Thread by @muralipiyer

I think the thread ends here.
There are a few over-generalisations here, but the core idea is solid:
We don’t really need an export surplus led growth like the East Asian success stories.
/1

https://twitter.com/svembu/status/1289743839473709060

The problem with the excessively obsessive “work out of poverty” view of society is like that of bulking up with steroids. Eventually, you will stop showing off muscles. The side effects will soon catch up.
That’s what @svembu portrays in the thread./2

Real economy gets eventually affected after a sharp rise, often termed unsustainable rise of economy.
This is all part of the demography story. Nothing to do with the growth path chosen by the population.
/3

The #Demographics story is simple. A population uses the natural urge to procreate freely, and this clearly offsets the high mortality rate, including pre-natal/infant/child mortality, prevalent at that place.
Nature adjusts population by balancing crude birth and death rates.

5. Eventually, something improves.(eg: better health care or no wars).
This phase is seen with improved quality of life style due to decrease in IMR, etc. fertility rate is high or highish. Overall, this is the time of population explosion.

6. Economic activity around this time is to go for more labour intensive stuff. Agrarian nature need not change. But eventually the secondary and tertiary sector kicks in.
Remember that services are meaningless unless the population evolves to a certain level.

7. Somewhere in between, a sub group realises that privileges have benefits. Concentration of wealth starts. The inequality grows. The predominant social force is gradually shifting to improve quality of life.

8. One of the key characteristics is the low dependency ratio (population of non-employed dependent’s/working population). This means that people can work their way out of poverty, or work their way to better social strata.
Essentially, real income rises. Better quality of life

9. Then nature starts coming in the way.
Eventually, the cost of raising a child so that child remains in same social strata increases. The cost of climbing social ladder by giving a higher initial push in formative years becomes a lot costlier.

10. Remember that human beings are still animals, procreation is the primary reason for marriage. People started using contraceptives to reduce unintended births. Even the word “unintended” is crucial. This implies a conscious effort of ‘family planning.’

11. The reason for having less children are many. One is the karoshi thing pointed out by @svembu. People just work too much so that they can improve the quality of life of their children. Remember that this didn’t happen in one or two generations.

12. Initial generations were just fucking around, and children were just a byproduct. The family structure was bad. The collective community takes care of child growth. Some will live, some will die.
The overall benefits of the community was the only goal.

13. This remains typical in countries with TFR greater than 6. This general lack of “development” or what the white man(all wokes included) calls the “barbarians”, is characteristic of that type of society. The drawback is that soon family size becomes unsustainable.

14. Without this uncontrolled population growth phase, the urbanisation phase won’t kick in. This is a continuation of the earlier stage where migration was gaining pace and the shift away from agrarian economy had started

15. That takes us through the 6 to 2 journey.
This is where urbanisation becomes the norm. The weight of the services sector grows.
Predominant belief is that the path is from primary to tertiary via the secondary economy.

16. The Iran story is the only case I know of rapid fall in TFR without the accompanying transition through the phases. China story is discounted due to the one-child policy and the Deng era.

17. Generally, the transition happens over 3-4 generations passing through the industrialisation phase. This is the phase where working way of poverty shifts to the extreme.

18. Around the replacement level fertility rate(2.1), nature plays the next card.
This is around the time, the cost of raising child becomes high enough to force heightened family planning. This happens irrespective of whether the shift has happened to nuclear family structure.

19. The nuclear structure triggered by increased migration and urbanisation just accentuates the next fall.
This is the time when the infant mortality figures are low. This is also an era of higher stability. No wars, reduced unnatural deaths, increase in life expectancy.

20. Typically, the real wage growth flattens around this time. This is the breeding ground for socialism or excessive left politics. Populism gains. Even authoritarians turn to a bit of populist rhetoric.

21. Right around this 2 mark of TFR, the working age population starts shrinking. This is because of a replacement level mode of population growth. Typically, the 20-29 age cohort is contributing to birth rate. This is accompanied by growth in 60+ age cohort.

