{"id":26200,"date":"2011-12-26T07:15:53","date_gmt":"2011-12-26T12:15:53","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2011\/12\/26\/after-america-get-ready-for-armageddon\/"},"modified":"2011-12-26T07:15:53","modified_gmt":"2011-12-26T12:15:53","slug":"after-america-get-ready-for-armageddon","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/12\/26\/after-america-get-ready-for-armageddon\/","title":{"rendered":"After America: Get Ready for Armageddon"},"content":{"rendered":"

By The Sizemore Letter<\/a><\/p>\n

\u201cLook around you. From now on, it gets worse. In ten years\u2019 time, there will be no American Dream, any more than there\u2019s a Greek or Portuguese Dream. In twenty, you\u2019ll be living the American Nightmare, with large tracts of the country reduced to the favelas of Latin America, the rich fleeing for Bermuda…. <\/em><\/p>\n

\u201cFor a while, there may still be an entity called the \u2018United States,\u2019 but it will have fewer stars in the flag, there will be nothing to \u2018unite\u2019 it, and it will bear no relation to the republic of limited government the first generation of Americans fought for. And life, liberty, and the pursuit of happiness will be conspicuous by their absence.\u201d<\/em><\/p>\n

\u2014Mark Steyn, from After America<\/em><\/p>\n

\"\"
\n\"\"<\/a>In his last book, America Alone: The End of the World as We Know It<\/em><\/a><\/strong>, Canadian political writer came out guns blazing.\u00a0 Due to aging demographics and low birthrates, the Western world would be crushed under the weight of an unsustainable welfare and pension system.\u00a0 Only America, with its comparatively high birthrates and more open economy, would be left to carry the torch of Western Civilization.<\/p>\n

In his 2011 After America: Get Ready for Armageddon<\/em><\/a><\/strong>, however, Steyn appears to be having second thoughts.\u00a0 In the introduction to the book he writes, \u201cThe good news is that the end of the rest of the West is still on schedule. The bad news is that America shows alarming signs of embracing the same fate, and then some\u2026 My warning proved so influential that America decided to sign up for the same program but supersized.\u201d<\/em><\/p>\n

Normally, I might dismiss Steyn as just another publicity-hungry political shock jock.\u00a0 We have enough of those already, thank you very much.\u00a0 Politics are heated enough already, and political rants give me a headache.<\/p>\n

But what separates Steyn from, say, an Ann Coulter or a Sean Hannity, is that behind the brash, inflammatory bravado is a surprisingly sharp mind\u00a0 with an understanding of the single most important macro trend of the next century: changing global demographics.<\/strong><\/p>\n

I disagree with Steyn on many policy points (we\u2019ll get to some of those), and I find his attitude and approach to life to be unnecessarily caustic.\u00a0 (It\u2019s ok to smile, Mark.\u00a0 Don\u2019t worry; your face won\u2019t fall off.)\u00a0 But while his delivery may be somewhat crass and obnoxious, his understanding of demographic trends is spot on.\u00a0 \u00a0This book review will primarily be an explanation of Steyn\u2019s views on demographic trends and a comparison of his views with some of our own.<\/p>\n

On Europe\u2019s Demographic Destiny<\/p>\n

\"\"<\/a>\"\"
\nSteyn, echoing the work of demographer Philip Longman in The Empty Cradle<\/em><\/a><\/strong>, writes that the European downturn has \u201cbrought forward by a couple decades the West\u2019s date with demographic destiny,\u201d and that destiny is not pretty.<\/p>\n

The average American women will have 2.1 kids during her lifetime.\u00a0 But in Greece, the fertility rate is just 1.3 children per woman.\u00a0\u00a0 That\u2019s significantly below the replacement rate; soon, more Greeks will be dying of old age than are being born.\u00a0 \u201cYou can\u2019t borrow against the future,\u201d<\/em> Steyn writes, \u201cbecause, in the crudest sense, you don\u2019t have one\u2026 Welcome to My Big Fat Greek Funeral.\u201d<\/em><\/p>\n

Steyn asks a question that we have asked repeatedly: \u201cHow do you grow your economy in an ever shrinking market?\u201d<\/em><\/strong><\/p>\n

