America’s Demographic Exceptionalism

The strength of a nation starts with its population.  Are its ambitions compatible with its population base: too small, and it does not have the economic weight needed to project power; too big, and its people are a hostage to famine and poverty. 

We have grown up in a world where China and Russia are the twin evils; two slides down to the Dark Side.  Does demographics give us any reason to fear them?

Focusing first on China, its biggest strength, ultimately, has been its huge population, which is the basis for its economic clout, market size and geopolitical power.  The rest of Asia is a collection of little markets of varying degrees of unimportance.

This is about to change.

North America is poised to overtake East Asia in population.

Not just China  -  all of East Asia.

Source: Foreign Affairs

East Asia – China, Japan, South Korea, and Taiwan -  will decline to about 800-million people by 2100, and the US will have 400 million, growing steadily.  Canada could have 100 million, and Mexico 140 million.  Together, NA will have a population of 640 million in 2100…not far behind (20%) all of East Asia.  And the NA population will still be growing.

Unlike, say, Russia.

By demographic exceptionalism alone, America will be the world champion nation for at least the next 100 years.

There are some who think it could reach – Should reach - one billion people.

Author Matthew Yglesias makes a convincing case for a new kind of American greatness in his book One Billion Americans, which received excellent reviews.  A more populous America, he argues, will be a boon to current residents, richer on average by powering an economy that can produce more abundance.

Would we not be crowded out?  The population of the Lower 48 even when tripled would leave the main part of America about as dense as France and less than half as dense as Germany. A US as dense as England (just England, so excluding Scotland, etc.) could have some 3.5 billion people. Accommodating “just” one billion Americans will still leave plenty of land for parks and natural areas.

Cities would grow, which is ideal for innovation and productivity enhancements that result from the economics of agglomeration in urban labor markets.

He notes that a U.S. with one billion people would have more fresh water per person than Spain, the UK, Germany, and the Netherlands. And he’s not worried about agricultural output. He insists that “America generates massive surpluses of food and can easily accommodate more eaters.”

As for a possible surge in housing prices, he points out that the U.S. is suffering from land-use policies like restrictive zoning that keep housing prices artificially unaffordable. He also advocates for innovations in transportation policy, including the adoption of congestion pricing and bringing the cost of mass-transit construction projects more in line with those in other countries.

But there is no need to reach for the billion-person ribbon just to make the point that a rising population in America of any size is exceptional in today’s world. This is very lucky for anyone of retirement age, who need to count on the younger generation to support them.

The US has been exceptional in its population rise.  It was a demographic outlier among its developed world peers; after dipping well beneath the 2.1 replacement rate needed to maintain a stable population from one generation to the next in the 1970s, the U.S. total fertility rate partially recovered as Boomers finally got around to starting families. From the beginning of the 1990s until the Great Recession, it averaged 2.0, higher than the average for almost any other developed country.

Over the past decade, however, America had begun to look much more like a typical developed country. The U.S. total fertility rate began to decline in 2008 and, except for a minor uptick in 2014, has fallen every year since. By 2019, on the eve of the pandemic, it had dropped to 1.7, an all-time historical low. Now the pandemic has driven it even lower, to 1.6 in 2020 and perhaps to as low as 1.5 in 2021.

Net immigration has followed a roller-coaster path. It experienced a partial recovery in the early 2010s, but began to decline again starting in 2015. The decline then became a plunge in 2020 as immigration was dramatically curtailed amid the pandemic-related border closings.

Most of America’s increase in population is due nevertheless to immigration.  In this it is following the example of several developed countries, most notably Australia and Canada, that have made immigration the lynchpin of their long-term strategy for confronting population aging. 

Over the next three decades, the working-age population will be growing at an average rate of just 0.2 percent per year.  All of this growth, moreover, will be attributable to net immigration, which will gradually climb from its 2021 level of about 500,000 to between 1.0 and 1.1 million per year, significantly more than its average since the Great Recession. Without net immigration, our working-age population would actually shrink.

So would our productivity growth; immigration increases productivity growth. For one thing, the faster employment growth that comes with immigration increases the need for capital-broadening investment, and higher rates of investment, and consequently a more rapid turnover in the capital stock, can spur technological progress by increasing opportunities for “learning by doing.” For another, numerous empirical studies have found that the greater diversity of skills and entrepreneurial initiative that immigrants bring to the economy also spur productivity growth. Indeed, the boost that immigration gives to economic growth by increasing productivity may be even more important than the boost it gives by increasing employment.

Almost 45% of the CEOs of the Fortune 500 companies in 2023 were first- or second-generation immigrants.

