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To NEDA Chief Balisacan: Demographic Transition Follows Economic Growth, Not the Other Way Around

August 29, 2012

NOTE: I posted the following as a Facebook status. I did minor changes. Second Update: I included the case of China. 

If you want to know the state of ‘elite’ education and economics in the Failippines, just read the published papers of the President’s economic czar Arsenio Balisacan and the alleged studies by some UP economists. Mr. Balisacan, who now heads NEDA (the country’s central planning agency), is former dean of the UP School of Economics.

I’d like to inform my reader that I’m not an economist, yet I strongly believe I don’t have to be one to critique the works of the country’s ‘top economist’.

What do I have and why do I think Mr. Balisacan is dead wrong about his alleged economic analyses/evaluations? LOGIC and PROPER REASONING. Logic is the most important, indispensable conceptual tool in economics (or any field of discipline) because economics simply requires a logical, reality-based process of thought.

In his paper titled “Population Management should be mainstreamed in the Philippine Development Agenda”, Balisacan argues that “the performance of the Philippine economy has been hindered by the country’s bourgeoning population due to its rapid population growth.”

Where did Balisacan actually base his main argument? Well, he simply believes there’s a verifiable link between the country’s poverty and its high population growth.

He says: “The core idea which links population and economic growth is demographic transition described as “a change from a situation of high fertility and high mortality to one of low fertility and low mortality.””

The theory of demographic transition, which refers to “the change in the human condition from high mortality and high fertility to low mortality and low fertility ” (Caldwell 2010), is usually used by Malthusian economists and intellectuals to peddle the idea that states must control population to achieve economic growth. Lifeboat theorist Garrett Hardin once called this still questionable theory the demographers’ “deus ex machina

But this theory is simply a MODEL that chronicles or describes- usually in graphical and illustrative forms- changes in population over a period of time. It does not tell what really happened behind those changes. It’s up to the researcher or observer to understand the facts behind the model. Thus, it cannot be used as a substitute for proper reasoning. It’s just a TOOL that we can use to understand population transition.

Here’s my own analysis: There are two ways to explain or interpret demographic transition.

  • Subjective interpretation. An interpretation is subjective when it is simply based on, or inspired by, some social, political, ideological agenda. The agenda behind Balisacan’s paper is ‘Malthusianism’ or Malthusian policy. People who have this interpretation argue that there’s an undeniable link between demographic transition and economic growth, hence the argument that lower population means higher economic achievement. This is the main reason why they propose drastic population control measures to expedite our way toward economic progress.

Balisacan explains: “A country that enters into a demographic transition experiences sizable changes in the age distribution of the population and this affects economic growth.”

  • Objective interpretation. To be objective, an interpretation must take into account all possible reasons or explanations, which must be based on scientific facts, why a nation enters into demographic transition. That is, it does not merely focus on one or two areas and is not influenced by any ideology or dogma. Correlation does not imply causation.

Malthusian economists observed that most developed countries entered into demographic transition.

From Balisacan’s paper: “Unlike its Southeast and East Asian neighbors, the Philippines failed to achieve a demographic transition similar to what its neighbors had in the past three decades.”

He also says: “Studies show that demographic transition accounts for a significant portion (about one-third) of the economic growth experienced by East Asia’s economic “tigers” during the period 1965 to 1995.”

What he’s trying to say is that all we need to do is aggressively cut or control our population through massive state intervention to achieve economic growth. If that is not ‘economic quackery, I don’t know what is. Again, this theory of demographic transition is just a model; it cannot be used as a substitute for argumentation.

Yes, most developed economies passed through DT period, but most of them did not adopt population control measure just to achieve economic growth. They simply adopted sound, liberal, free market economic policies. In fact, most of them have adopted pro-natalist policies to increase their dwindling population!

What did those East Asia’s economic tigers do to pass through what he calls ‘demographic transition’?

Demographic Transition Model

Demographic Transition Model

Well, Singapore admitted it made a mistake by aggressively curbing its population. So, in 1987 the SG reversed its “Stop at Two” program replacing it with “Have Three or More (if you can afford it)” pro-natalist policy. Japan also adopted the same policy, while South Korea plans to do the same.