The answer is that you don\u2019t.\u00a0\u00a0 There is no growing out of the ongoing Greek debt crisis.\u00a0 It\u2019s simply not going to happen.\u00a0 As Steyn continues,<\/p>\n

Greece is broke, and has run out of Greeks. So it\u2019s getting bailed out by Germany. But Germany also has deathbed demographics:<\/strong> as Angela Merkel, the Chancellor, pointed out in 2009, for Germany an Obama-sized stimulus was out of the question simply because its foreign creditors know there are not enough young Germans around ever to repay it. \u00a0<\/strong>Germany has the highest proportion of childless women in Europe: one in three fr\u00e4ulein have checked out of the motherhood business entirely.<\/em><\/p>\n

There are real economic implications here, most obviously for consumer spending and housing.\u00a0\u00a0 A dearth of young people means a permanent oversupply of housing, all else equal, unless existing supply is torn down.\u00a0\u00a0 As Steyn explains it, \u201cAn asset is only an asset as long as there\u2019s a buyer willing to buy it. If you\u2019ve got 50 houses and 100 would-be homeowners, that\u2019s good for property prices. If you\u2019ve got 100 houses and 50 would-be homeowners, that\u2019s not so rosy.\u201d<\/em><\/p>\n

The same is true of manufactured products and services.\u00a0 While declining populations are actually good in pre-industrial, agrarian-based societies (fewer people means that a given amount of food is divided fewer ways), the economic system that was born in the Industrial Revolution depends on ever-increasing populations and economies of scale.<\/p>\n

What do you do when your domestic population is aging and actually declining, as it is in Japan, Germany and Russia?\u00a0 Well, export, of course.\u00a0 As Steyn notes, \u201cfor Germany, Italy, and Japan, their only viable sales territory is the world. When your median age is forty-three and rising, any economic growth is down to exports.\u201d<\/em><\/p>\n

This is why the calls for Germany to boost its imports and domestic consumer spending as a means of alleviating the Euro crisis are absurd.\u00a0 Over the long haul, it\u2019s simply not a viable option.<\/p>\n

In an interesting analogy that I had never before considered, Steyn describes the credit markets as a \u201cdemographic exchange.\u201d\u00a0 Banks are a conduit whereby the older generation with accumulated assets lends money to the capital-poor younger generation with \u201cambition and ideas.\u201d\u00a0 The lack of such ambition and ideas\u2014or perhaps more accurately the lack of young people\u2014goes a long way to explaining the low yields\u00a0 on offer.\u00a0 There is a surplus of capital and a shortage of money-making ventures in which to invest it!<\/strong><\/p>\n

Changing Socials Mores<\/p>\n

The demographic changes underway in the West are a case study in the Fallacy of Composition<\/strong><\/a>; what is \u201cgood\u201d for the individual pieces is not<\/em> good for the whole.\u00a0 \u00a0Moral or religious preferences for large families aside, having few (or no) kids is \u201cgood\u201d for a single household.\u00a0 Kids, as every parent knows, are expensive.\u00a0 Fewer children means more money to be spent on the existing children or on the parents themselves.<\/p>\n

But while the lifestyle choice for smaller families (or the decision to eschew parenting at all) is good for the immediate material comfort of the people involved, it is a disaster for society as a whole.\u00a0 Yes, your family can now afford a bigger house.\u00a0 But who are you going to eventually sell it to?<\/p>\n

Steyn throws out the statistic that, in 1970, 69 percent of 25-year-old white men were married. By 2000, the number had fallen to just 33 percent.\u00a0 Steyn insists that this is due to an abandonment of responsibility by young and youngish men\u2014\u201cthey lead teenage lives on an adult salary.\u201d\u00a0 <\/em>This would seem to be a little unfair.\u00a0 The average age of marriage has trended upward with education and\u2014critically\u2014female education.\u00a0 The pool of women available to be married is smaller because so many are furthering their educations and want to have at least a few years of independent work experience before marriage and motherhood.\u00a0 This is not a bad thing.\u00a0 And Steyn\u2019s statistics also do not account for changing social mores; a decent percentage of men this age would probably be considered \u201cmarried\u201d in the common-law sense of sharing a home with a woman.<\/p>\n

