The Great Pause Week 77: The Manchurian Confusion

"The reveal came when China moved to control the price of infant formula."

Two decades into their 81st Century, the powers that be in China announced a succession of dramatic policy shifts. They began with a move on the transnationalist Chinese financial sector, including Hong Kong; disrupting ownership of the largest online retail chains; sidelining their wealthy oligarchs; keeping enterprises from leaving China through public stock offerings in New York, London or Brussels; banning BitCoin miners; and reasserting authority over the all-important data that technology companies — FinTech, MedTech, EdTech, gaming, telecommunications, even China’s version of Uber, Didi Chuxing — had begun amassing to track personal buying habits, health, gaming skills, attitudes, and interests. The Chinese central party asserted dominion over all that. If you were a company in China, Xi Jinping seemed to say, the government is now your managing business partner. The data you gather belong to us. The profits you make return to be used to elevate the standard of living for Chinese people. We are, after all, communists.

Popular media outlets in many parts of the world read nefarious meanings in these tea leaves. They assumed an emerging Big Brother surveillance state, a return to hardline Marxist doctrine, or some similar totalitarian power grab of all China’s young, successful, capitalist enterprises that apparently had gone too far and transgressed some unseen red line. Reassertion of control over the financial hub at Hong Kong was only the first shoe to drop. China was moving to control its own interior, across the entire spectrum of industries and new media. 

The reveal came when China moved to control the price of infant formula. The hidden motive behind China’s crackdown was much simpler then the Sinowatch cabals on K-Street fantasized. It was about babies.

Facing an aging population and dwindling labor force, China in 2015 scrapped its controversial one-child policy. Still, Beijing has struggled to convince couples to have more babies. In 2020, the number of newborns plummeted 18% to 12 million compared to the previous year, the fourth straight year of decline. 

The cost of education steadily rising through the new EdTech sphere in the wake of pandemic lockdowns was less about those startups getting way too profitable for Communist Party tastes. Prices were getting way too prohibitive for parents to educate children, which meant they would be less inclined to have more.

China cracked down on unaffordable housing costs for the same reason. Then they cracked down on video game play by dating age youth, and on the high cost of dating generally. They actively encouraged the developers of Tinder-like apps, with data sharing redirected to Beijing to be combined with gaming habits, taxi-rides, concert attendance, Fitbit uploads, and purchases at the corner pharmacy. 

In a country that not long ago went to great lengths to limit family size to one child, there are now generous incentives to have more children, even a monthly check equal to US$77 for any second or third child.

Risk-taking and experimentation by young workers make them the engine of capitalism. They are also more mobile and thus can move to places where they will be most productive. So, what happens when that part of a national demography wanes? 

Over the next 80 years, in almost every country, population will shrink. According to a 2017 “Global Burden of Disease” study published in The Lancet, some of the largest nations’ populations will halve, while Nigeria will overtake China as the second most populous. Other African countries will also continue to densify.

Outside of Africa, women are having fewer children. In 1950, the average number a woman produced was 4.7. By 2017, it was 2.4. Well before 2100, the Lancet authors predicted, it will fall below 1.7. And that is a magic number, something Thomas Malthus would not have predicted absent a globe-shattering famine or descent into vice (neither of which should be ruled out, as I will explain in later posts).

In the United States, 25 states had more deaths than births last year, up from five at the end of 2019. Kenneth Johnson, a demographer at the University of New Hampshire, has calculated that together with the rise in deaths — up by about 18 percent from 2019 — the drop in births is contributing to the aging of the US population. The rate among women in their early 20s is down by 40 percent since 2007. Teenagers have had the sharpest decline, down by 63 percent. The U.S. fertility rate is now around 1.73 children per woman — roughly on par with that of Denmark and Great Britain.

Max Pop

Once women have fewer than 2.1 babies each, population declines. In fact, the researchers at the University of Washington’s Institute for Health Metrics and Evaluation predicted the world’s population will max out in 2064 at 9.7 billion and fall to 8.8 billion before century’s end. “Falling to 8.8 billion” makes me wince. One needs to grasp what that dimension of human flesh will mean to fish and fowl. It is like accepting 3 degrees as a climate goal (our present trajectory is 4–5 degrees warmer by 2100).

