The Asian Baby Bust

Here at HS Dent, we’ve spilt quite a bit of ink writing about the economic consequences of declining birthrates.   The aging of the Baby Boomers, of course, is the subject to which we have devoted the most attention.  But we’ve also written extensively about Japan’s demographic implosion, the Chinese One Child Policy and about Europe’s birth dearth.

Interestingly, though it rarely get reported in the Western press, the countries of East Asia are facing a demographic crisis far greater than that of the United States or Europe.  And I’m not talking about Japan and China this time.  The Asian Tigers–Hong Kong, Singapore, South Korea, Taiwan, and Macau–have some of the lowest fertility rates in the world.

As the Economist informs us,

The trend towards smaller families is a supercharged version of a pattern seen everywhere: as people get richer, live in cities and women are better educated, they have fewer children… [The Asian Tigers’]  declines in fertility rates have been astonishingly quick.

In the developing world as a whole, fertility rates fell by half, to three [children born per woman], in the 50 years to 2000. In South Korea the TFR fell by two-thirds in 20 years from the early 1960s. In Taiwan it dropped from 6.5 in 1956 to 2.2 in 1983 and 1.7 in 1986. So for three decades, fertility rates have mostly been below the “replacement” level—of just over 2.0 in rich countries.  Last year the TFR was 1.22 in Singapore, 1.15 in South Korea and 1.04 in Hong Kong. In Taiwan it was 1.03, and the government’s planning agency forecast a further decline, to 0.94% in 2010, as women defer having babies during the Year of the Tiger (inauspicious, oddly). These are unprecedented levels for places unaffected by war or famine.

See “An Exercise in Fertility“

It is fascinating that these countries have birth rates lower than those in mainland China.  While China has a mandated One Child Policy (which does not cover parts of the countryside), much of the rest of developed Asia has adopted a de facto one child policy of their own, by citizen choice.

As for the question of “why,” the Economist has an answer that is similar to our own.   “The Singapore dream, as commonly defined, comprises five Cs. The catalogue of cash, car, credit-card, condominium and country-club membership leaves some glaring alphabetical omissions.”  The biggest omission, of course, is “children”.  In the modern, urbanized economy, children are an economic burden.  The amount of money required to provide for their well-being and education assures that few of us can afford to have more than one or two.  This is true in the United States by far more so in many Asian countries where parents dedicate enormous amounts of time, energy, and money to give their children a competitive advantage.  This is simply not possible with a large family.  Many Asian families have come to believe that a large family dooms its children to a life of mediocrity.

Asian governments realize that they have a crisis brewing.  Unfortunately, their efforts to increase the birth rate have been largely unsuccessful.  Ultimately, this means that most of East Asia will eventually face a demographic crisis that makes our problems in the West seem mild by comparison.

Charles Lewis Sizemore, CFA
Co-author of the recently-published Boom or Bust: Understanding and Profiting from a Changing Consumer Economy

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