Still, Steyn notes a Nielson survey that found that males aged 18 to 34 now play more video games on average than teenagers <\/strong>(two hours and forty-three minutes per day), so maybe he has a point.\u00a0 In comparison, Al Bundy, the \u201cEveryman\u201d of a different era, would seem downright respectable sitting on the couch watching football with his hand down his pants.<\/p>\n

Steyn cites a 1996 piece written by the historian Samuel Huntington in which Huntington identified ten world civilizations, including three major ones\u2014Western, Muslim, and Sinic.\u00a0 Steyn comments,<\/p>\n

\u201cA decade and a half on, China\u2014the Sinic power\u2014is on the rise economically but is demographically weak, while Islam is surging demographically but is economically irrelevant, except for that portion of the Muslim world that sits on oil it needs foreigners to extract. Meanwhile, the West is in steep decline both economically and demographically. And as western civilization was the indispensable component in the construction of the modern world, that raises a question: What comes next?<\/em><\/p>\n

\u201cAs I wrote in America Alone, the People\u2019s Republic has a crude structural flaw: thanks to its disastrous one-child policy, it will get old before it gets rich,<\/strong> and, unless it\u2019s planning on becoming the first gay superpower since Sparta, the millions of surplus young men whom the government\u2019s One-Child Policy has deprived of female companionship is a recipe either for wrenching social convulsions at home\u2014or for war abroad, the traditional surplus inventory-clearance method of great powers.\u201d<\/em><\/p>\n

Again, crude, but largely right.\u00a0\u00a0 We’ve written volumes about China\u2019s bleak future and has even joked about the economics of Chinese gay bars.\u00a0 China has a surplus male population of roughly 30 million.\u00a0 Even if you ignore cultural and linguistic compatibility and import brides from other parts of the world (parts of the Middle East have surplus women), the numbers don\u2019t add up.\u00a0 Thirty million is a large number.\u00a0 It\u2019s roughly the entire female population of the United Kingdom.<\/p>\n

Some sinophiles, including the legendary Investment Biker<\/em><\/a> Jim Rogers,\u00a0 believe that the shortage of women in China (and Korea too, for that matter) will lead to an Asian feminist revolution.\u00a0\u00a0 Precisely because of their scarcity, women will get the recognition and respect that has so long eluded them in patriarchal Asian societies.<\/p>\n

Fat chance.\u00a0 The reality is that the \u201cvalue\u201d of Asian women has increased, but not in the way that Rogers envisioned.\u00a0 Human trafficking , forced marriage, and forced prostitution are all on the rise in large parts of Asia.<\/p>\n

Rather than raise the status of Asian women, changing demographics appear instead to have created a boom for pimps.<\/p>\n

Returning to After America<\/em>, Steyn shifts his arguments to areas he really should have avoided\u2014globalization and immigration<\/strong>.\u00a0 When Steyn\u2014or any other author for that matter\u2014issues the tired Luddite rants about globalization and illegal immigration destroying the American middle class, I lose respect for his intellect and for his body of work.\u00a0 It\u2019s cheap, crass populism, and a writer with Steyn\u2019s knowledge of the world ought to know better. Worse, it detracts from his insightful writings on the role of demographics.<\/p>\n

Here are a few examples of Steyn\u2019s intellectual \u201cslumming\u201d:<\/p>\n

\u201cAs disastrous as the squandering of America\u2019s money has been, the squandering of its human capital has been worse. While our overrefined Eloi pass the years until their mid-twenties in desultory sham education in hopes of securing a place in professions that are ever more removed from genuine wealth creation, too many of the rest, by the time they emerge from their own schooling, have learned nothing that will equip them for productive employment.\u201d <\/em><\/p>\n

Nearly anyone would agree that plenty of American youth waste their educational opportunities pursuing university majors of little practical value.\u00a0 We have too many \u201csoft\u201d majors in things like sociology and not enough engineers and computer scientists.\u00a0 But Steyn would appear to place no value at all on a liberal arts education.\u00a0 Rather philistine of him and also a bit hypocritical given his continued lamentations over the decline of Western civilization.\u00a0 And it gets worse:<\/p>\n