There’s no causal link between high population and poverty (translation: that high population is the main cause of poverty). But there is causal link between repressive economic policies and poverty. Contrary to Balisacan’s interpretation, the reality is that the theory of demographic transition indirectly shows that in most cases, poverty causes population growth, and poverty is CAUSED by repressive economic policies.

The Philippines is poor because of its repressive economic policies, and it failed to achieve demographic transition because of its increasing poverty, again, CAUSED by its repressive, protectionist, failed economic policies.

The case of Singapore, Japan, South Korea and other developed nations shows that governments don’t need to adopt aggressive population control policy to secure economic growth. This is because demographic transition is merely the result of a nation’s economic success. In other words, demographic transition FOLLOWS economic growth, and this is what Malthusian intellectuals like Balisacan fail to see.

I must repeat: DEMOGRAPHIC TRANSITION FOLLOWS ECONOMIC GROWTH, not the other way around. This is almost the same as the scientifically proven argument against man-made global warming that CO2 (carbon dioxide) follows temperature, not the other way around. But that’s another story.

SECOND UPDATE:

But what about the case of China, which is notoriously used by demographers and neo-Malthusian economists and intellectuals to prove their argument that population control policy is the key to economic success?

A commenter (below) showed me a study in support of the Malthusian school of thought. The finding of this study, by Hongbin Li and Junsen Zhang, is as follows (emphasis mine):

We find that the birth rate has a negative impact on economic growth, and this finding is robust even after we control for a number of demographic and institutional variables. Our finding provides some new evidence that shows the negative causal effect of population on economic growth, as asserted by Malthus.

China started its unique population control policy in the late 1970s. Our study is among the first to provide some evidence that can be a basis for evaluating the effect of this
population control policy. While the birth control policy has many negative aspects for human beings, and there may be other policies that can control population, the one-child policy may indeed have contributed to the rapid growth of the Chinese economy since the late 1970s.

Here’s my comment on that study:

That’s a good example of a junk, intellectually bankrupt economic study that supports the Malthusian School of thought.

That malthusian study covers an extensive period ranging from 1978 to 1998 without even mentioning the RADICAL policy and economic changes implemented during the same epoch. What’s very interesting is that Deng Xiaoping started China’s “second revolution” that radically changed the Maoist country’s socialistic economic policies, opening it “to outside world” in 1979. In other words, Deng Xiaoping stubbornly compromised China’s Maoist/Marxist principles by adopting what he called “radical pragmatism” that opened China to foreign investment and economic opportunities.

Those things were not even mentioned in that hilarious study!

So, what happened since 1979?

According to this source:

“The Deng reforms decentralized the state economy by replacing central planning with market forces, breaking down the collective farms and getting rid of state-run enterprises. One of the most successful reforms—the “within” and “without” production plans—allowed businesses to pursue their own aims after the met their state-set quotas. Enterprises and factories were allowed to keep profits, use merit pay and offer bonuses and other incentives, which greatly boosted productivity.”

That made China a potential economic tiger in Asia. I can even say that China’s free market reform was the one of the greatest transformations in Asia in the 20th century. Other success free market stories were Singapore, Japan and South Korea. On the other hand, Philippines kept its protectionism and nationalist economic policies when many Asian countries, which are now economic tigers, embraced free market reforms.

Also:

“In the Deng era there was a shift from central planning and reliance on heavy industry to consumer-oriented industries and reliance on foreign trade and investment. The 1978 reforms included efforts to boost foreign trade through the establishment fo 12 state companies to control imports and exports and the creation of Special Economic Zones (SEZs) along China’s southern coastline. In 1982, communes began to be dismantled and peasants were allowed to grow and sell produce. In 1985, tariffs were cut from 56 percent to 43 percent beginning the long, gradual reduction of import barriers.”

Now, let’s see the economic results of Deng’s open door policy- or betrayal of Maoist principles- since 1979.

