The following is an interesting and somewhat humorous commentary by Randy Johnson of Dent Research, an investment advisory firm in Delray Beach, Florida.

“We’re in the midst of a global disconnect.  Judging by what I hear on the radio and see on television, people are having sex every minute of the day, or at least they’re thinking about it.  We’re no longer satisfied with innuendo and flirting.  Courting, as a term and an activity, is dead.  If art is an imitation of life, then we’re all just seconds away from the next “hookup.”

Except, of course, we’re not.  We can’t be.  If it were true, we’d have baby explosions around the world, even with contraceptives.

Nowhere is this dichotomy more evident than in Japan.  The island nation has the second highest per capita spending on pornography.  It creates more porn movies than the U.S…yet its birthrate has hovered around 1.3 births per woman of child-bearing age for over a decade.  Japan’s population is shrinking, and has been since the mid-2000s.  While they consume a lot of sex-based media, they’re not following through.

The problem is so bad that by age 34, 26.1% of men and 23.8% of women have had no sexual experience.  This isn’t surprising, considering that over 40% of Japanese men in their 20s have never dated anyone…ever.  And the problem doesn’t go away once a couple gets hitched; 44.6% of married couples say they are in sexless relationships.

We don’t have this extreme of a problem in the United States yet, but we’ve moving in that direction.  Unfortunately, so far, it’s a problem with no solution.

While 30 years ago we were worried about too many people on the planet consuming precious resources, today we have the opposite.  Faced with the prospect of declining populations, leaders of developed countries around the world realize they’re facing nothing short of an economic implosion.  Without kids, young adults aren’t forced to spend.  Without rising adults, workforce populations decline.  Without tax receipts, governments can’t pay their bills, especially for social spending like benefits for the aging population.  Governments from Asia to Europe facing this situation haven’t come up with a successful solution.

Now the U.S. appears to be facing the same dilemma, as our birth rates fall and young adults push out family formation.  While the examples from other countries are bleak, there’s reason to be hopeful that, at least in the U.S., things might turn around.  If they do, then we could be in for a baby boomlet, but only time will tell.

The Problem Hits Close to Home

I’m not the first person staring down 50-year-olds to think that the younger generation has lost its sense of propriety.  It’s a rite of passage in middle age to rant about those “darn kids” and the trash they listen to and watch.  I’m feeling this in spades.

The current social scene has passed me by.  I find myself alternately surprised and appalled at some of the lyrics on the radio and some of the original content from online streaming services.  When Netflix, Amazon, and other streaming companies develop original content, they aren’t bound by the guidelines that constrain typical cable channels.  They’re free to include graphic sex scenes anywhere and everywhere, even when they aren’t important to the storyline.  And don’t get me started on the Internet.

Yet, since 2007, the U.S. birthrate has plummeted.  From 2007 to 2013, the number of births in the U.S. fell by almost 400,000, from 4.32 million to 3.93 million.  That’s a 9% drop.

Births dropped even though we added millions more potential moms to the ranks as millennials joined the adult world.  The U.S. total fertility rate (TFR) fell from 2.12 to 1.86.  The rate must be at least 2.1 for a population to remain at its current size (replacing each man and woman, plus a little bit more for mortality).

We went from barely above replacement level to well below, and have stayed there for more than half a decade.  The TFR inched up almost imperceptibly in 2014, but that isn’t much help.

In the face of an economic downturn, this makes sense.  Having fewer children or no children at all is an immediate economic benefit to a society.  Not only do young adults escape the cost of raising children, but accumulated funds can be spent on immediately productive assets such as steel mills and factories.  Children eventually add to an economy when they become young adults, but until then the consume resources.

This is exactly why, after WWII, the Japanese government asked its citizens to stop having children after two.  Officials wanted to keep their population size steady.  They wanted to use all available resources to rebuild the nation’s infrastructure.  The government went so far as to recommend that women with two children who became pregnant should have an abortion.

On the flip side, the long-term effects of too few births can be devastating.

With a shrinking number of children, societies can run short of the consumers and workers they need to keep their economies functioning.  Virtually every developed nation on the planet relies on current workers to pay for benefits to retirees, which can make matters worse.