22. Basically, crude death rates starts to fall. The population growth about this time is due to the difference between this slowing down of crude death rate and still relatively higher crude birth rates.
This is where you see flattening of population chart.

23. About this time, the urban way of life becomes too costly that people start limiting to a single child.
Unlike China which forced a one-child policy, this is completely voluntary decision. The marker for this is increase in late marriage.

24. Unmarried men and women are delaying the marriage because they feel that they need better savings/earning potential before they can start a family.
There will also be some sort of peer pressure to either delay marriage, delay child birth or a combination of various factors.

25. The dip below TFR 2 happens and that’s about the time the basic structure of population is drastically altered.
This is accompanied by stagnant real wage growth, increased cost of raising a child, improved quality of life, increased life expectancy, and increased dependency.

26. We have observed that this is accompanied by children forced to work away from dependent parents. Often, one parent stays nearby children. Palliative care becomes a buzzword.

27. Demographic tax comes in the way of increased expenses to maintain dependents combined with declining income. Of course, per capita income is high. But so is per capita consumption.

28. This is where nature works it’s beauty. The higher consumption of resources eventually starts a supply constraint that increases demand(as in total cost of resource). This restricts supply more, like the slow grip of a python.

29. The indebtedness of countries post “growth story” is actually the work of this python. As real wages start struggling, the political leadership will have to resort to some amount of populism. This increases the debt burden.

30. About the same time, the middleclass insists on the basic Infrastructure of food, water, energy, residence. Water and energy are affected by the resource constraints. Residence become a problem because of reduced supply of quality real estate. Affordability plays a key role.

31. Food is a different breed altogether. The farmers growing the food too want to be able to afford better quality of life. So they are going to raise prices. The increased quality of life or the pressure to maintain high quality of life forces more exotic dietary preferences.

32. Net net, the savings of the middleclass is under stress. The middleclass is forced to work more than their parents just to maintain their social strata. The class movement—poor to middleclass and reverse, and middleclass to rich and reverse—becomes a lot more fickle.

33. All this forces population to shrink further.
Low population growth is not sustainable from the nation’s perspective. All countries rely on taxation. If taxes fall, their ability to serve populist goals falls. This forces the governments to borrow more.

34. All countries are happy to borrow more with the expectation that future earning power will offset the increased debt-gdp pressures.
The image of the government enables central banks to issue cheap bonds on behalf of governments.

35. But the story doesn’t stop here. Since the quality of life in these countries is higher, migrants from poorer countries flock. And these people generate remittance-based revivals of the poorer economies.

36. Remittances are of two kinds. Meeting basic needs of the immediate family and increasing their quality of life, including buying big houses, etc. investment in government debt.

37. Yes. Money grows faster back home than in the places where they work, even though opportunities are higher in the rich countries. There is no contradiction here. Money put in native place is to feed the growth of family back home.

38. “Successful” migrants pull in more migrants. This population transfer from high TFR to lower TFR regions offsets the pressure on population rate due to falling birth rates.
This has a different effect on the poorer regions.

39. I talked earlier about migration becoming the main resort for families under population pressure. This pull of migrants is feeding that push. What this means is that those poor countries walk through the same path.

40. What is the endgame of this nature’s play with demographics.
The Asian countries started the journey about the same time in 20th century. Almost all countries are now about the TFR 2 range.

41. African countries(yes, Africa is a continent with 50+ different nations) are about the same level as Asian countries last century. So, the next century should belong to Africa. Africa has large diversity, with countries like S Africa, Nigeria, etc and Burkino Faso, Susan, etc

42. So, the question is: do we really have to grow like Japan, China to become a developed country.
Will every country have to follow the same path.
Is karoshi the only way of life in the modern world? Is working to death just to maintain quality of life the norm?

43. Nature doesn’t care how it does it, as long as the pressure of human population reverts back to sustainable levels.
Life must go on, whether human species is a part of it or not.