I can only cite this economic study published in Economic Analysis & Policy in 2009. The study states:

“During its reform period, China amazed the rest of the world by its rapid rate of economic growth which in most years reached, or almost reached, double digit levels. As a result, China’s real GDP was over 13 times higher in 2006 than in 1978. This change is based on World Bank information which uses US prices for 2000 to estimate that China’s real GDP in 1978 was US$157.7 billion whereas in 2006 it was US$2,100 billion.”

See the changes? See how Deng’s economic reforms turned China from a poverty-riddled Maoist state into a potential economic tiger in the 1990s? Well, China’s one-child policy indeed had a massive impact on its GDP per capita simply because the country was then experiencing radical economic transformation as a result of the Maoist traitor’s “pragmatic” reforms. So, I can say that even without implementing the one-child policy, Deng’s open-door policy would still lead to increased GDP and growth.

China’s open-door policy also attracted foreign direct investment:

“A very important contribution to China’s open-door development has been the inflow of foreign direct investment (FDI) to China. China became the major global recipient of FDI during its reform period. Prior to 1979, FDI in China was negligible but after 1979 it rose rapidly with a small temporary decline in the late 1990s, probably associated with the Asian Financial Crisis. With the passage of time, China’s FDI inflow has become less important as a proportion of China’s GDP. It peaked as a proportion of China’s GDP in 1993 but the absolute amount of FDI in China continued to rise.”

Here’s the graphical illustration of China’s economic rise since DXP’s 1979 reform:

What happened since the 1979 reform?

Here’s what DXP said prior to his 1979 reform:

“We have admitted that we lag behind many countries in our study of the natural sciences. Now we should admit that we also lag behind in our study of the social sciences, insofar as they are comparable in China and abroad. Our level is very low and for years we haven’t even had adequate statistical data in the social sciences, a lack that is naturally a great obstacle to any serious study”.”

What DXP was trying to say is that he didn’t simply want social change, he also wanted drastic economic transformation that compromised, or even betrayed, Maoist principles.

Again the result of the reform since 1979, from this 2008 study:

“As a result, China’s real GDP was over 13 times higher in 2006 than in 1978. The extent of this growth is highlighted in Figure 1. Furthermore, because of its controlled growth in population, the level of per capita income in China rose steeply.

“Furthermore, China experienced a substantial rise in its Human Development Index (HDI) during this period. Its HDI (one indicator of well-being) rose from 0.530 in 1975 to 0.777 in 2005.”

What actually went right in China since 1979? Is it the country’s one-child policy which, according to Li and Zhang, contributed to “rapid growth of the Chinese economy” or Deng’s “open-door” economic policy? Or: was it possible for China to achieve the same economic growth without Deng’s free market reforms? In my honest opinion, the answer is NOPE!

Works cited:

  • Caldwell, J.C. (2010) Demographic Transition Theory. NY: Springer.
  • Li, H. and Zhang, J. (2007) Do high birth rates hamper economic growth? The Review of Economics and Statistics, 89(1), pp. 110–117.
  • Tisdell, C. (2009) Economic Reform and Openness in China: China’s Development Policies in the Last 30 Years. Economic Analysis & Policy, 39(2), pp. 271-294.
  • Tisdell, C. (2008) Thirty Years of Economic Reform and Openness in China: Retrospect and Prospect [WWW] UMN.Edu. Available from: http://ageconsearch.umn.edu/bitstream/90620/2/WP%2051.pdf [accessed 30/8/2012]
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29 Comments leave one →
  1. GabbyD permalink
    August 30, 2012 3:38

    this is a good paper on the issue

    http://www.dial.prd.fr/articles/master_ape/CRI1/longtermfactors/population_growth_china.pdf

    • August 30, 2012 3:38

      That’s a good example of a junk, intellectually bankrupt economic study that supports the Malthusian School of thought. That malthusian study covers 1978 to 1998 without even mentioning the RADICAL policy and economic changes implemented during that period. It’s very interesting that Deng Xiaoping started China’s “second revolution” that radically reformed the Maoist country’s socialistic economic policies and opened it “to outside world”. In other words, DXP compromised China’s Maoist/Marxist principles by adopting what he called “radical pragmatism” that opened China to foreign investment and great economic opportunities.