These New Americans generated an enormous $8.1 trillion in revenue during 2022. They employed over 14.8 million people, emphasizing their role as a crucial driver of job creation and economic prosperity. 

Almost 80% of America's privately held, billion-dollar companies have an immigrant founder or immigrant in a top “C” level role such as CEO or CTO.

Four of the seven most valuable U.S. public companies are now headed by immigrants: Tesla, Nvidia, Google and Microsoft.

In addition, the four most valuable private, venture-backed U.S. companies are led and founded by immigrants: SpaceX (South Africa and Canada), Stripe (Ireland), Instacart (France), and Databrick (Iran).

New York state leads the states benefitting the most from this, along with California, Illinois, and Virginia.  Oh yeah, and two states that squawk so much about immigration- Texas and Florida – were also on that ‘top economic recipients’ list.

America’s biggest threat to increased prosperity is coming from the fact that the numbers of immigrant-led startups are going down.  This is being caused by the growth of startup hubs outside the U.S., making it easier for founders to launch companies in their home country.

This is obviously unfair as an economic practice; what we need are the state governors like Ron DeSantis going around to these countries and begging them to send immigrants!

Can’t see any flaws in that.

The higher the rate of immigration, the better the economy will be. Also, immigrants do not take way jobs; the jobs that immigrants take generate additional income, resulting in additional demand for goods and services that in turn translates into additional jobs. At the economywide level, immigration is a positive-sum proposition.

Immigrants also tend to be of working age when they arrive, which means they begin contributing to the social security system immediately.

The advantage of immigration, moreover, continues to compound over time. By 2075, the working-age population will have grown by 10.7 percent with immigration but shrunk by 15.9 percent without it. To look at the numbers another way, by 2075 the working-age population would be one-third larger with immigration than without it. (See figures 4 and 5.) All other things being equal, GDP would also be one-third larger—and a larger GDP in turn makes all things more affordable, including paying for the cost of our aging society.

Most Americans realize the advantages here.  The share of Americans saying that legal immigration should be decreased has fallen from 53 percent in 2001 to 24 percent in 2018, while the share saying that it should be increased has risen from 10 to 32 percent.

In fact, if we do not sustain a modest level of immigration, America’s population – and economic growth – would shrink.

Like the case of two of America’s rivals today, Russia and China.

In the case of the shrinking dot called Russia, the invasion of Ukraine is an evolution, not a sudden break, in Russian thinking.  It is only one of Russia’s wars in the post-Soviet region.

Following the collapse of the Soviet Union, Russia militarily intervened in civil wars in Moldova and Georgia, supported Armenia in its fight against Azerbaijan, fomented separatist conflicts in Chechnya and invaded parts of Georgia. And these were only the wars in its backyard. Russian forces showed up in the Western Balkans and fought in Syria, Libya, and more than a dozen African countries.

It cannot disguise the fact that it is still eroding.

The Warsaw Pact was dissolved in 1991 and 30 years later all the other former members have joined both the European Union and NATO.  They were not forced to.  They chose to.  So when Putin whines about how the EU and NATO are expanding into “Russia’s” sphere of influence, he can be reminded that Russia has all the attraction of tumbleweed. If he wants to fight back, he can make his little hell-hole more attractive. 

The Soviet Union once had 290 million people and almost 5.5 million active military personnel.  They lived under a shared ideology that was projected abroad by a sophisticated information system.  They bound the countries of Europe to them – to some degree – with shipments of oil and gas.

Then it broke.

15 new republics emerged, and Russia itself shrunk to a population of 144-million – less than half of what it had before.  Its armed forces dropped to less than a million soldiers.  It power projection capability disappeared as it lost its global military bases and its operational aircraft carrier – built in Ukraine – has stopped working.

The curtain of Moscow-friendly countries has also disappeared except for outliers like Cuba and Syria. Russia calls Belarus a friend but its loyalty is based on coercion and dependence on Moscow.  It is not adding strength.

Europe’s energy reliance on Russia has been evaporating since Putin’s genius invasion of Ukraine.

The USSR’s once-cohesive philosophy of communism has dissolved into Russia’s mish-mash support of practically any anti-EU, anti-NATO, and anti-US idea, regardless of ideology.

When Russia attacked Ukraine it was no longer making war on a much smaller and weaker power, but on Europe’s largest country.  It’s intended blitzkrieg (lightening war) has turned into a sitzkrieg (sitting war).

