July 1, 2022

China Reckons with Its Fatal Conceit, as Birth Rate Falls to Historic Low

Four decades ago, the Chinese government began enforcement of its ghastly one child policy. Now, the fruitlessness reaped by its population control policies threatens its economic future.

China’s latest census results show an 11.5 percent decline in births compared to 2020. This is the fifth consecutive year of lower births in China. Wang Feng, professor of sociology at the University of California-Irvine, argues these new numbers demonstrate China’s population has peaked:

“The year 2021 will go down in Chinese history as the year that China last saw population growth in its long history,” Feng writes in The New York Times.

This change signals the beginning of future difficulties for China, as the younger members of the aging population will be under increasing pressure to support older generations. A falling labor supply could also signal the beginning of the end for the government’s strategy of selling low cost exports.

Sowing the Seeds of Fruitlessness

Although many developed countries tend toward lower birth rates as infant mortality falls, the turn for China has been unnaturally fast. This is due, at least in part, to the long reign of China’s one-child policy, which utilized everything from social pressure to fines to forced sterilizations to keep birth rates low.

Why would China cultivate such a self-destructive policy? The reason rests in China’s Communist Revolution, and the philosophy of its leader, Mao Zedong.

“(Re)production needs to be planned. In my view, humankind is completely incapable of managing itself,” Mao argued. “It has plans for production in factories, for producing cloth, tables and chairs, and steel, but there is no plan for producing humans. This is anarchism—no governing, no organization, and no rules.”

This fear of the anarchy of reproduction is simply a play on the Marxist charge that capitalism is anarchy of production in contrast with the glorious planning under communism.

Mises Predicts Mao

Although some communists, most notably Fredrich Engels, argued a large population would be a boon to a communist society, economist Ludwig von Mises knew better. Mises recognized 29 years before the rise of Mao’s one child policy that  a thoroughgoing dedication to any form of socialism, including communism, is incompatible with people’s ability to freely choose to have children. As Mises pointed out in his book Socialism: An Economic and Sociological Analysis,

Without coercive regulation of the growth of population, a socialist community is inconceivable. A socialist community must be in a position to prevent the size of the population from mounting above or falling below certain definite limits. It must attempt to maintain the population always at that optimal number which allows the maximum production per head.

Anyone attempting to plan the number of factories and machines required to maximize production must have the right number of workers to man the factories and machines. Too many or too few people will confound central planning.

The problem is even worse for communists. When property is held in common, there is an incentive to overuse it. If, for example, a pond is owned by everyone near it, there is an incentive to over-fish today for fear that others will catch all the fish before you have a chance. This problem is known as the tragedy of the commons.

And, the more neighbors who live around the pond, the more likely it is to run out of fish quickly. This incentivizes people to extract more fish even sooner. Adding population to a commons then adds incentive to overuse the commons.

Under capitalism, this problem is solved many different ways. By allowing private property, ponds can be fenced and individuals can charge fishermen per fish. Alternatively, the possibility of earning a profit could drive some real estate investors to offer re-stocking services to ponds which are over-fished.

Capitalism can even utilize a growing population as a boon in solving this problem. New minds can develop creative technologies for policing ponds to make sure they aren’t being overused. This was economist Julian Simon’s thesis in his book, The Ultimate Resource. Population growth aided by economic freedom leads to economic growth.

However, without private property, there is little incentive for any individual to solve the tragedy of the commons. And under communism, private solutions are made illegal.

When all property is held in common by force, as communism proclaims to do, all property becomes subject to the tragedy of the commons. As such, communism will inevitably tend to result in calls for population control, not because population growth is inherently harmful, but because of the perverse incentives created by the enforced commons.

The Fall of Communism

From 1960 to the 1980s Nobel prize winning economist Paul Samuelson predicted that the Soviet Union would overtake the US economy’s Gross National Product. In retrospect this seems unbelievable, since the Soviet Union would cease to exist in 1991, but many economists joined Samuelson in being bullish on the USSR. The lure of a scientifically planned economy bewitched the technocrats of economics.

One economist who did not fall for the allure was Austrian economist Murray Rothbard, who saw through the smoke and mirrors that had fooled Samuelson. As Rothbard notes:

Curiously, one finds that the “growth” seems to be taking place almost exclusively in capital goods, such as iron and steel, hydroelectric dams, etc., whereas little or none of this growth ever seems to filter down to the standard of living of the average Soviet consumer. The consumer’s standard of living, however, is the be-all and end-all of the entire production process.

Rothbard recognized that data surrounding economic production was hollow on its own. The rise of China has been heralded similarly for the last few decades. Economists marvel at China’s productive abilities and GDP growth and have begun to speculate that China’s planned economy might serve as an alternative system to capitalism for developing countries.

However, much like the Soviet Union, China’s productive abilities are built on the back of the failure of central planning. In attempting to manage its population through force, China has created an unnatural population pyramid.

The country will now face an elderly population who, by law, were unable to have the number of children they desired. Economists and demographers have long noted how children serve as a form of social security in developing countries. But without the ability to have more than one child, will the state be able to replace this function?

This problem is exacerbated by the fact that China has a far larger male population, with 118 men born for every 100 women. This phenomena is called the “missing women” of China and is largely an unintended consequence of the one child policy combined with cultural male preference wherein families would selectively abort girls so their one child would be a son.

This imbalance hasn’t gone unnoticed. Yihuang county officials recently sparked controversy when trying to convince “leftover” women—sheng nu, a term used to describe unmarried women as young as 27—to wed unemployed men.

“At present, the phenomenon of ‘older young female cadres and workers’ remaining single in our county has become a very prominent problem,” the government reportedly said in a leaked internal document, “which urgently needs the care, help and support of the whole society.”

The one child policy has created other problems within the country, including a group of undocumented people born in China known as the Heihaizi. These individuals were illegally born due to the one child policy and therefore are not legal citizens. As such, they are restricted in their ability to improve society via mutually beneficial exchange because of their inability to get government approval for education, marriage, and employment among other things.

The demographic problems associated with the one-child policy abound.

China’s GDP growth over the past few decades has been impressive. However, I part with hawkish views of China’s threat for one key reason: the fruits of central planning of the population will soon bloom and poison this progress, just as the fruits of the Soviet Union’s economic planning did.

In his classic work The Fatal Conceit, Nobel Prize-winning economist Friedrich Hayek highlights the importance of a growing population to the development of many people in many regions of the world:

In these regions the population must multiply if its members are to achieve the standards for which they strive. It is in their own interest to increase their numbers, and it would be presumptuous, and hardly defensible morally, to advise them, let alone to coerce them, to hold down their numbers.

It seems the best chance for the country is for leaders to end the central family planning policies completely and hope the anarchy of reproduction comes to their rescue in time.

This article, China Reckons with Its Fatal Conceit, as Birth Rate Falls to Historic Low, was originally published by the Foundation for Economic Education and appears here with permission.  Please support their mission.