When the population skews to retirees, you have a smaller cohort of workers shouldering a larger financial burden.  The falling numbers of consumers means less domestic commerce, which drives down sales tax and value-added tax receipts.  This provides government entities less revenue for social spending.  It also puts even more economic pressure on the working class, making them less likely to take on the cost of children, exacerbating an already bad situation.

This problem has been on display in Japan for more than a decade, but is now spreading across the developed world like wildfire.

The Developed World’s Biggest Problem Right Now

I mentioned earlier that falling birth rates is a global phenomenon, particularly in developed nations.  A quick glance at the total fertility rates of selected countries from 2011 through 2015 makes it clear that we don’t have enough children.

France has the highest rate in the group at 2.0, but it’s still not enough to replace their population.  Italy and Germany match Japan at 1.4, while Spain and Greece fall near the bottom at 1.3.  The worst is South Korea at a dismal 1.2, or almost half of what they need to simply keep their population size constant!  Oddly, South Korea is the nation with the largest per-capita spending on porn.

Even among developing nations, the birth rates have recently fallen.  Russia’s TFR is 1.7, which matches the rate in China.  Mexico barely makes it over the replacement rate at 2.3.

As a nation’s economy moves from agriculture to industrial production, and populations move from rural to urban living, it’s easy to see how children change from assets as extra hands in the fields to burdens as extra mouths at the table in an apartment.  Falling birth rates go hand-in-hand with the economic transition to developed-nation status.

But then what?

Birth rates can be too low.  The drop in child bearing can be so dramatic that a nation can’t recover.  No one knows where that point is, but the question has many government officials quaking in their boots because the absolute number of new births required to reverse the trend is breathtaking.

France needs just a few more kids, while South Korea must almost double their birth rate simply to keep their population from falling further.

But even if each country were able to magically increase its birth rate to these levels tomorrow, it would only stop their eventual population declines.  It would do nothing to make up for the previous years of too few births.

What’s a country to do?

Motivating Romance and Ovulation Discounts

Around the world, governments are trying their best to motivate couples to get busy.   The Singapore-based Strait Times newspaper provided couples with a list of the best places to go “parking.”  It went on to suggest covering the windows with the newspaper itself, which is an interesting way of selling more copies.

The Singaporean government commissioned a rap song calling on citizens to “do it for their country.”

Several years ago, Russian President Vladimir Putin called on couples to conceive in September so that they would have babies on Russia Day the following June.

South Korea and Japan both run state-sponsored dating agencies.

Probably the funniest approach to the problem comes from the Danish travel agency Spies Travel.  The company ran a television commercial called, “Do it for Denmark!”  It starts by identifying the problem of too few children, and then recommends a solution.

Apparently Danes have 46% more sex while on holiday than during regular days at home (I don’t know how the travel agency would know such a thing!).  So clearly the solution is to get people to travel.

Unfortunately, whether it’s a government program or a gag by a travel agency, no program has effectively motivated couples to have more children.  This is the case even in countries where additional kids were once restricted…like China.

Lessons from China

Over the past 35 years, China has regulated its population through its infamous one-child policy.  Generally couples had to pay a penalty tax for additional children.  Rural families could have two children without a tax.  Rich families would take a long holiday to a foreign nation and return with additional children born abroad.  But overall, families were held to the one-child policy from 1979 through 2015.

The government estimates this policy resulted in 400 million fewer births in the country (roughly one-third of the current population).  It allowed the Red Dragon to focus its energy and resources on economic output.  Now that its growth is solidified, government officials want families to have more kids, so the government eased the policy and now allows two children per family.

Many people forecast a baby boom in China—one particularly well-known newsletter publisher has even gone so far as to tell his subscribers to invest in this coming boom—as families quickly take advantage of the relaxed policy.  I’m not convinced.*

The Chinese government has relaxed birth restrictions before.  In late 2013, the government allowed couples who were both only children to have an additional child.  Officials expected this to add two million births per year; but as of September 2015, only 1.76 million permits for additional children, about 850 thousand per year, had been requested.  Those were simply requests for permission.  There was no official count of how many additional births actually occurred.

More on the subject in Part II coming up on 4-20-16.


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