Demographic Cognitive Dissonance

People who don’t practise what they preach are not necessarily hypocritical. Perhaps they are merely not sufficiently intelligent to realize that what they do is inconsistent with the logical implications of what they preach. This gap between what they insist to be true while doing something which reveals their words to be false can be attributed to what is politely called cognitive dissonance but more accurately should be termed as stupidity.

Examples of cognitive dissonance abound, in people great and small. My favorite example of a deluded person is our omnipotent ruler of the world, POTUS G W Bush. His ranting and raving about weapons of mass destruction possessed by others is a study in cognitive dissonance (or stupidity, if you prefer.) But we mere mortals are also subject to varying degrees of this mental illness. We are spared the ignominy of our affliction behind the veil of our anonymous lives. But newspaper columnists lose that protection when they hold forth on subjects that they haven’t thought through entirely. They willingly reveal their cog dis to the world at large. Why they don’t follow that cautious rule of “keeping your mouth shut and be suspected a fool, rather than open it and remove all doubts” is a mystery to me.

At this point you may ask what the devil am I going on about. I was coming to that. You see, one astute reader of this blog (and you are all astute, dear readers, I hasten to add) wrote to me pointing out a column by one Mr Swaminathan Aiyar in The Times of India of 23rd September, 2006. Rohit, the said astute reader, wrote to say that he finds something not quite right with that column. Anyone reading this blog knows of my abiding interest in population matters (the population category has about 36 articles, some of which are worth reading even) and Rohit asked me to comment.

Without someone’s prompting, I am unlikely to read a rag such as The Slimes Times of India. I scanned the article, shook my head in disbelief, and promptly decided to blog it one of these days. As is my wont, I equally promptly moved on to other distractions and forgot about the unbearable silliness of Mr Aiyar’s musings. I would have been writing about the cog dis of the POTUS right now (which I will have to get to later, for sure) but for the fact that Rohit revealed himself to be not just astute but persistent as well. Thank goodness not all the readers of this blog (astute as a bunch) are as persistent as he is. Else I would be busy writing all my promised pieces all day long and have no time to surf the web. Anyway, time to get on to the point that I want to make.

Mr Aiyar’s column is cleverly called “Swaminomics” and I suppose he is an economist of some sort or the other. One cannot be sure, of course, since there was “Reaganomics” and Mr Reagan, a minor actor and later a major POTUS, did not even act as an economist in movies, leave aside be one. Just adding “-nomics” to your name therefore does not reveal what your day job is. For all I know, you may be a computer programmer with a diploma from NIIT on J2EE or something mysterious as that. Still, to have a regular column dealing with matters economic in a national newspaper could mean that one was an economist. But then one has to remember that it is The Times of India we are talking about after all and perhaps we are justified in having our doubts.

The column titled “Lalu Yadav’s Demographic Dividend” says that Lalu, the ex-chief minister of Bihar, fathered nine children and thus bequeathed an example for all Indians to procreate with abandon which will undoubtedly lead to India’s GDP growth while China’s GDP growth sputters out due to its misplaced emphasis on population control through its draconian one child per couple policy. Lalu, claims the column, moves as mysteriously as God himself.

Perhaps Mr Aiyar was just being facetious. Perhaps he is not serious and the aim of the column was to poke fun at Lalu Yadav who, as Mr Aiyar admits, presided over the “economic and social stagnation” of the state of Bihar. Not mentioned is the broad-daylight shameless looting by Lalu of public funds by the thousands of millions. Perhaps Aiyar does not seriously admire neither the man’s mendacity nor his fecundity. But I doubt it. I think that the columnist is indeed seriously peddling nonsense, and it is errant nonsense at that.

Briefly, the column talks about three demographic phases: first, there is a baby-boom with its high dependency ratio; in the second stage, there is a baby bust, accompanied with improving dependency ratio and a “demographic dividend” from more savings; the third stage – the write forgets the third stage. Perhaps each “demographic dividend” is a distinct phase. I am confused about the phases bit. But let me get down to a few details.

He writes,

“[T]he middle-class remains shocked that Lalu has fathered nine children, worsening the population explosion (viewed by this class as one of India’s top problems).

Yet, economists are now unanimous that rising population is giving India a ‘demographic dividend’ that will soon help it grow faster than China. Seen in this light, Lalu Yadav’s contribution to the demographic dividend may outstrip his contribution to the railways.”

Never mind who is responsible for the recent so-called success of the Indian Railways. It was a dismally mismanaged public sector monopoly and a few public-spirited bureaucrats may have been responsible for promoting a few good policies which, given the massive inefficiencies already present, resulted in the easy picking of some low-hanging fruits. Crediting Lalu with improving the railways is silly at best; perhaps it would be more appropriate to praise Lalu for not yet stealing (as far as one can tell) the 50 million tons of steel rails scattered along the railway lines. But enough about Lalu.

Let’s examine “growing faster than China.” GDP growth rates don’t mean a whole lot. Like many extremely poor countries, India’s GDP growth rate is much faster than, say, a developed country like the US. What matters is the absolute per capita GDP and to some extent the growth in the per capita GDP. The operative phrase is “per capita.” Let me put it in more personal terms.

It could be that the peon in our office is getting a 20 percent raise every year while I am stuck with only 5 percent raises annually. Yet, if I earn 40 times what the peon earns, the peon would be happy to be stuck with a low annual rise as long as he gets my salary. Rates of growth have to be read in the context of what the base is.

