China running low on Factory Workers and Farmers as an Aging Population threatens Future Growth

Posted by PITHOCRATES - February 3rd, 2013

Week in Review

During the Eighties those in America who favored large government incursions into the private market liked to point to Japan.  Whose economy was booming during the Eighties.  Thanks to a lot of government partnering with business.  And low interest rates.  The Japanese were buying up landmark American properties.  Some feared that they would take a controlling interest in the United States.  And those on the Left said that we were fools for not doing what the Japanese were doing.  They still believe this.  Despite what happened in the Nineties in Japan.  It turned out that a lot of that economic growth wasn’t real.  It was a bubble.  And they blew that bubble up so much that it took a decade and more to deflate it.  Japan’s Lost Decade.  Which is closer to two decades.  And counting.

Now China is the new Japan.  Where government partners with business.  And keeps interest rates low.  Once again those on the Left point to this model.  Urging that the U.S. adopt it, too.  So the U.S. can have a strong manufacturing sector.  And a booming export market.  But there’s more to the economy than exports (see UPDATE 3-China to speed up rural land reform, ensure food supply by David Stanway and Kevin Yao posted 1/31/2013 on Reuters).

The central government said in its “number one document” for 2013, focusing on modernising agriculture, it would grant more subsidies to large-scale landholders, family farms and rural cooperatives as it tries to provide more incentives to bring economies of scale to the fragmented countryside…

It listed grain security and farm product supply as top priorities, with China seeking to boost production as it urbanises and industrialises. The relocation to the cities of more than 200 million migrant workers has slashed the rural workforce and boosted food demand, leading to a growing dependence on imports.

So the Chinese traded food for exports.  To get cheap workers to fill their export factories they just pulled people from agriculture.  Leading to food shortages that they have to make up with food imports.  A country no stranger to food shortages.  Or trying to bring economies of scale to agriculture.  The last time they tried it was during the Great Leap Forward.  With forced collectivization of their farms.  Which was such a failure that tens of millions starved to death in the famine this forced collectivization caused.  But famine is not the only way to cause a population decline (see China’s looming worker shortage threatens economy by AFP posted 1/30/2013 on France 24).

China’s demographic timebomb is ticking much louder with the first fall in its labour pool for decades, analysts say, highlighting the risk that the country grows old before it grows rich.

The abundant supply of cheap workers in the world’s most populous nation has created unprecedented cost efficiencies that underpinned its blistering economic expansion over the past 35 years, propelling the global economy forward.

But now the inexorable consequences of the one-child policy imposed in the late 1970s are beginning to appear, and threaten to impact its future growth.

China’s working-age population, defined as 15-59, fell 3.45 million last year, official data showed earlier this month — the first decline since 1963, after tens of millions died in a famine caused by the Great Leap Forward…

“The population is aging so fast that we are running short of time to deal with it,” said Li Jun, also of CASS, adding the family planning policy had exacerbated the problem…

An ageing population not only means fewer people available to employ and higher labour costs, but investment — a key driver of China’s growth — will be harder to maintain as families spend their savings on health care, she said…

At the same time…the country was woefully underprepared to meet the burden of caring for the elderly…

By around 2060, every three Chinese workers will have to support two people above 60, compared with a ratio of five to one now…

Analysts said the medical services are increasingly expensive and hard to access, while the country’s flagship public pension plans are crippled by problems including insolvency risks, difficulties in expanding coverage and mismanagement.

Over a billion people in China and it’s not enough.  They’re short of both factory workers and farmers.  Because of an aging population.  The problem all advanced economies have.  Only China is having it before they are even an advanced economy.  And their problems of trying to take care of their aging population are going to make the problem of saving Social Security and Medicare seem like child’s play.  Because of that one-child policy.

In the advanced economies parents are having barely enough children to replace them.  While China’s one-child policy guarantees a shrinking population.  Which means fewer mouths to feed.  But it will also mean fewer people to farm their land and to work in their factories.  Just as more people leave the workforce.  Which means the future isn’t looking very good for China.  Who may soon experience their own Lost Decade.  A lesson for the U.S.  That having government partner with business and low interest rates does not make a sound economy.  It only creates bubbles.  Not real sustained economic activity.  Which all can come crashing down when overwhelmed by the crushing weight of an aging population.

