Growing Old Before Becoming Rich

By BERNARDO VILLEGAS

October 28, 2010, 5:19pm

MANILA, Philippines – The poster child of the population control advocates is Thailand that has already a per capita income more than twice that of the Philippines. Without belittling the great accomplishments of our former non-identical twin, especially in the area of agribusiness, let me inform the Thai admirers that their idol will be the first country in the history of mankind to grow old before becoming rich. With a per capita of just about $4,000 per annum (compared to a rich country like Singapore that has $37,000 per capita income), 

Thailand is already aging faster than Singapore, whose leaders have been frantically trying to combat the ill effects of a demographic winter. Those over 65 years of age in Thailand comprise 8.7 % of the total population while it is only 8.3% in Singapore.

Rich countries like Japan, Italy, Spain, and the Scandinavian countries are having a hard time coping with their aging population. You can imagine what it will be like with a developing country like Thailand already burdened with too many retired people and not enough young people to support the aging and to constitute a dynamic consumer market. That is why, in the list of emerging markets crafted by the economists of Goldman Sachs, 

Thailand is excluded while Vietnam, Indonesia, and the Philippines (VIP) are among the so-called Next Eleven (N-11) after the BRIC (Brazil, Russia, India, and China). Although Thailand has a large population, the rapid aging of its people does not make it an attractive emerging market during the next 20 years.

This should make economists who have been systematically comparing Thailand and the Philippines to show the benefits of population control to reconsider their position. Their analysis lacks a theoretical framework. They make an oversimplistic inference. If the Philippine population, they say, had grown as slowly as Thailand over a 25-year period, the Philippine GDP would be four times greater than what it actually is. This is Arithmetic, not Economics. Let me explain.

Thailand's GDP grew much faster than that of the Philippines because of the very enlightened policies of its leaders — inspired by a king with a magnificent obsession for agriculture — of endowing its countryside with excellent infrastructures, e.g. farm-to-market roads, irrigation systems, post-harvest facilities, etc.

 As early as the 1980s, there was no small farm in the most remote areas of Thailand that was not within one kilometer from a good road. During that same period, we were still obsessed with inward-looking, import-substitution, 

ultra-nationalistic industrialization which dragged our economy down to become the "sick man of Asia in the mid-1980s. Thailand made its farmers rich by providing them with efficient infrastructures. Our farmers got poorer and poorer (70 percent of the poor in the Philippines are in the rural areas).

Richer farmers mean less dependence on a large family for farmwork. I find no statistical evidence from the population control advocates that would show that it was the birth-control program that was the primary reason for the deceleration of population growth in Thailand. I maintain that it was the enlightened economic policies that led to a steep fertility decline. 

Even with a lackluster economic performance and ineffective family planning programs, the Philippines saw its fertility rate drop from 6 babies per fertile woman in 1975 to 3.1 in 2008. Without an aggressive population control program, the Thais could have succeeded in bringing down its population growth through the usual forces of later marriages, urbanization of the population, and the education of women (Thailand has one of the highest literacy rates of females in Asia).

 With very aggressive population control, what Thailand achieved was to overshoot the decline way below replacement level. This is why, its population is aging prematurely. It is becoming old before getting rich, a very dangerous combination. And if China does not modify its one-child policy soon, it may be the second country after Thailand to grow old before it grows rich (see International Herald Tribune, October 16-17, p. 12).

When in Cebu City, please visit gregmelep.com for your real estate and retirement needs.

For comments, my e-mail address is bvillegas@uap.edu.ph.