Further, Russia is experiencing a level of international isolation rarely seen among nations.  A UN vote against Putin’s war turned up only five supporters for Russia:  Belarus, North Korea, Eritrea and Syria.

Foreign capital left Russia, as did a million skilled and aware Russians.

Russia’s population is now declining.

Russia’s population peaked in 1994 with 149 million people, but has since dropped to 146 million today. That is not counting a deduction of a million people who fed the country after Putin started his war, and another million who have been killed or disabled – take out of the breeding pool – because of the war.

By 2046 the natural decline in the population will average around 500,000 people per year, with the total population decreasing by 7.6 million by 2046, to 138.8 million.  By 2050 the UN expects Russia to have 133 million people. 

The US reached that number in 1940.  And it’s been booming ever since.

In fact, there has never been a year since the Jamestown settlement of 160 people in 1610, when America has seen a decrease in population.

This is demographic exceptionalism.

America’s other big world rival, China, is also disappearing down the population rabbit-hole.

Births in China have been plummeting for decades because of the one-child policy implemented from 1980 to 2015.

There were in fact two stunningly stupid policy decisions made by the Communist Party in China over the past 50 years.

Of all the idiocy imposed by government planning, these must be in the top ten, right alongside “Let’s bomb Pearl Harbour”.

The first one was Mao's Great Leap Forward, which caused a famine that killed around 36 million people from 1959 to 1961.

The second one, in the late 1970s, was dropped by the Chinese Communist Party (CCP) as a way to boost economic growth: they decided that population control was the answer. 336 million abortions were carried out from 1971 to 2012 — more than the entire U.S. population.  Add  sterilizations and infanticides, and China’s population has established patterns of diminished returns.  It just declined for the second straight year in row, for example.

Births continued a precipitous decline in 2016, now down by more than 50 percent in just eight years—while deaths ticked up marginally again.  China is heading in the direction of a far worse population drop than Japan.

China indeed has few children – and not much of a future.

As an after-effect, many Chinese in their twenties and early thirties seem to have simply given up on life. They are tangping’ers — meaning to “lay flat” — dedicated to doing just enough to get by in life. Their plans do not include marriage, much less children. It’s just too much work.   I know the feeling.

Many young women in China’s cities have also taken themselves out of the marriage market. They are focused on building careers and taking care of aging parents.

The Chinese government has done a hard reverse on the ‘one child’ policy, trying to encourage women to give birth.  Having a family is now a state affair, the government says.  This has run headlong into opposition from Chinese feminists like Xiao Meili who has criticized the policy shift, complaining that “women’s uteruses are not spigots, to be turned on and off at will by the state.”

Marriage and birth rates continue to plummet.  And abortions are running high, only slightly below births.

China adopted a “three child policy” a few years ago, but it was much too late.  The population continues to collapse.  And youth unemployment is at a record high.

This is a disaster for the real estate market, which underlies much of China’s economy. 

According to Goldman Sachs, the total value of unsold homes, unfinished projects and unused land in China is about $4.1 trillion.  Hundreds of billions of dollars might be necessary to clear the backlog of millions of empty or unfinished homes across the country.  A new policy asking local governments to buy unsold homes from developers and convert them into social affordable housing is judged as being far too small to be effective.  Just finishing construction of pre-sold homes would require at least $442 billion.  There are currently 20 million pre-sold homes that remain unbuilt. Chinese cities have already racked up about $15 trillion in debt and may have to slash services, like providing heat for people’s homes in the winter.

The population pressure makes China’s economic forecasts, always suspect, even more dodgy.  Chinese household consumption cannot be rising when the actual number of consumers are falling by millions every year.  Also, the most consumption-intensive group, newborns, is declining fastest.

The prospects for China exceeding the size of the US economy are a lost cause  -  China will never exceed the size of the US economy. Because people do not emigrate to China.

When you read about how China is a big threat, you can safely scoff and cancel your subscription to that publication.

Russia and China are over.  Pundits worrying about a China-Russia partnership are in the grandstand watching a quicksand contest.

Those countries shot themselves  -  we did not have to lift a finger.

It was all done by the brilliance of one-Person decision-making.

It would be like someone giving a business to Trump and expecting him to turn a profit.  Not going to happen in an orange age.

But America’s expanding economy does not reply on one person…it replies on millions of people coming to the US and growing the country, month-by-month.  This is the result:

This is what happens when you have demographic exceptionalism – an economy of promise for newborns and a policy that encourages people to immigrate to America.  America did something right – and almost no one is noticing.  Then again, maybe American exceptionalism IS normal. But don’t tell the media – they are running a counter-narrative about how America is falling apart.