\u201cIn the space of one generation, a nation of savers became the world\u2019s largest debtors, and a nation of makers and doers became a cheap service economy. Everything that can be outsourced has been\u2014manufacturing to by no means friendly nations overseas; and much of what\u2019s left in agriculture and construction to the armies of the \u2018undocumented.\u2019<\/em><\/p>\n

\u201cOnce upon a time, millions of Americans worked on farms. Then, as agriculture declined, they moved into the factories. When manufacturing was outsourced, they settled into low-paying service jobs or better-paying cubicle jobs\u2014so-called \u2018professional services\u2019\u201d often deriving from the ever swelling accounting and legal administration that now attends almost any activity in America. What comes next? Or, more to the point, what if there is no \u2018next\u2019?\u201d<\/em><\/p>\n

Again, most people would agree that this country has too many accountants and lawyers that have been made necessary by an ever-expanding government.\u00a0 A lot of brain power gets wasted in gaming the tax code and in finding legal loopholes.\u00a0 Imagine how much more productive this country would be if those same highly-intelligent, highly-educated professionals were freed up to do anything<\/em> else.<\/p>\n

But farming and manufacturing?\u00a0 Seriously?<\/p>\n

\u201cAt America\u2019s founding, 90 percent of the labor force worked in agriculture. Today, fewer than 3 percent do. Food is more plentiful than ever, and American farms export some $75 billion worth of their produce. But they don\u2019t need the manpower anymore.\u201d<\/em><\/p>\n

And this is a bad<\/em> thing?\u00a0 It\u2019s called productivity,<\/em> Steyn.\u00a0 When any business\u2014be it a farm, factory, or legal firm\u2014produces more with less inputs, this is a good thing.\u00a0 Without creative destruction, there can be no progress.<\/p>\n

But beyond this, Steyn seems to misunderstand what \u201cwealth creation\u201d is.\u00a0 Consider that modern consumer staple, the iPhone.\u00a0 The wealth creation is in the intellectual property that devised the concept, designed the product, and wrote the software that makes it all go.\u00a0\u00a0 It was Steve Jobs and his engineers who created the wealth in Cupertino, California, and not<\/em> the anonymous assembly line workers scattered throughout Asia.\u00a0 Similarly, it was Henry Ford and his engineers who created the wealth when they designed the Model T and its assembly process, and not<\/em> the interchangeable workers tightening the bolts.<\/p>\n

This is not to diminish the role of labor in the economy, of course.\u00a0 Without quality workers, neither Steve Jobs nor Henry Ford would have ever been able to implement their plans.\u00a0 But workers do not \u201ccreate\u201d wealth.\u00a0 Capitalists, large or small, create wealth by using labor as an input.\u00a0 Steyn should know this.<\/p>\n

At any rate, I should give credit where it is due.\u00a0 Steyn \u201cgets\u201d demographics, and much of his writing that concerns demographics is spot on.\u00a0 But his social commentary, even when it is insightful, tends to be extremely inflammatory.\u00a0 And his economics leave quite a bit to be desired.\u00a0 If you enjoy reading a good rant, pick up a copy of After America<\/em>.\u00a0 But for most readers, I would recommend instead Philip Longman\u2019s The Empty Cradle<\/em>.\u00a0 Longman tells the same demographic story but without managing to anger half the civilized world.<\/p>\n

If you liked this article by Sizemore Insights<\/em>, you\u2019d probably enjoy The Sizemore Investment Letter<\/em>, our premium members-only newsletter. Click here<\/a><\/strong> for more information.<\/p>\n","protected":false},"excerpt":{"rendered":"

By The Sizemore Letter \u201cLook around you. From now on, it gets worse. In ten years\u2019 time, there will be no American Dream, any more than there\u2019s a Greek or Portuguese Dream. In twenty, you\u2019ll be living the American Nightmare, with large tracts of the country reduced to the favelas of Latin America, the rich … <\/p>\n

Continue reading “After America: Get Ready for Armageddon”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-26200","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/26200","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=26200"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/26200\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=26200"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=26200"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=26200"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}