Commoditization of populations

Twenty years from now, what might the world's most precious, depleting, natural resource be? Oil? Steel? Lumber? How about working—age adults who are still contributing to a nation's entitlement programs rather than receiving benefits from them? 

Want to know how short the future supply of such people is?  Well, across the globe, nations like Japan, Australia, and Singapore are actually begging their child rearing—age population to procreate.  For instance, according to the Tokyo correspondent for the BBC:

Japan currently has one of the lowest birth rates in the world. [And] the government says that unless the trend is reversed quickly, the shortage of children risks doing damage to the economy.  The decline in Japan's birth rate is so severe they have invented a word for it — 'shoshika', meaning a society without children.   Unless women here start having more babies, the population in Japan is expected to shrink more than 20% by the middle of this century. Nearly half would be elderly, placing impossible burdens on the health and pension systems.

AAP reports a similar condition in Australia  :

Treasurer Peter Costello has already beseeched healthy young couples to procreate for their country, and now a report on the economic implications of the ageing population has given his words extra weight.  Far from blaming the baby boomers for a projected doubling in the proportion of people aged 65 years or more by 2044, the draft Productivity Commission report has found that falling fertility is the major culprit.

Having a bigger proportion of older people will increase the nation's healthcare costs and diminish participation in the workforce, the report found.  The commission estimates that gross domestic product (GDP) growth per capita could fall to 1.25 per cent per year in the 2020s — about half its present rate — while health spending is likely to rise from six per cent to about 10.8 per cent of GDP by 2044.

Finally, a recent Times of London article forecasts a similarly dire situation brewing in Europe:

In 50 years there will be almost 100 million fewer people living in Europe, according to a United Nations report.  The UN's latest study on international migration released yesterday predicts that even if Europe gains an average of 600,000 immigrants a year, its population will fall by 96 million by 2050. Without the new arrivals, the decline would be even more spectacular: 139 million. Already immigration into Europe is partly helping to offset the impact of declining birth rates. The continent's population would have shrunk by over four million in the final five years of the past century if it were not for the latest wave of immigrants.

Certainly, America is not immune to this global population crisis, as we are projected to experience a doubling of our own senior demographic in the next 30 years, from the current 40 million to likely 80 million, as our Baby Boomers retire. Which begs the question:  What has the world done wrong to get into this predicament, and what can we do to solve this looming international catastrophe? 

To begin with, in 1968, Paul Ehrlich, Charles Remington, and Richard Bowers created a non—profit organization called 'Zero Population Growth.'  Its primary goal at the time was to draw attention to the global problems associated with overpopulation, and to get American couples to start thinking about having families with two children or fewer.  Unquestioningly, this concept spread throughout the industrialized world as a Good Thing.  However, the problem is that at roughly the same time as this restrictive procreation policy was being advocated, entitlement programs were being expanded, and their economic architecture required a continually increasing number of workers to be paying into the system to support the ever—growing number of retirees that would draw from it.  The concepts of ZPG were on course for a head—on collision with the expanding socialist welfare structure of many governments.

Further complicating matters were the changing mores of a species that once felt that procreation was a requirement.  Paradoxically, this new ethos not only made it socially acceptable to not have children, inasmuch as couples were helping the population 'problem' by remaining childless, but also made such a condition practically a badge of honor.  As a result, people from all walks of life, in an increasing number of areas around the world, just intentionally stopped having babies.

Where does this leave us?  Well, fortunately, America appears to be better positioned for addressing this imminent disaster than most of our trading partners.  As discussed in the previously referenced Times of London article:

Recent years have seen North America overtake Europe as the preferred destination for people looking to start a new life outside their native country. Between 1960 and 2000, the foreign—born population in the US more than tripled from 10 million to 35 million, with a further 8 million in Canada. Whereas four decades ago, six out of every 100 people in North America was an international migrant, the figure has now climbed to 13 per cent.

Given this, the solution moving forward is clearly going to be job creation. The nations that can employ people with the highest wages and the most desirable standards of living are going to attract skilled labor from all over the world, while enticing their own populations to not emigrate elsewhere. Energetic and ambitious immigrants, especially those who possess education and other personal resources, and who utilize legal methods for moving to the United States, enrich the pool of our scarcest natural resource, and make America more competitive in the arena of international trade.

As a result, contrary to the worries about American outsourcing expressed in the past presidential campaign, the exact opposite will occur in our nation over the next several decades, and is already being fostered by a lower dollar and higher energy costs.