44. There is another factor at play here. The way developing world works. Developing world has a certain lackadaisical way of growing. They generally just drift along the ebbs and flows till a bunch of structural changes happen.

45. It can come in the form of a LKW who transformed Singapore over a generation. Or it can happen gradually. India has been following the slow and steady growth over the years. 1991 reforms was one of the structural changes that happened.

46. Unlike the success stories, there was not much follow up for almost 3 decades. All this while, the pace of growth has been steady. Unless someone studies the progression over the last century, no one can easily point out the major changes that have happened along the way.

47. The success of India growth story is this slow and steady pace. It has to be taken as a given that per capita income will grow from 2000 levels to 10000 levels, at some point of time. There is also the scale factor. India is just too big and too diverse.

48. We have relatively high developed Kerala and a relatively undeveloped Bihar-UP. Each state is struggling based on its own local concerns.

49. The growth potential of India is huge. We just about endured that every village has road and electricity access. The next phase of reaching every hamlet with metalled roads and steady electricity has just started.
Piped water for all and piped gas for all is still in progress

50. The focus on rural growth had always been shallow, but as time goes by, the basic needs are getting better resolved. The administrative structure has yet not seen any change, not even cosmetic changes.

51. The transformation of Korea was triggered by the Japanese administrative system imposed on the vassal state. India is right now following the Victorian era system meant to manage a colony(not even a vassal). That’s one huge structural change that’s due.

52. A new educational policy has come in. It will get implemented by 2030, a decade later. That would solve a few of the structural challenges in the education domain.

53. Health is an area that requires a lot of improvements. There are some improvements in states like Kerala. Public health depends a lot on medical education, that is likely to improve after the education policy of 2020 kicks in. Universal health insurance has taken first step.

54. India still has a systemic distrust of private profit. Hopefully, the right to property and respect for private profit led growth comes at some point of time. This is a slow process.
Once that comes, ease of doing business will drastically improve.

55. We have a legislative overload. We have too many laws that look nice on paper, but are non-implementable. Rationalisation of laws, regulations and rules based on facts of life is going to be a huge structural change.

56. A low hanging fruit of repealing a lot of useless laws have just been done.
Rationalisation of various aspects into broad codes of law is still under talks. A direct tax code, a labour code, the revised troika of penal-criminal-civil procedure codes, company code, etc are due

57. A shift to rules-based independent regulator heavy architecture is long overdue. People are now thinking about not just having a regulator, but also having an effective regulator now.

58. Then, there is the police reforms and judicial reforms. These are interlinked. Judicial reforms can happen only if police reforms take place. We still haven’t differentiated the different roles of police. There has to be a lot of rationalisation here.

59. There is a huge shortage of staff to deliver government services. The current number of posts are grossly inadequate (we still largely follow the scheme left by British). Even the posts currently present are largely not filled.

60. India has this strange mixture of the need for more man power, availability of a large population and a largish unemployment/underemployment.
Low productivity in agriculture doesn’t help either.

61. I have not even touched industries yet. Due to the largely subdued demand due to lack of purchasing power, industries have a huge market that’s waiting to be tapped. Of course, more companies have to give employment to ensure that there is enough customers for all to profit.

62. Remember the lackadaisical way of developing world I mentioned earlier. India can gradually walk through all these in the same slow process. Or, a transformative leader can change the whole landscape.

https://twitter.com/muralipiyer/status/1289780465457455104?s=21

https://twitter.com/muralipiyer/status/1289780465457455104

63. That last line, “transformational leader”, is heavily crafted to make it impossible for any leader to be truly transformative. In fact, the Indian politics has now abused the words “progressive”, “transformative”, “Big Bang reforms”, etc more than a captive sex slave in Daesh

64. No transformation can happen overnight. A structural change requires broad based consensus in a democracy like ours. And then we have the Raj era babudom. Don’t forget that a consensus Rafale purchase still required 2 decades to land the first batch of planes.

