact of increased life expectancy as rising living standards improve the general health of the population. So Vietnam's population is both increasing, and ageing rapidly, and this latter issue will undoubtedly have significant consequences later on.

It isn't only in rural Vietnam, however, that labour shortages are now appearing. The Ho Chi Minh City Construction Association has forecast that this year the city will face a labour shortage in the construction industry since the number of building projects awaiting execution has doubled. In a recent report they noted that the shortage problem got significantly worse in the post-Tet holiday period, since (and in an example which follows a pattern we have already seen in China) many young workers did not return to their jobs after the holiday. Most construction companies have been busily raising wages in an attempt to entice more people yet the shortage persists. Nguyen Huu Quang, deputy director of the NBH Building Service Ltd. Co, is quoted as saying that construction companies in HCM City were in danger of losing a significant part of their human resources.

As I mentioned, this failure of people to return after the Tet holiday is surprisingly reminiscent of the situation as reported in China after the end of the recent winter holdiday. The Economist - in an article entitled Where is Everybody - reported that the vast annual migration of around 20m people that has been fuelling the manufacturing boom in southern China over the past two decades is now rapidly diminishing.

The Guangdong Labour Ministry is reporting that 11% of the workers did not return after the January holiday period, and independent estimates put the number as high as 30%. Whatever the exact details, many factories are reeling. Wages were already rising (according to government figures by around 20% y-o-y) now they will surely go up further. Meanwhile, revenues are falling due to slowing demand from America and a reduction, following pressure from other countries, in China's complex system of export subsidies.

According to HCM association’s figures, construction companies in HCM City currently can supply more than 42,000 skilled masons, a number which is far below the real demand for workers, which is thought to be somewhere in the region of 100,000. In a trend which has been evident in other countries (like Eastern Europe) skilled construction worers have either transferred to other provinces (or gone abroad) or returned to their hometowns where better infrastructure now exists and a rapid rise in the construction of industrial parks and export processing zones is producing plenty of work.

And what is the result of these growing labour shortages? As we have been seeing elsewhere (and again the East European comparison is instructive) the outcome is virtually inevitable: rapidly rising wages and accelerating inflation. Vietnamese consumer prices rose 21.4 percent in April, the fastest pace since at least 1992 and the IMF are now forecasting annual inflation of 16% for the whole of 2008 in Vietnam.

These growing labour shortages, which can to some extent be anticipated in any economy which is growing rapidly, are exacerbated in Vietnam by the fact that many potential workers - in a way which is similar to the situation which is to be found in Poland or Romania - now work abroad, whether as temporary or permanent migrant labour. There is, however, one important difference between Vietnam and Eastern Europe in this regard in that Vietnam has an active policy of encouraging what they call "labour Export", indeed the Ministry of Labour has a whole department which is dedicated to the topic. The reason that this policy is persued is not hard to imagine. It is summed up in one single word: remittances. For 2006 the World Bank estimates that migrant workers sent home to Vietnam roughly $4.8 billion, or 7.5% of GDP. Of course such a sizeable flow of money has an impact in its own right on the Viet Nam economy, creating in its wake more consumer demand, and with this more demand for construction, and with this more demand for construction workers who, as a result of one of those many anomalous circularities we are able to identify here, happen all to be often to be working out of the country and are doubtless to be found among those actively sending money home. When you stop and think about it it isn't hard to see where all that inflation comes from here.

As I say, it is not simply a question that people from Viet Nam want to go to work abroad, the Vienamese government is actively encouraging the process. As a result the number of foreign destinations has been expanding significantly. There are now more than 40 countries to which Viet Nam "exports" labour, compared with 15 in 1995. The Vietnamese labour market generated about 1.68 million new jobs in 2007 according to the Ministry of Labour, Invalids and Social Affairs. About 1.6 million of these new jobs were generated inside Viet Nam, but about 85,000 were jobs abroad, and these brought the total number of Vietnamese guest workers and experts officially working abroad to over 400,000 in 2007. And the Labour Ministry is working on further expanding the business, since it has plans to raise the rate of "exported labour" at an annual additional rate of 40,000 to 50,000 (to around 130,000 annually) by the time we get to 2010, an increase of 65 five per cent over a five-year period.

Job seekers at a recent employment exhibition held in Ha Noi. Obviously given the wage differentials which exist people are eager to leave, but should the Viet Nam government be actively promoting the process? In the short term it eases pressure on the labour market, but at what price in the longer term?

One destination which is proving increasingly popular is South Korea, and the Vietnamese Ministry of Labour recently proudly announced that Korean companies would like to recruit 15,000 Vietnamese guest workers in 2008, 27 per cent more than last year. In addition the Korean Government has decided to allow 1,000 migrant Vietnamese labourers who had originally registered for agriculture work to transfer to construction, which is itself suffering from a shortage of workers, according Vu Minh Xuyen, vice director of the External Labor Center of the Vietnamese Ministry of Labour.

Xuyen said the workers will have to take an exam testing their understanding of the Korean language. The exam can be taken in May or October. Those living in remote areas and poor rural areas will be given priority.

Workers seeking South Korea employment learn Korean at a job service centre in the Central Highlands in Gia Lai Province. Korean company demand for Vietnamese guest workers this year is 27 per cent up against last year.

Of course South Korea is facing its own low fertility driven labour market issues. According to U.N. statistics, the fertility rate per women has fallen from 5.4 in 1995 to 1.5 in 2005 with the estimate for 2050 being 2.1. The population in the age group of 15-59 it is estimated to fall from 68.2 percent in 2000 to 50.4 percent in 2050, whereas the share of 60 plus population is to rise from 11 percent in 2000 to 33.4 percent in the same time span.