In fact, a recent Wall Street Journal editorial addressed this concept called 'insourcing': 

Insourcing is what happens when foreign—headquartered multinationals operate subsidiaries in the U.S. These companies contribute both to U.S. economic growth and living standards.... Insourcing provided jobs for more than 5.4 million U.S. workers in 2002, or nearly 5% of total private—sector employment. These are good—paying jobs, too. The average annual compensation at such companies was a tad over $56,000, or some 31% more than the average annual private U.S. compensation.

To be sure, the notion of insourcing is so foreign to most Americans that Microsoft Word doesn't identify it, and the definition at Dictionary.com is not applicable. Regardless, Japanese and German car companies like Honda, Toyota, Nissan, and BMW for many years have been insourcing employees and manufacturing facilities in America to combat fluctuating exchange rates while significantly reducing transportation costs.  Even the just—announced purchase of IBM's PC unit by China's Lenovo represents insourcing inasmuch as Lenovo will be retaining all of IBM's employees, and moving its headquarters to New York.

Insourcing is not limited to manufacturing operations. The service sector accounts for a growing share of world economic activity, and the United States already boasts the world's most competitive and technologically sophisticated service sector, as well as a substantial trade surplus in services. The availability of the natural resource most important for the production of services — educated and qualified people who work — will be a continuing competitive advantage, at least compared to Europe, Japan, and other countries following a population spiral downward.

The bottom line is that with the current value of the U.S. dollar, as well as the high cost of energy, we are likely going to see more foreign companies expanding in America to overcome such rising expenditures.  Moreover, these same variables will likely make it less attractive for American companies to move operations overseas thereby reducing the trend of outsourcing that has been such a political hot potato.  In reality, it is quite likely that this ancillary benefit of the dollar devaluation that we have seen in the past three years is by no means accidental, and is probably a pivotal component of America's global economic strategy to create jobs here at home.

In addition to continually expanding the number of high—paying jobs that are available in our nation, America is going to also have to quickly come to grips with its illegal alien problem. Controlling who enters the country and realizing that an appropriate mix of talent can make immigration a strong contributor to our ability to grow our workforce and enhance our international competitiveness.  As a result, the U.S. must not make the same errors that Europe appears to be heading toward with regard to its Muslim population. 

As working—age, productive members of the society will continue to command a high premium around the world, American immigration policy should be taking advantage of the apparent biases that are surfacing elsewhere to once again make our nation the preferred vocational destination of desirable people from all parts of the globe.

Noel Sheppard is a business owner, economist, and writer residing in Northern California.  Noel receives e—mail at slep@danvillebc.com.  

Twenty years from now, what might the world's most precious, depleting, natural resource be? Oil? Steel? Lumber? How about working—age adults who are still contributing to a nation's entitlement programs rather than receiving benefits from them? 

Want to know how short the future supply of such people is?  Well, across the globe, nations like Japan, Australia, and Singapore are actually begging their child rearing—age population to procreate.  For instance, according to the Tokyo correspondent for the BBC:

Japan currently has one of the lowest birth rates in the world. [And] the government says that unless the trend is reversed quickly, the shortage of children risks doing damage to the economy.  The decline in Japan's birth rate is so severe they have invented a word for it — 'shoshika', meaning a society without children.   Unless women here start having more babies, the population in Japan is expected to shrink more than 20% by the middle of this century. Nearly half would be elderly, placing impossible burdens on the health and pension systems.

AAP reports a similar condition in Australia  :

Treasurer Peter Costello has already beseeched healthy young couples to procreate for their country, and now a report on the economic implications of the ageing population has given his words extra weight.  Far from blaming the baby boomers for a projected doubling in the proportion of people aged 65 years or more by 2044, the draft Productivity Commission report has found that falling fertility is the major culprit.

Having a bigger proportion of older people will increase the nation's healthcare costs and diminish participation in the workforce, the report found.  The commission estimates that gross domestic product (GDP) growth per capita could fall to 1.25 per cent per year in the 2020s — about half its present rate — while health spending is likely to rise from six per cent to about 10.8 per cent of GDP by 2044.

Finally, a recent Times of London article forecasts a similarly dire situation brewing in Europe:

In 50 years there will be almost 100 million fewer people living in Europe, according to a United Nations report.  The UN's latest study on international migration released yesterday predicts that even if Europe gains an average of 600,000 immigrants a year, its population will fall by 96 million by 2050. Without the new arrivals, the decline would be even more spectacular: 139 million. Already immigration into Europe is partly helping to offset the impact of declining birth rates. The continent's population would have shrunk by over four million in the final five years of the past century if it were not for the latest wave of immigrants.

Certainly, America is not immune to this global population crisis, as we are projected to experience a doubling of our own senior demographic in the next 30 years, from the current 40 million to likely 80 million, as our Baby Boomers retire. Which begs the question:  What has the world done wrong to get into this predicament, and what can we do to solve this looming international catastrophe? 