65. Something like a uniform civil code has not even reached a consensus, though most are not averse to the core notion when stripped of all political connotations.

66. Then there is the problem of implementation. A 5-year term is grossly inadequate for any major change. A 10-year period is sufficient for at least some of the reforms to kick in.

67. The universal electrification game started in the 80s. A structured program came in 2000, with the PMGVY. It got almost over in 2012. The last push and the expansion to cover every hamlet came in 2018. Electricity for all is still a decade away. That’s half a century.

68. I just listed the broad structural changes that India needs. We are talking about a 5-10 decade long, slow process. It’s simply impossible for any one leader to do everything even if he/she had a 25 year long term.

69. There is one ray of hope. We have one small thing working for us, that can help speed up the whole process: Information Technology.

70. By going for a Digital India(it’s just convenient to use the government slogan), a lot of issues can be resolved. A lot of unnecessary government work can be streamlined through digital means. Digital also enforced rules-based governance.

71. Of course, the entrenched babudom will slowdown the process. National digital land record project has been going on for a long time. But, eventually a technology will come that will speed up the process. Technology innovation is independent of bureaucracy.

72. IT works.(pun intended)
A digital net metering has changed the way some power consumers are keeping track and paying their electricity bills. Pre-paid electricity is gaining traction in many places.
Soon, prepaid utility(like your prepaid phone) will become the new norm.

73. Such defined services will help the service providers run a successful business. That in turn will ensure better services, or put another way, a better quality of life for the citizens/users. These add up to the quality of life argument of demographics.

74. The first version of GST had focused a lot on just converting whatever happens in paper to a digital medium. There are already a lot of concerns raised by the various stakeholders. A second version will come, which will simplify processes and make it IT friendly.

75. The hype of artificial intelligence and blockchain has finally reached the higher levels of entire political spectrum. Soon, decision makers will realise that we are not collecting enough data to do any meaningful analysis. This will lead to data centric governance.

76. Unlike European story and the East Asian story, the infiltration of e-governance into our babudom will help India transform from a middle income to a developed world. These changes will happen in the same lackadaisical manner typical of all developing economies.

77. Where does demographics kick in? If you haven’t noticed it yet, demographics has already made its mark now. The number of children finishing school age has been steadily falling over the last few years.

78. For a cash strapped country like ours, the mere fact that we need to provide 10% lesser schools is a huge boost. The school growth will continue because universal education is still not 100%, school dropout is a concern. But reduced population will help need the demand.

79. This covid induced lockdown has made many people ask: why can’t my village have the same level of Internet speed, the same set of basic services. As urban areas get developed, the rural areas will start gravitating towards development commensurate with urban way of life.

80. This play of demographics will be met by the economic changes triggered by rural development schemes that had been running for decades. The use of digital will speed up the service delivery and resolve service deficiencies.

81. Yes, rising life expectancy has already forced our lawmakers to think about palliative care. Kerala, the most developed state, is leading the way. The rising dependency ratio is now forcing government and population at large to trigger some of the structural changes.

82. To get back to @svembu’s question (the one that triggered this whole thread), should India follow the East Asian story. Do we have to face all the problems of rapid growth. India is already charting a new path. Probably no other country can emulate us.

83. The power of demographics guided by the regional and economic diversity of the nation has already forced our hands to follow a new path. The digital transformation around the world has already ensured that this new as yet undefined path is taken.

84. Our cacophonous politicians and our lackadaisical babudom will ensure that the demography induced transformation will happen slowly and steadily. We will avoid a lot of past mistakes, we will repeat a few and we will make a few new ones. But, India has to grow, and India will

85.
Pulled one way, then the other,
Like a blade of undersea grass,
India will grow roots
Despite the constant sway.

Destiny is already written.
We just have to find our way.
A chance for us to err anew
And to kill old daemons on our way.

/end