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SOVEREIGN MAN

Japan is causing its own demise

Japan is causing its own demise

January 24, 2011
Santiago, Chile

Most people have never heard of Lee Kuan Yew… but he’s an incredibly important figure in one of the world’s most cutting-edge economies.  As Singapore’s first prime minister, he governed for 3 decades, overseeing his country’s transformation into a modern, developed economic powerhouse.

Prior to Lee’s tenure, Singapore was fairly provincial backwater under British colonial rule; completely devoid of natural resources, its only real importance was as a conveniently located trading post.

Post-independence, Lee’s government passed substantial labor, immigration, and tax reforms that were incredibly favorable to businesses and foreign investors. These policies are widely viewed as the spark for Singapore’s economic growth, and Lee is still heavily revered today for those decisions.

In short, he has a Mandela-like influence in his society… and when Lee speaks, people listen in Singapore.

Last week, Lee made some remarks about immigration and Singapore’s aging population, indicating that in order to avoid a disastrous population decline, Singapore needs to attract young immigrants to save the economy in the long run:

“At these low birth rates, we will rapidly age and shrink… So we need young immigrants. Otherwise our economy will slow down, like the Japanese economy…. [Young immigrants] will increase our population and talent pool. Singapore will be vibrant and prosperous, not declining and ageing.”

Low birth rates and declining populations tend to have terrible consequences for an economy; in countries which have a bloated social welfare network, for example, a declining population means that fewer and fewer people are paying into a pension system that supports more and more beneficiaries.

Perhaps more importantly, though, an aging population dramatically shifts its consumptive habits. Older folks are notoriously thrifty, usually opting to save their money for an uncertain future. They don’t have young children to go through a different size shoe every month, college tuition to pay for, etc.

Saving is ordinarily a good thing for an economy– it’s an essential ingredient in long-term growth along with technological advancement. But ‘being thrifty’ isn’t necessarily the same as ‘saving’.

Generating a large pool of savings requires a society to produce much more than it consumes… and with a declining population, even though a society is consuming less, it is also producing less because the labor force is decreasing as well.

The net effect of population declines is a deteriorating standard of living and a host of social welfare system that go bust. Whatever younger generation that still exists is usually burdened with the clean-up costs, but this only increases their rate of emigration. Nobody wants to get stuck with the check.

Japan is a rather famous example of a developed country with a demographic crisis. The rising cost of living and decades-long economic decline caused families to have fewer children, such that the birth rate for the last 30+ years is well below the ‘population replacement level’ of 2.1 births per woman.

With a median age of 44.6 years, Japan already has one of the oldest societies in the world (compared to 39.6 in Singapore, 40.7 in Canada, 36.8 in the United States, 28.9 in Brazil, 25.9 in India, and 31.7 here in Chile).

Japan also has one of the world’s highest life expectancies and highest costs of living… which means that the long-term cost to support idle pensioners is extremely high.

One would think that the Japanese government would be rolling out the red carpet for young foreigners, yet Japan remains a fairly closed society. Foreign residents comprise less than 2% of the population according to government statistics, not enough to even qualify as a drop in the bucket.

Without serious addressing this issue and attracting young foreigners both at the economic and cultural level, Japan runs substantial risk of fading into obscurity.

It’s amazing how so many governments don’t get it… going out of their way to repel or even prevent talented foreigners from settling, as if the fundamental freedom to work hard and prosper is somehow derived from bloodlines, ethnicity, or irrelevant, invisible lines on a map.

These governments will figure out soon enough that labor and intellectual capital are easily exportable assets. Some governments like Singapore, Estonia, and Chile understand that truth, and they’ve laid out incentives to compete for foreigners and establish conditions for long-term growth.

Singapore’s open, mutli-lingual, multi-cultural society is well-equipped to deal with the matter… and given the host of residency incentives that it already provides to talented foreigners, I suspect this free market approach will become a model for global migration and population stability.

Sometime in the next two years, I expect the government to act quickly and unveil a new series of packages aimed at attracting younger people to Singapore; I will look forward to telling you more about it when the time comes.

About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

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Comments on this entry are closed.

  • Elai

    They can attract young skilled immigrants even further if they allow multiple citizenships. Many people from developed nations do not want to give up the passports from where they were born. I was seriously considering getting a singaporean passport until I read that condition. Now if work brings me there, the most I will get is a PR card.

  • Jenna Price

    Hello-

    After reading your article I went to the Estonia tourism website just to look at pictures and weather, and I saw they were advertising their world freedom rankings: http://www.heritage.org/Index/Ranking

    It says the US is 9th, I thought their finding were interesting though it didn’t say what they were based on specifically just generally. Any thoughts or comments?