      These things were not even mentioned in that hilarious study!

      So, what happened since 1979?

      From this source:

      “The Deng reforms decentralized the state economy by replacing central planning with market forces, breaking down the collective farms and getting rid of state-run enterprises. One of the most successful reforms—the “within” and “without” production plans—allowed businesses to pursue their own aims after the met their state-set quotas. Enterprises and factories were allowed to keep profits, use merit pay and offer bonuses and other incentives, which greatly boosted productivity.”

      That made China a potential economic tiger in Asia. I can even say that China’s free market reform was the one of the greatest transformations in Asia in the 20th century. Other success free market stories were Singapore, Japan and South Korea. On the other hand, Philippines kept its protectionism and nationalist economic policies when many Asian countries, which are now economic tigers, embraced free market reforms.

      Also:

      “In the Deng era there was a shift from central planning and reliance on heavy industry to consumer-oriented industries and reliance on foreign trade and investment. The 1978 reforms included efforts to boost foreign trade through the establishment fo 12 state companies to control imports and exports and the creation of Special Economic Zones (SEZs) along China’s southern coastline. In 1982, communes began to be dismantled and peasants were allowed to grow and sell produce. In 1985, tariffs were cut from 56 percent to 43 percent beginning the long, gradual reduction of import barriers.”

      Now, let’s see the economic results of DXP’s open door policy since 1979.

      I can only cite this economic study published in Economic Analysis & Policy in 2009. The study states:

      “During its reform period, China amazed the rest of the world by its rapid rate of economic growth which in most years reached, or almost reached, double digit levels. As a result, China’s real GDP was over 13 times higher in 2006 than in 1978. This change is based on World Bank information which uses US prices for 2000 to estimate that China’s real GDP in 1978 was US$157.7 billion whereas in 2006 it was US$2,100 billion.”

      See the changes? See how DXP’s economic reforms turned China from a poverty-riddled Maoist state into a potential economic tiger in the 1990s? Well, China’s one-child policy had a massive impact on its GDP per capita simply because the country was experiencing radical economic transformation as a result of DXP’s economic reforms. So I can say that even without implementing the one-child policy, DXP’s economic reforms would still lead to increased GDP and growth.

      China’s open-door policy also attracted foreign direct investment:

      “A very important contribution to China’s open-door development has been the inflow of foreign direct investment (FDI) to China. China became the major global recipient of FDI during its reform period. Prior to 1979, FDI in China was negligible but after 1979 it rose rapidly with a small temporary decline in the late 1990s, probably associated with the Asian Financial Crisis. With the passage of time, China’s FDI inflow has become less important as a proportion of China’s GDP. It peaked as a proportion of China’s GDP in 1993 but the absolute amount of FDI in China continued to rise.”

      Here’s the graphical illustration of China’s economic rise since DXP’s 1979 reform:

      What happened since the 1979 reform?

      Here’s what DXP said prior to his 1979 reform:

      “We have admitted that we lag behind many countries in our study of the natural sciences. Now we should admit that we also lag behind in our study of the social sciences, insofar as they are comparable in China and abroad. Our level is very low and for years we haven’t even had adequate statistical data in the social sciences, a lack that is naturally a great obstacle to any serious study”.”

      What DXP was trying to say is that he didn’t simply want social change, he also wanted drastic economic transformation that compromised, or even betrayed, Maoist principles.

      Again the result of the reform since 1979, from this 2008 study:

      “As a result, China’s real GDP was over 13 times higher in 2006 than in 1978. The extent of this growth is highlighted in Figure 1. Furthermore, because of its controlled growth in population, the level of per capita income in China rose steeply.

      “Furthermore, China experienced a substantial rise in its Human Development Index (HDI) during this period. Its HDI (one indicator of well-being) rose from 0.530 in 1975 to 0.777 in 2005.”