In recent years this population conversation has divided into two opposing camps. One camp sees the issue in terms of economics. There is a “demographic time bomb” about to explode in the most highly developed and modernized countries. It has already begun to shrink those countries native populations below replacement level and erode their abilities to maintain economic growth, innovation, and the essential services required for a high standard of living. 

The other camp sees the issue in terms of ecology. Human population has grown beyond reasonable limits and is now degrading biodiversity, social systems, and nature, leading to a spiral of abrupt climate change, extinctions, pandemic diseases, and economic overshoot. Our demands on the planet for energy, mineral and food supplies exceed its ability to support us at this scale. 

Some in the first camp think we should try to avert this problem by encouraging fertility. Others believe immigration could solve the problem. In 1965, the US Congress repealed 1924 Johnson-Reed Act, which had imposed national-origin quotas expressly designed to maintain America’s Western European ethnic makeup. Ending it resulted in 58.5 million new immigrants over the next 50 years, about 25 million Asian. Many were high-tech geeks, Unicorn creators, arriving from China and India as students or young professionals. And so was born Silicon Valley and a quadrillion-dollar industry from mere electromagnetic ones and zeros.

According to a study by the nonpartisan National Foundation for American Policy, more than half of the 91 start-ups that became $1 billion companies had one or more immigrant founders. Likewise, the Partnership for a New American Economy found that immigrants or their children had founded more than 40 percent of the 2010 Fortune 500 companies.

 — Shikha Dalmia, Who Has the Cure for America’s Declining Birthrate? Canada.
The New York Times, Aug. 18, 2021.

Given the perfect storm of climate change, water scarcity, biodiversity loss and resource depletion, my feeling is that we should not be thinking of ways to have more babies. National economies and elderly welfare, as important as they may be, are not more important than innumerable species extinctions, our own included. Degrowth is a wave we could learn to surf. And, like zoonotic pandemics, it is a wave we know is out there.

The demographic bomb that China is attempting to defuse is set to go off in 2035 when China’s new births will no longer keep pace with its natural death rate. A few years later, China will be hard pressed to fill employment vacancies in its production and service industries. Rather than prepare for its future by defusing the demographic bomb, as it is doing by draconian means (China time makes the New York Minute seem like hours), it would do better to let the D-bomb go off and prepare to build a better, smaller society as the implosion proceeds. 

Not everyone in the Chinese Central Congress is entirely agreed to Xi’s program, by the way. Rumors coming from China’s own version of Breitenburg or Davos suggest Xi might do well to start shopping his resumé around. In a contest between Marxist wealth sharing and unicorn billionaires, old Karl M. may hold the losing hand this time.

Instead of dethroning its oligarchs, China’s next generation of leaders may find it more fruitful to recruit immigrant clean-tech startups and back them. Climate tech venture capital is trillionizing, outstripping investments in every other industry on the planet by orders of magnitude. The nations that emerge on top will be those that discover diverse and novel ways to run the carbon cycle backwards within the next ten years. That is something that can grow.

 

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The COVID-19 pandemic has destroyed lives, livelihoods, and economies. But it has not slowed down climate change, which presents an existential threat to all life, humans included. The warnings could not be stronger: temperatures and fires are breaking records, greenhouse gas levels keep climbing, sea level is rising, and natural disasters are upsizing.

As the world confronts the pandemic and emerges into recovery, there is growing recognition that the recovery must be a pathway to a new carbon economy, one that goes beyond zero emissions and runs the industrial carbon cycle backwards — taking CO2 from the atmosphere and ocean, turning it into coal and oil, and burying it in the ground. The triple bottom line of this new economy is antifragility, regeneration, and resilience.

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#GenerationRestoration

“There are the good tipping points, the tipping points in public consciousness when it comes to addressing this crisis, and I think we are very close to that.”
 — Climate Scientist Michael Mann, January 13, 2021.

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