To begin with, in 1968, Paul Ehrlich, Charles Remington, and Richard Bowers created a non—profit organization called 'Zero Population Growth.'  Its primary goal at the time was to draw attention to the global problems associated with overpopulation, and to get American couples to start thinking about having families with two children or fewer.  Unquestioningly, this concept spread throughout the industrialized world as a Good Thing.  However, the problem is that at roughly the same time as this restrictive procreation policy was being advocated, entitlement programs were being expanded, and their economic architecture required a continually increasing number of workers to be paying into the system to support the ever—growing number of retirees that would draw from it.  The concepts of ZPG were on course for a head—on collision with the expanding socialist welfare structure of many governments.

Further complicating matters were the changing mores of a species that once felt that procreation was a requirement.  Paradoxically, this new ethos not only made it socially acceptable to not have children, inasmuch as couples were helping the population 'problem' by remaining childless, but also made such a condition practically a badge of honor.  As a result, people from all walks of life, in an increasing number of areas around the world, just intentionally stopped having babies.

Where does this leave us?  Well, fortunately, America appears to be better positioned for addressing this imminent disaster than most of our trading partners.  As discussed in the previously referenced Times of London article:

Recent years have seen North America overtake Europe as the preferred destination for people looking to start a new life outside their native country. Between 1960 and 2000, the foreign—born population in the US more than tripled from 10 million to 35 million, with a further 8 million in Canada. Whereas four decades ago, six out of every 100 people in North America was an international migrant, the figure has now climbed to 13 per cent.

Given this, the solution moving forward is clearly going to be job creation. The nations that can employ people with the highest wages and the most desirable standards of living are going to attract skilled labor from all over the world, while enticing their own populations to not emigrate elsewhere. Energetic and ambitious immigrants, especially those who possess education and other personal resources, and who utilize legal methods for moving to the United States, enrich the pool of our scarcest natural resource, and make America more competitive in the arena of international trade.

As a result, contrary to the worries about American outsourcing expressed in the past presidential campaign, the exact opposite will occur in our nation over the next several decades, and is already being fostered by a lower dollar and higher energy costs.

In fact, a recent Wall Street Journal editorial addressed this concept called 'insourcing': 

Insourcing is what happens when foreign—headquartered multinationals operate subsidiaries in the U.S. These companies contribute both to U.S. economic growth and living standards.... Insourcing provided jobs for more than 5.4 million U.S. workers in 2002, or nearly 5% of total private—sector employment. These are good—paying jobs, too. The average annual compensation at such companies was a tad over $56,000, or some 31% more than the average annual private U.S. compensation.

To be sure, the notion of insourcing is so foreign to most Americans that Microsoft Word doesn't identify it, and the definition at Dictionary.com is not applicable. Regardless, Japanese and German car companies like Honda, Toyota, Nissan, and BMW for many years have been insourcing employees and manufacturing facilities in America to combat fluctuating exchange rates while significantly reducing transportation costs.  Even the just—announced purchase of IBM's PC unit by China's Lenovo represents insourcing inasmuch as Lenovo will be retaining all of IBM's employees, and moving its headquarters to New York.

Insourcing is not limited to manufacturing operations. The service sector accounts for a growing share of world economic activity, and the United States already boasts the world's most competitive and technologically sophisticated service sector, as well as a substantial trade surplus in services. The availability of the natural resource most important for the production of services — educated and qualified people who work — will be a continuing competitive advantage, at least compared to Europe, Japan, and other countries following a population spiral downward.

The bottom line is that with the current value of the U.S. dollar, as well as the high cost of energy, we are likely going to see more foreign companies expanding in America to overcome such rising expenditures.  Moreover, these same variables will likely make it less attractive for American companies to move operations overseas thereby reducing the trend of outsourcing that has been such a political hot potato.  In reality, it is quite likely that this ancillary benefit of the dollar devaluation that we have seen in the past three years is by no means accidental, and is probably a pivotal component of America's global economic strategy to create jobs here at home.

In addition to continually expanding the number of high—paying jobs that are available in our nation, America is going to also have to quickly come to grips with its illegal alien problem. Controlling who enters the country and realizing that an appropriate mix of talent can make immigration a strong contributor to our ability to grow our workforce and enhance our international competitiveness.  As a result, the U.S. must not make the same errors that Europe appears to be heading toward with regard to its Muslim population. 

As working—age, productive members of the society will continue to command a high premium around the world, American immigration policy should be taking advantage of the apparent biases that are surfacing elsewhere to once again make our nation the preferred vocational destination of desirable people from all parts of the globe.

Noel Sheppard is a business owner, economist, and writer residing in Northern California.  Noel receives e—mail at slep@danvillebc.com.