light headed!

A NYT article got me thinking on how a population affects consumption. On an average in India the poorer households have more number of kids as compared to richer households.

The upwardly mobile delay conception because they seem to want to enjoy the life a little more. This means delayed child birth and hence fewer kids. This is a generalization based on a few people i know. So do not hang me for it. Point is i see more and more couples in their late twenties delaying a child by at least two to three years. This could also be a direct result of inflation which makes things costlier or they just want to have a longer span of “good-times” before they throw in the towel in exchange for responsibilities and parenthood.

Many people in India wail about India’s population being the main reason for our troubles, truth is the problem lies in lack of production rather than in consumption. Here you have so many feeding mouths and potentially large number of people who will want to have a better lifestyle at some point in time, and you complain they being more than necessary?

The problem lies and i have always maintained this, is that more children are born in unproductive households rather than in productive ones. By productive i mean people who contribute directly to the GDP and/or, hence are definitely above sustenance level, pay their taxes and so on. A beggars household inadvertently generates more beggars and not the other way around. So you have more and more consumers but hardly any producers.

Here is Japan, where prices have fallen for decades after their peak. The newer generation prefers to save than to consume. Since prices are falling anyway there is no point in building an asset like a house for e.g. This means people are holding much of their assets in cash. Since you have no consumption, you have no growth. This might seem quite a contrast to an earlier essay where i argue for more production viz a viz consumption but it really is not. The greater the population, greater is the potential consumption. Now all you need to bring those teeming millions into the national fold where they can actually contribute directly to the gross revenue by way of taxes.

So you are producing more and more for your own population. Japan has a case of more products for very few customers. Supply > Demand. Their population is aging and decreasing. If Japanese companies abroad have been doing extremely well over the past many years, subsequent governments eventually will want to throw them out to support their own internal economies. Honda/Toyota in US anyone? This leaves Japanese companies without a market or a shrinking market. Japan now needs India, China and Brazil more than ever for their products to be sold. This will the only way they could pump in money into their deflation ridden economy.

Idea here again, is to produce more and seek markets for your products.

NYTIMES Article