NPR had a report on China's one-child policy this morning. While there have been many abuses associated with this policy, it has probably been the most successful environmental policy in the history of the world. Imagine if China had 1.7 billion people today rather than 1.3 billion. Add 30 percent to their annual emission of greenhouse gases, wouldn't that be great? This point apparently never occurred to NPR's reporter. Neither did the fact that China's economy has grown. Yes, China has a higher ratio of retirees to workers. Each worker is also massively more productive today than they were 30 years ago. In fact, China's output has been rising at an average annual rate of almost 10 percent for the last decade. Most of this increase is due to higher output per worker, not increased employment. Suppose we assume that output per worker increases at just 7 percent annually, a considerably more modest pace than China's recent growth. At this growth rate, output per worker will quadruple In a twenty year time span. Suppose that the ratio of worker halves in a 20 year period, falling from 4 to 1 to just 2 to 1. This is a hugely more rapid decline than China is actually seeing. With output per worker having quadrupled, we could reduce the tax per worker by 30 percent and still have the elderly receive pensions that are 40 percent higher than they did when the ratio of workers to retirees was 4 to 1. This is extremely simple arithmetic, but NPR's reporter could not be bothered to do it. Instead she told listeners that China's is too late in relaxing its one-child policy. The real issue here is that China has to rebuild its Social Security system to ensure that the elderly get adequate pensions. (Maybe they could better afford these pensions if they wasted less money holding dollar reserves.) The problem is not too few children as NPR told its listeners.
--Dean Baker