      • GabbyD permalink
        August 31, 2012 3:38

        wow, didnt you read that paper? its a comparison of the effects of a population program that varies across provinces within china. its robust to any national program that is happening at the same time as this program.

        dude, if you didnt understand the paper, why dont u just say so?

      • August 31, 2012 3:38

        No, it’s you again and again and again who didn’t read your own link and my reply, including the links I provided. You don’t know what you’re talking about.

      • GabbyD permalink
        September 1, 2012 3:38

        wow, ok. its obvious you didnt get it. national policy affects ALL PROVINCES. it doesnt account for differences in growth ACROSS provinces.

      • September 1, 2012 3:38

        LMAO!!! Oh yeah! It’s as if Deng Xiaping’s “radical pragmatism” or open-door policy in 1979, including all the succeeding free market reforms, did not exist at all. Keep fooling yourself.

      • GabbyD permalink
        September 1, 2012 3:38

        Ok. never mind. you dont really understand it. the tragedy is that you arent even humble about it. carry on.

      • September 1, 2012 3:38

        LOL! That really cracked me up. Delusion is a mental disease, GabbyD.

  2. August 30, 2012 3:38

    “the performance of the Philippine economy has been hindered by the country’s bourgeoning population due to its rapid population growth.”

    If majority of population do not have jobs, that should be the problem. The employment rate can be boost up through investments. We can’t expect investments coming from locals, can we? Those who draft 1987 constitution are unfair to the foreign investors/businessmen and professionals alike. The present constitution perceives the (higher)possibility of foreigners to be unfair. Actually, one has not to look for scums outside of our backyard because we have our own. Oligarchs, commies, trapos, and you know who…

    • August 30, 2012 3:38

      They’re not just unfair; they’re also intellectually bankrupt. Well, there’s a big difference between the words “schooled” and educated”. You may be schooled in an elite university, but that doesn’t mean you’re ‘educated’.

      We’re in breach of the international principle of reciprocity. In fact, all countries that deal with RP should also impose the same restrictions against Filipinos and Filipino-owned businesses. For instance, America, Canada, Australia, UAE and other countries should BAN/PROHIBIT Filipino professionals (e.g., doctors, lawyers, engineers, etc.) from practicing their respective professions. They should also ban Filipino companies from owning more than 40% equity in any firm.

  3. john permalink
    September 1, 2012 3:38

    Tama si Froi. There was no mention of sound, economic policies that may have affected real GDP growth..
    Ito lamang ang mga variables na ginamit nila..

    Annual growth of real per capita GDP
    Annual population growth rate
    Birth rate (1/1000)
    Proportion of minority population
    Real per capita GDP
    Secondary-school enrollment rate
    Investment share
    In-migration rate
    Growth of labor force share
    Youth dependency ratio
    Old dependency ratio
    Trade share
    Government spending share

    • September 1, 2012 3:38

      There was no mention of the radical economic policies adopted by Deng Xiaping since 1979. That would have changed the entire tone of the paper. Thus, the paper’s methodology is TOTALLY DEFECTIVE. Remember that China before 1979 was a pure socialist society, with state ownership of lands and all means of production, collective farming, collective, state-run enterprises, etc. But through Deng’s open-door policy, China gradually became a socialistic MIXED ECONOMY (others use the term market socialism), as the government allowed its citizens to own lands and start their own businesses, encouraged FDI, among others. My main argument is, China would have not achieved economic growth without Deng’s economic reforms.

  4. Jason Aganan permalink
    September 1, 2012 3:38

    It makes me wonder why we only hear about population deduction and not genuine economic reforms from the government and media. The narrative is always the same.

    • September 1, 2012 3:38

      It’s because the area of demographic literature is dominated by Malthusian intellectuals and economists. Try to find demographic and population studies that tackle subjects like ‘demographic transition’, economic growth, etc. online and you’ll discover that most, if not all of these studies confirm Malthusian assertions, principles or dogma.

  5. monk permalink
    November 16, 2012 3:38

    Malthusianism is currently taking place globally, as seen in oil production not meeting demand (and the need for other sources to do so) coupled with the effects of financial speculation and environmental damage, leading to high oil and food prices.

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