This post from Dean Baker on why China will not have a dependency ratio problem confuses me. Why does he only cite percentages? Viz.:
If we look at the IMF’s data, we see that per capita GDP has rise by 740 percent over the last 25 years while Mexico’s per capita GDP has risen by just over 26 percent [warning: more arithmetic ahead]. Now let’s assume that China’s per capita income doesn’t rise at all over the next decade (absolutely no one expects this), while Mexico’s continues to grow at the same pace as it has over the last quarter century. This means that in 2020, per capita GDP in China will still be 740 percent higher than it was in 1985, while in Mexico per capita GDP will be 38.6 percent higher.
It’s kind of a weird red herring on his part. He’s equating per capita GDP with living standards, and saying that if the increasingly large population of retirees consumes ~80% of what a worker would, they’d still have living standards far higher than what they had in 1985.
Which is nice, but it doesn’t really address the issue of China having a dependency ratio problem. It just says they won’t be as poor as they used to be.
Additionally, he’s ignoring China’s increasing level of inequality. China’s new GDP isn’t smeared in a nice smooth layer across the country. It’s held in relatively few hands.
The distance between “can” and “would” is huge.
@Dave Schuler
Baker adds the caveat at the bottom:
“If there is a problem in this story for China, it is difficult to see what it is.China’s extraordinary growth over the last three decades is sufficient to ensure large increases in living standards for its whole population, if it is evenly distributed.”
Fat chance of even distribution happening. The only countries which have made made any progress in that direction are all scandinavian.