So even if China’s GDP were to grow at 5 percent, and India’s were to grow at twice that rate, if China’s GDP is three times that of India’s, then in absolute terms China adds more production than India every year. Sure, if the differential growth were to persist for 25 years, India will catch up eventually. But 25 years is the long run (and as Keynes noted, in the long run we are all dead) and what happens 25 years hence is not going to bother us.

The story gets even worse when you move to per capita GDP growth rate. If the population is growing at rate x and GDP is growing at rate y, then the per capita GDP growth rate is (y – x). Since compared to China, India has a lower GDP growth rate and a higher population growth rate, India’s per capita GDP growth rate is lower than China’s. What matters is the per capita GDP (which is another way of stating the income of the average person) and to some extent the per capita GDP growth rate, not the GDP nor the GDP growth rate. I would rather be stuck with an average American income growing at 2 percent a year than have an average Indian income growing at 8 percent a year.

Reading that column once again underlined my conviction that those who refuse to do arithmetic are doomed to speak nonsense. All you have to do is pull out an Excel sheet and do a bit of figuring. I just did that. If today India’s per capita GDP is $700 and China’s is $2,000, and if India’s per capita GDP grows at 10 percent a year while China’s grows at only 5 percent per year, India’s per capita GDP in the year 2031 – 25 years hence — will be $6,143, still lower than China’s $6,268. The average Chinese will still earn more than the average Indian despite (an unlikely) twice the per capita GDP growth rate compared to China. And even if India were to have the same GDP growth rate as China, if India’s population growth is higher than China’s, then India’s per capita growth rate would be lower than China’s.

This is all very tedious. I should not have to poke around in an Excel sheet to make my point. I blame the pathetic Indian education system that even some columnists for newspapers (rags or not) are innumerate. I am forced to go on about GDP, per capita GDP, GDP growth rates, and per capita GDP growth rates because of a silly column when it should be absolutely clear to the average 7th grade student what it all means. My patience, and I am sure yours as well, is wearing thin at this point. But we have a few more points to address. So stick with me.

The story Mr Aiyar is telling appears to be this: “Indians have been having more children than the Chinese and that is good because India’s GDP growth rate will be higher than China’s sometime in the future. And therefore India is better off. So having a higher population growth rate is good. Therefore Lalu Yadav is god. And all you who were promoting lower fertility were ignorant neo-Malthusians. And the Supreme Court of India is ignorant of “demographic dividend.” So Lalu’s nine children is a miracle of nature, not ignorance of contraceptive methods.”

Seriously, why do we “neo-Malthusians” fret about India’s population. The answer is simple: because we care about the quality of life, not just about quantities. Here are some numbers. India has about 17 percent of the world’s population and 2 percent of the world’s land area, and about 1.7 percent of the world’s fresh water. Those who are reading this blog have access to adequate quantities of fresh water, but the majority of Indians don’t have clean water to drink, leave alone for personal hygiene. More than half of children below the age of five are malnourished in India. These and many more facts like them paint a simple picture: that we have more people than we have resources.

That is the basic incontrovertible fact: there is an imbalance between the number of people and the amount of resources available for them. When you do the arithmetic, the average figures are deplorable. But then, averages don’t matter to those who write newspaper columns because they are sitting pretty with umpteen times the average amount of resources at their disposal. So they can comfortably write about neo-Malthusians scaring the middle-class people. That there are those who are above average merely implies that there are many who are below even the deplorable average. The suffering of those hundreds of millions don’t matter to those who are comfortably sprouting nonsense about the demographic dividends.

The age structure of an economy matters, of course. Demographic transition is a well-understood phenomenon. You cannot study the development of economies without realizing that at some point in the path to development, an economy will reduce its fertility rate and move towards a lower population growth rate. The critical question is not whether but when. And it my contention that that point should have been decades ago instead of being some decades hence. It should have been earlier because it has to be at a point where the balance has not gone so askew that too many people are living with too few resources.

There will be a demographic transition in India’s future. It will have to go through the population bottleneck. But instead of going through the population bottleneck at an earlier stage (with less pain), now we will go through it with a great deal more pain at a later stage.

Why do so many otherwise seemingly educated people who should know better not pay attention to the damaging fecundity of the poor? I think I have an answer. It is because the damage that the poor do by multiplying beyond reason is primarily to themselves; the rich actually enjoy what I would call a “population dividend.” The higher the numbers of the poor, the lower their wages, and consequently the higher the standard living for the non-poor.

You may notice that there is a construction boom in most urban areas in India. You need people to do the slave labor. The US had imported slaves from Africa. Urban India gets its slave labor from the rural areas. These laborers live in horribly deplorable conditions. And they procreate. Women laborers at construction site often have three or four children hanging around. Children as little as toddlers play barefoot among the rusting steel, cement and other construction material. It is heart-breaking to see how the children have little future other than being labor for future constructions – and a significant percentage will never see adulthood, I am sure.

These are disposable children and are sacrificed to those who write glowingly about the demographic dividend.

Remember I started this piece with the matter of cognitive dissonance and hypocrisy? This is why I did that. If a person really believes that the more people there are, it is better, then they should behave consistently with that belief. That is, he or she should immediately go out and bring 20 or maybe 40 people home and thus increase the household income growth rate. They don’t because they realize that merely adding people who are below the average household income will not increase the average household incomes. Only by adding people whose incomes are greater than the current household incomes will the average household income go up.

That is what Mr Aiyar needs to ponder. He has to understand that it is not the number of people that matters, but rather what resources these people have at their disposal matter. Nine children born to a couple who can barely feed, clothe, and educate even one means that there will be nine under-nourished, illiterate, unproductive people who will actually slow down, not speed up, economic development.

Hypocrisy or cognitive dissonance? You decide.