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Pottery Stored Food Surpluses and Created Advanced Civilizations

Posted by PITHOCRATES - October 26th, 2011

Technology 101

An Advanced Civilization requires a Food Surplus and Something to Store it In

Take a look around your kitchen.  Your pantry.  What do you see?  Storage jars.  Canisters.  And, of course, cups and plates.  They’re so prevalent in your life you don’t even notice them.  You just use them.  You drink from them.  Eat off of them.  Shake salt and pepper from them.  Store flour in them.  Sugar.  Coffee.  And tea.

It would be hard to live your life without the things in these containers.  It would be harder still if you had no containers to store these things in.

And it’s been this way since the dawn of civilization.  In fact, there would be no advanced civilization without one invention.  Pottery.  Because to form an advanced civilization requires a food surplus.  An excess of grain.  That they had to store.  Where animals and bugs could not get at it.  Or moisture.  Today we use storage jars and canisters in our pantry.  Back then they used pottery.  In their homes.  Even in their granaries.

Pottery allowed the Farmer and Artisan to Eat at the Harvest and Long After the Harvest

Pottery and agriculture were attached at the hip.  They both needed each other.  The mass farming of these early civilizations, before the plough simplified farming, required a lot of labor.  Which produced highly populated cities.  With a lot of mouths to fed.  And they did produce a lot of food.  So much that they had a food surplus.  To feed the farmers.  And the non-farmers.  The artisans.  At the harvest.  And long after the harvest.

They could grow a food surplus.  And did.  But a surplus without the ability to store it was useless.  So following the great agricultural developments came the all important granary.  And pottery storage vessels.

The development of pottery required a dedicated work force.  A division of labor.  The potters couldn’t farm.  They needed to spend all their time mass-producing pottery to meet the demands of their civilization.  Plates.  Bowls.  Cups.  And storage vessels.  To store that food surplus.  So both the farmer and artisan could eat.  At the harvest.  And long after the harvest.

The Division of Labor gave us Agriculture, Pottery and an Advanced Civilization

The hunter and gatherer life was simple.  You followed the food.  And hunted.  Which pretty much consumed all of your time.  And kept you on the move.  That changed after some key advances.  Agriculture.  And pottery.  To name only two.  The rise of these specialties allowed people to settle down.  To stop following food.  And, instead, to grow it.  And store it.

None of this would have been possible without the division of labor.  Which allowed the rise of artisans.  Specialists.  A middle class.  To make the things that made a civilization advanced.  And a food surplus.  Which allowed an advanced civilization to survive.

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Food Surplus

Posted by PITHOCRATES - October 17th, 2011

Economics 101

The System of Hunting and Gathering has one Fatal Flaw – it Takes a Lot of Land which Results in War

Economics can be complicated.  Why?  Because it’s not an exact science.  It’s a social science.  That means it is opinion.  And theory.  Things aren’t black and white.  They’re gray.  Because of this it is necessary to know history.  To know what has worked.  And what hasn’t.  So let’s go back to a significant development that kicked off economic activity.  Trade.

When we were hunters and gatherers there wasn’t much economic activity.  And our lives were simpler.  All we did was search for food.  Built tools to help us hunt and gather.  Made our own clothes to help us hunt and gather.  And when we bumped into other hunters and gatherers we fought.  To expand the borders of our hunting and gathering grounds.  Making this time a violent time.  Where the fittest survived.  The strongest civilizations conquered the weaker ones.  Took their food.  Killed them.  And expanded into their territory.  Allowing stronger civilizations to grow.  At the expense of weaker civilizations.

Those most adept at killing others, then, advanced.  Putting civilizations onto a war path.  For survival.  It was inevitable.  For the system of hunting and gathering has one fatal flaw.  It takes a lot of land.  And as a civilization grew so did their hunting and gathering grounds.  Which brought civilizations together.  Into conflict.  As they fought over limited food resources.  To subsist.

The Development of Agriculture Made our Lives Better

Everything they did they did for one reason.  To survive.  There were no luxuries.  No entertainment.  It was a miserable existence simply to survive from day to day.  Life was hard.  And we died young from age.  We were lucky to see 40.  And those who did suffered from rotting teeth, arthritis, broken bones or other maladies.  Things that we manage today.  But not then.  Back then, people could die if they lost their teeth.  Because if they couldn’t chew animal meat or nuts, they didn’t eat animal meat or nuts.  There were no dentists then.  Or dentures.

Or our environment killed us.  Or our enemies.  In the prime of our youth.

What changed this?  What made life better?  The shrinking of hunting and gathering grounds.  Allowing more and more people to live on a smaller area of land.  And one thing made that possible.  The development of agriculture.  Growing food.  With our new farming skills.  And our new animal husbandry skills.  Domesticating and breeding animals.