  • Veritabletrut

    ageing doesn’t mean ‘idle’…and with life expectancy rates climbing [as well as quality of life-ie, people do not need to expec to get sick and immobile by age 65], we would do well to change our preconceived notions, as well. Consumer culture is also not the sole indicator of economic health. geesh. not buying new shoes every year? just an example you gave, i realize, but a bit too simplistic.

    Japan’s racism in general is a problem, not just their lack of immigration. Same can be said for china nad korea, as well. though china is happy to ‘use’ foreign volunteers to build orphanages, teach english,etc all the while make said volunteers feel somehow lucky to be part of this historically closed society. it’s typical long term chinese planning brilliance, of course…
    but it still irks me-this racism-and how it impaces our world. And people like to bring up race in the US. hah. it’s far worse in africa, india, east asia,south america etc. and still commonplace/institutionalized, if not growing even. It will impact economic growth and development, perhaps more than government controls will, IMO.

  • Local Singapore citizen

    Sorry to spoil the fun. Nowadays, the government and mainstream media have spinning tendentious lies to delude the public.

    I’m a local Singapore citizen and I have this to say:
    Singapore has no freedom of information and speech. Almost everything is being suppressed here.

    Recently, Singapore government boasted about 10% economic growth. GUESS WHAT? I AM JOBLESS despite being well-educated with skills and experiences.

    Singapore government-linked welfare and help groups did nothing (not a single cent), just sweet talks and waste of my time and depleted savings. There was a period couple of years back when I WAS UNEMPLOYED FOR MORE THAN 1 YEAR. And that time, Singapore government still boasted about growth!

    More surprises? I have a close friend (also local) and he is among the unspoken long-term discouraged unemployed in Singapore.

    • Standup4SG

      Singapore has no freedom of speech and information? Have you not heard of Hong Lim Park, a Speakers Corner where you can air your grievances and complain about everything? Similar to Hyde Park in UK. In many other countries, if you criticise too much about the government, you will disappear forever.

      Singapore’s unemployment is less than 2.3% in 2010. If you are unemployed, then it is your fault. There are so many jobs in the SG job market, but Singaporeans just do not want to do them, that is why we have to depend heavily on the foreign workers. Dun blame everyone but yourself for your own dilemma.

      Singapore is definately not a perfect country. But looking around the South East Asia region, it’s definately the place for me and my family to settle permanently. Renounce your citizenship if SG is that bad a place for you. There are hundreds who will gladly become Singaporeans without any hesitation.

      • Piglet

        All the media are controlled by government in Singapore. Cinema and music are heavily censored. Some trivial examples:
        - Any cultural production (stage theater, …) is screened by the government and must receive prior approval.
        - Any mention of equal rights for same sex couples is banned and removed.
        - Political movies are now allowed.
        - “Sex and the City” was banned until 2004.
        - Two of Janet Jackson albums are banned for promoting homosexuality.
        - Several foreign publications (The Economist, Far Eastern Economic Review) are restricted.
        - Opponent bloggers are harassed by the government.

        From Wikipedia:
        In 2009, Singapore ranked 133rd out of 175 nations by Reporters Without Borders in the Worldwide Press Freedom Index.

        Singapore has the highest execution rate in the world, compared to its population.

  • David Singhiser

    Still, I’d like to see Singapore be more open to civil liberties. It still gives me the creeps. It’s a beautiful clean city, but a one party system and Lee Kwon Yew’s view of freedom and individualism makes me uncomfortable. If that could change, then I’d be more open to the idea of Singapore.

  • Alexnordach

    “Idle pensioners”. LOL. A comment like that makes me wonder how much boots on the ground time you’ve put into Japan.

    Also, it’s perfectly possible for a single person to support him/herself on the equivalent of US$30-40K. Yes, the CPI is higher in Japan, but that doesn’t take into account factors such as not needing to have a car, lower utilities, lower medical costs (a big one if you’re older), and getting more for the same price in many (not all) areas. Last time I was in the US I was shocked at how slow and unreliable my sister’s wifi connection was – and she pays more for it than I do. Also, a $5 cup of coffee isn’t as hard to take when you’re making $50/hour just for talking (most “English teachers”), etc.

    However, I agree with the comments about Singapore.

  • flipspiceland

    For some countries like Japan and Singpore, an influx of immigrants will only help if the economy supports employment opportunities as in Shanghai where there is a known shortage of people to fill available jobs.