Recent statistics show that South Korea's birth rate fell to its lowest (in 2005). The projected (Health-Welfare Ministry forecast) fall in population from the present level of 48 million to 40 million will occur over next 45 years. The ageing index (U.N. statistics) is projected to grow from 52.7 in 2000 to 150.7 in 2025.

In a recent Korea National Statistical Office report, this index is forecast to reach 100.7 in 2016, almost doubling from 55.1 in July 2007, further projected to as high as 213.8 by 2030. This will put a tremendous financial burden on the working-age population (those aged 15 to 64), to support those elderly citizens, while the ratio of the working-age population to senior citizens is predicted to drop to as low as 2.7 per one elderly by 2030, as compared to the present level of 7.3 to 1.

So naturally Korea is going to increasingly need to import labour, and my only question is: does it make sense to import this labour from a country like Vietnam which itself is also going to be having problems over a fairly limited time horizon?

The point is economic growth of the kind Vietnam would like to have is very employment intensive. At the end of 2007, there were more than 45.6 million Vietnamese employed nationwide, an increase of 2.31 per cent over 2006, and the Ministry of Labour plans to generate a further eight million new jobs by 2010. This objective was recently announced by Dam Huu Dac, deputy minister in the department, who said it was part of a National Target Programme on Job Generation. "Each year, 1.5 to 1.6 million new jobs are being generated and a total of 49.5 million workers are expected to be employed by 2010." he said. And this is just it, right now Vietnam has a massive problem of job creation quite simply because the number of people of working age has been expanding rapidly, but soon, following that sudden turn downwards in the 15 to 19 age group curve, the problem will be inverted, and having constructed an economiy which needs and extra 1.6 million workers a year to keep moving the issue will be one of just where those workers are going to come from?

About 1.6 million seek to enter the Vietnamese labour market every year. Meanwhile, the nation’s population is growing by more than a million annually.

The question I am asking is really one about our whole perception of the ongoing demographic transition. Does it really make sense for a country with such low fertility as Viet Nam now has, and where labour shortages in rural areas and key sectors like construction are already being observed, to be so enthusiastically exporting - in a way which is very reminiscent of Eastern Europe - its future labour force? As I say, the issue here is as much one of changing how we see the situation as anything else, and getting it across to those responsible for making economic policy that "cutting your nose of to spite your face" may work in the short term, but in the longer term we are only building up problems, and big ones.

The Czech Connection

The story I am telling here is one of a web with many loose threads. And I wouldn't want to give the impression that I am arguing against labour mobility, far from it. I think that immigration from high fertility countries to lower fertility ones makes a lot of sense. What I am questioning is the movement of population from low fertility societies to higher fertility ones (from Poland and Latvia for example to the UK and Ireland, or from Ukraine to virtually anywere), and I am also questioning the advisability of countries which are attempting to grow rapidly while having falling and below replacement fertility actively encouraging and stimulating out-migration. At best this is simply moving the deckchairs round, and at worst it is robbing Peter to pay Paul when Peter is already out of money.

The strangeness and lack of apparent rationality in all of this is perhaps nowhere better illustrated by the close and growing connection between the Czech and the Vietnamese labour markets. The Czech Republic's economy is growing rapidly - around 6% to 7% per annum -and unemployment is amongst the lowest in the European Union. As a result the Czech Republic is now itself growing very short of labour (only 3 years after watching a stream of its own young people leave for work in the UK and elsewhere), since after 20 years of very low fertility (1.2-1.3 TFR range) there are now fewer and fewer young people coming forward into the labour market, and so, of course, the Czech Republic is busy out and about looking for migrants to fill the gap.

Initially they turned to their immediate neighbours, and indeed the largest group of foreign migrants with rights to work in the Czech Republic comes from Slovakia. At the end of last year, there were 101,233 Slovakians legally working in the country. Ukranians are the second most numerous group with 61,592 working in the Czech Republic as of last year. But there are problems here since both of these countries (and indeed all the other ones in the region) have very low fertility too, so they soon notice any drain on their labour resources, and this is then simply displaces a problem from one place to another and is not a long term solution.

As a result the Czech government is now looking further afield - much further in fact - since the number of Mongolian and Vietnamese workers working in the Czech Republic has been increasing rapidly. In 2007 there were 6,897 Mongolians working legally in the CR (up from 2814 in 2006) and 5,4425 Vietnamese (up from 692 in 2006). The numbers of Vietnamese present in the country is undoubtedly much larger, and according to the Czech police, there are almost 51,000 Vietnamese holding long-term or permanent residence permits for the CR, many of these associated with temporary student visas. Demand from people inside Vietnam is also way up, and the Czech embassy in Hanoi had to close its doors to visa applicants temporarily in March to reorganise itself in order to cope with the influx.

So you plug one gap to create another, and where I ask, is the method in all our madness here?

In this post I have not presented solutions, rather I have attempted to identify problems, problems which need to be addressed. But in order to adequately start to address the problem we need first to recognise that it exits. Basically I feel that far too many people - and especially at the institutional level - are still effectively in denial that the problem exists, and is important. What I would like to ask is when is someone (someone with some clout I mean) finally going to start taking seriously the idea that emerging economy countries like Vietnam need to try and do something about their fertility situation (and that something will undoubtedly involve dedicating resources to the issue) before they get stuck - like South Korea, Singapore, Taiwan and Hong Kong before them - down on that very bottom rung?