A Surplus of Food, and the things that this Surplus let us Create, Introduced Economic Activity and Peace

With agriculture came advanced civilizations.  A better life.  And peace.  Because we were able to produce a food surplus.  Which let people do other things.  They didn’t have to hunt and gather for subsistence.  And it’s that surplus of food, and the things that this surplus let us create, that introduced economic activity.  Because we had things we could trade with other people.  Transforming us from warring civilizations of hunters and gatherers.  To peaceful civilizations of traders.  Which gave us the world we know today.

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LESSONS LEARNED #57: “Environmental policy is a zero-sum policy; save the planet, kill man.” -Old Pithy

Posted by PITHOCRATES - March 17th, 2011

DDT gets rid of Mosquitoes and Malaria

No one thinks much about malaria in big American cities.  Because they’re modern, paved cities.  So there aren’t a lot of mosquitoes.  At least, not like there used to be.  In colonial times, summers were bad.  Anywhere there was standing water.  Thomas Jefferson hated to be anywhere near tidewater areas during the summer months.  Because people got malaria.  He thought it was the air.  It wasn’t.  It was the mosquitoes.  Unpaved areas in tidewater streams just bred mosquitoes wholesale. 

As our concrete cities grew these wetlands went away.  As did malaria.  In the United States.  Other nations, though, were not so fortunate.  Especially sub-Saharan Africa.  Where malaria kills hundreds of thousands of children each year.  Why?  Because much of sub-Saharan Africa is impoverished.  With no modern, paved cities.  And it’s a mosquito paradise.  For awhile, that is.  Because man stepped in and used chemistry.  Created a miracle synthetic pesticide.  DDT.  And went to war against mosquitoes.  Campaigned especially fiercely in the tropical countries that really favored mosquito breeding.  Armed with DDT, it was a lopsided war.  Areas that saw millions of people infected by malaria each year had less than a hundred people infected after the DDT campaign.  It was a huge success.  Chemistry saved the children.  It was so successful they also used it in agriculture.  Food yields improved with the resulting pest elimination.  The mosquito and other pests were on the run.  But then an unlikely ally saved them.  Rachel Carson.

Carson wrote Silent Spring.  Published in 1962, she saved malaria.  And started the environmental movement with her attack against chemistry.  It was hurting the environment.  DDT was thinning egg shells.  And some other nasty stuff.  And perhaps it was.  But there were two uses of DDT.  Heavy agricultural uses.  And the lighter anti-malaria uses.  Some of the things she cited may have been more on the agricultural side.  In any event, environmentalism was born.  DDT fell out of favor and nations banned it or discouraged its use.  And malaria returned in force, killing hundreds of thousands of kids each year.

Firebreaks stop the Spread of Wildfires

Smokey the Bear says only we can prevent forest fires.  Well, that’s not exactly true.  We can’t change the weather.  Oh, sure, we can change the climate by warming the earth with manmade greenhouse gases, but we can’t make it rain.  Or stop the lightning.  Put the two together (a long time without rain then a lightning storm) and it will start a forest fire/wildfire.  And there’s nothing we can do about it.  Well, there’s nothing we can do to prevent it from starting.  But we can limit the severity of the wildfire.  By cutting firebreaks in the forest.

Dried trees burn very well.  And dried brush makes excellent tinder.  As a forest burns, the trees burn and flick off embers.  The wind blows the embers downwind.  Where they land on dried brush (i.e., tinder).  A fire smolders.  Then takes hold.  Flames grow.  And jump to the trees.  Which flick off embers.  That blow downwind.  And so on.  This is how fires travel.  And sometimes you can’t stop them.  They get too big to try and douse with water.  So they burn.  And the only thing that will stop them is the lack of fuel.  And this is where a firebreak comes in handy.  If you cut firebreaks into the forest at strategic locations the fire will spread until it comes to one of these fire breaks.  The embers flicking off of trees will then fall harmlessly on the firebreak.  Where there is no fuel.  And the embers will burn out.  Without starting a new fire.  Depending on the strength of the winds and the width of the firebreak, you can stop a lot of fires.  As long as there isn’t a rat living in the area.