    If Japan has this kind of problem where the work is not getting done then immigrants make sense. If the economy is stagnant, with few opportunities for the existing population then an influx of immigrants only exacerbates existing problems, as in France, the U.K. and other european countries with an excessive pool of labor with nothing to do, a recipe for riots, internal strife, and major funding problems for welfare benefits.

  • Steveloy

    Thats very good and I like it. Any ideas for the old folks?

  • http://justen.us Justen Robertson

    If singapore really wants to attract outside youth it is going to have to relax its authoritarian social policies. Nobody under 50 is going to move to a country where you get thrown in a cage and whacked with sticks for possessing herbs and murdered for distributing them. Well-trained slaves don’t leave their masters-of-origin, everyone else is open-minded enough to be intolerant of that kind of sickness.

    • kristin

      Huh?? The only people that get “whacked with sticks” are those that commit crimes. I grew up in Singapore and I never, EVER felt as if I were under an authoritative government. If I were a drug dealer, a thief or other criminal maybe I would be uneasy. For “regular” persons it is a tropical heaven. Practically no crime.

      • Guest

        kristin – I hope you now that there are many millions of ‘regular’ people who smoke (or ingest by eating) herb, a popular one being cannabis – which is probably what justenrobertson was referring to above. What he’s trying to say is that it’s absurd that in the year 2011, someone gets thrown into prison and beaten because he’s smoking some dried cannabis flowers instead of government-approved (and cancer-causing) dried tobacco leaves.

    • LimTK

      U are clearly so ignorant… Jet Li and many top CEOs among others have become Singapore citizens. Even Jim Rogers have uprooted his family from US and staying in Singapore.

      If you would prefer your kids carry guns to school, drugs, gang fights and vice available at every street corner..then clearly Singapore is NOT the place to be at…

      • http://justen.us Justen Robertson

        Over those same kids being caged, beat, and murdered by gangsters wearing government colors? Sure, I would prefer that. Vice at every corner? Sounds like a great time to me. Violence is violence, put on official costumes and commit theft, rape and murder and it’s still a crime no matter how many pretty ideals and noble goals you dress it up in. A drug dealer’s property is just as much his as yours is yours, and his life is just as much his own as is yours. You have no right to deprive him of it just because he offends you, and to agitate and advocate for theft and murder of people you don’t like shows who the true criminal is.

  • kristin

    I’d love to emigrate to Singapore. Do you know of any concessions Sing. offers to people like me (US citizen). I grew up there and have very fond memories of it. All I know of the country now is it can be expensive.. I would not know where to start in researching moving there.

  • http://twitter.com/filip_rabuzin Filip Rabuzin

    I’ve been reading your letter for quite some time Simon however with 99%? of your posts on Singapore you tend to completely ignore the social/cultural environment. The place might be great for doing business but for living a free life it is not – from what i read the place is an authoritarian social backwater. My immediate thoughts run very much along the lines of justenrobertson below but they extend very much to the question of – how exactly did this 30 year dictatorship mold the social norms of the society and where is it now? Also how does one reconcile this with the obviously open business environment?

    I would truly appreciate if you tackled some of these questions in the near future…

  • Overseas Singaporean

    “Prior to Lee’s tenure, Singapore was fairly provincial backwater under British colonial rule”

    Rubbish. Singapore was the jewel in the English colonial crown even before Singapore’s independence. Stop rehashing the PAP/LKY’s propaganda tripe that they delivered Singapore from fishing village into a modern city only after 1965. Sure they did a lot, but Singapore was well pretty bustling even when the British was here. They transformed Singapore, PAP/LKY tweaked it to make it better.

    As for Japan, again please do your own research. Its decline is deep seated and has many causes, not least its continual throwing good stimulus money after bad in the 1990s. Its demographic challenges are not helping, but not the root cause of Japan’s problems. More tripe from LKY to justify his ridiculous policy failures.

    • LimTK

      Penang, Malacca, Batavia were once a jewel of crown too.. just look at it now… You need a group of capable, uncorrupt people to make a difference.. You know of any small country besides Singapore that has transformed itself in less than 2 generations?

      • m12321

        Japan. It was a backwater agrarian society in 1853 (Commodore Perry) that transformed into an industrial one capable beating a European Power (Russo-Japanese War 1905) .

  • Mark

    a departure from SM’s typically insightful, big-picture anaysis. if one’s cattle ranch is suffering from declining production due to overgrazing, the last thing the ranch needs is an increase in cattle in the belief that more animals equals more beef.
    obvious to any thinking person, the basic assumptions underlying our current economy need to be rethought.

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