Fire struck Riverside County outside Los Angeles in 1993.  It was huge.  And hungry.  That fire advanced and ate everything in its path.  Trees.  Brush.  And houses.  Homeowners in Riverside Country wanted to plow in some fire breaks to protect their homes.  Unfortunately for them, they shared their habitat with the kangaroo rat.  Which was on the Endangered Species List.  And plowing in those firebreaks may have harmed those rats burrowed shallowly in the sandy soil where all that tinder was growing.  So they were forbidden to cut in those firebreaks.  To save the rat.  And the fire burned through their houses.  And kept on burning.

The Food Chain Turned Upside Down

The San Joaquin Valley in central California is one of the most fertile farmlands in the world.  The Westlands.  Some call it the food basket of the world because they grow so much stuff there.  The San Joaquin River is fed from the snow in the Sierra Nevada Mountains and drains into the Sacramento-San Joaquin River Delta.  And it’s from this delta the government has helped the farmers pump water to irrigate their farmlands.  That is, until drought hit the area.  And a little fish.  A tiny smelt.

In the Delta there lived a fish.  This fish was on the Endangered Species List.  And this fish liked to hang around with man.  And the things man built.  Like water pumps.  With the prolonged drought, those irrigation pumps were pumping a lot of water.  And apparently killing a lot of smelt.  That were hanging around the pump inlets.  So a federal judge ruled in 2008 to shut off the irrigation pumps.  To save the fish.  And they did.

Without water farmers can’t farm.  So land went unused.  Farmers planted fewer tomatoes.  And fewer of their other crops.  Worse, some farmers had to destroy some of their healthy crops.  Such as almond trees that took 30 years to grow.  Without water they’d died.  And dead trees attract pests.  That can spread to healthy trees.  So it was either cut down some of their trees.  Or face pest infestation and lose all of their trees.  So food production in the fertile San Joaquin Valley dropped.  There was less food.  Which, of course, raised food prices.  All to save a small fish.

Diverting Corn from Dinner Tables to Gas Tanks 

Some say that we have to find an alternative to oil.  Because oil will run out one day.  Soon.  They’ve been saying this for decades.  And we haven’t run out yet.  But that’s beside the point.  The point is that they say it will run out because of our increasing demand for gasoline to drive our cars.  And that rising demand one day will exceed the oil supply.  One of their solutions?  BiofuelsEthanolFlex FuelE85.  Made from corn.  Our food.  And others.  For we feed a large part of the impoverished world with our surplus corn.

Back in the summer of 2008, gas hit $4/gallon.  That hurt.  The pain was so bad that it made people change behavior.  They bought smaller cars.  Hybrids.  And cars that ran on the ‘cheaper’ E85 (ethanol).  Which sold for something like fifty cents less than unleaded gas.  It seemed like quite the bargain.  Until you used it.  As those who had a significant commute to work soon learned.  One tank of gas let you commute to work for a whole week.  A tank of ethanol?  It didn’t take you quite as far.  People often learned this the hard way.  After having to stop in an unseemly part of town to refuel late night on the way home from work after hearing that ‘low fuel’ chime unexpectedly.  Those of us who did soon switched back to gasoline.  Why?  To prevent late night surprises like that again.  And because we just don’t like pumping gas.  Or, should I say, ‘fuel’.

You see, ethanol has less energy than gasoline.  So it takes more of it to go as far as gasoline takes you.  When you crunched the number you were actually paying more using the ethanol.  Because you were buying more of it.  Which brings us back to the interesting argument of why we have to replace oil.  Because our growing demand will eventually use it all up.  Now, let’s apply that logic to ethanol.  And the fact that it takes more ethanol to drive as far as with gasoline.  What does that tell you?  They will divert an enormous amount of our corn crop from dinner tables to gas tanks.  Making less food available for us.  And for export.  Which will do what?  That’s right.  Make some people go hungry.  And increase food prices.

Trading Humans for non-Humans

Advancements in environmental policy come at the expense of man.  Every time they protect an endangered species man has to yield ground.  When we fight global warming it is man who makes the ultimate sacrifice.  We have to lose some liberty.  Pay more for food.  Or eat less.  When they ban life-saving chemicals people die.  Hundreds of thousands of them.  Especially children in sub-Saharan Africa.  All in the name of saving the planet.

Environmentalists are okay with this.  For they must know about it.  And yet they pursue their agenda.  So they don’t mind the zero-sum game they play.  Trading humans for non-humans.  Because they favor the non-humans over the humans.  So when it comes to saving the planet or saving man, their choice is an easy one.  They save the planet.  And kill man.  For the human dead are acceptable collateral damage in their war to save the planet.

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