In Box

The Baby Menace

Are we too worried about falling fertility rates?

President Vladimir Putin says it's Russia's "most urgent problem." Commentator Pat Buchanan argues it's part of the reason America is "disintegrating." Former U.S. Commerce Secretary Pete Peterson calls it a "threat more grave and certain than those posed by chemical weapons, nuclear proliferation, or ethnic strife."

What is this global menace? Babies. Or, more accurately, the lack thereof.

In fact, if you listen to politicians and pundits, it's the most dangerous threat we've faced since, well, overpopulation.

The trend is certainly real enough. The global fertility rate fell from five children per woman in 1950 to just 2.5 in 2011. In each of the G-8 leading economies, the fertility rate was below replacement level (roughly 2.1 children per woman) last year. Many economists argue that this demographic decline is an economic time bomb that will blow up when there are too few working-age adults to support the growing ranks of the elderly. But is our gray future really that dire?

University of Göttingen economist Klaus Prettner thinks it's too simplistic to reduce a country's productivity to a numbers game. "If workers are better educated or healthier, they are effectively more productive," he says. In a recent article for the journal Labour Economics co-authored by fellow economists David E. Bloom and Holger Strulik, he argues that the "effective labor supply" will actually increase even as populations fall.

"If fertility declines, people invest more in the education of their offspring and raise healthier children," Prettner says, noting that when women have fewer kids, they are more likely to join the workforce. "These effects can compensate for the fall in the total number of people in the labor market," he says.

Prettner and his co-authors looked at World Bank data for 118 countries between 1980 and 2005, and they found improved education and health outcomes in countries with falling fertility rates -- which they think can more than compensate for a decrease in total labor force. In light of this, it might not be surprising that the countries with the world's lowest fertility rates -- like South Korea and Singapore -- have some of the world's top school systems.

At a certain point, Prettner concedes, fertility rates could fall so far that they counteract these positive effects. But for the time being, there's no reason to panic, Vladimir. A grayer Russia could also be a better Russia.


In Box

A New Law of Petropolitics

Sorry, Tom Friedman, higher oil prices don't always mean lower levels of democracy.

In a 2006 cover story for this magazine, New York Times columnist Thomas Friedman proposed what he called the First Law of Petropolitics. "The price of oil and the pace of freedom always move in opposite directions in oil-rich petrolist states," he wrote, noting that "the higher the price goes, the less petrolist leaders are sensitive to what the world thinks or says about them."

The law makes a lot of intuitive sense. If you look around the world at countries that are highly dependent on oil profits -- Saudi Arabia, Russia, Nigeria, Iran, Venezuela -- many have high levels of authoritarianism and corruption. Dig into the numbers, as University of California/Los Angeles economist Romain Wacziarg did for a recent study, however, and the picture gets murkier. "If you look at countries that have a lot of resources, compared to countries that don't, they do tend to have a more autocratic regime," he says. "But if you look within a country, and if they discover a natural resource, do they then become more autocratic? There's no evidence for that."

Wacziarg looked at petroleum-producing countries between 1961 and 2007, comparing their Polity scores -- a commonly used quantitative measure of democratic conditions -- with the price of crude oil. He found no correlation. In fact, in some countries, such as Egypt, Indonesia, and Mexico, the level of democracy markedly improved between 2000 and 2007, when oil prices were skyrocketing.

He also found no evidence to suggest that low oil prices make regime change more likely. "In fact, the Arab Spring happened just at a time when oil prices were pretty high," he notes, pointing out that under Friedman's First Law of Petropolitics, the autocratic regime of Muammar al-Qaddafi in oil-rich Libya would have been the least likely Arab government to fall. Meanwhile, the tiny Persian Gulf kingdom of Bahrain -- which Friedman cited as a country forced to liberalize by its dwindling oil reserves -- has only become more repressive.

Asked to comment, Friedman argues that Wacziarg's study focuses too closely on the effects of oil prices and "overlooks something that was implied in my article (and is explicit in most academic studies) -- that it also matters how much oil and gas a country produces."

"While Wacziarg is correct in showing that higher oil prices have not made oil-rich countries less democratic," Friedman adds, "it has allowed them to remain steadily undemocratic at a time when the rest of the world has become vastly more democratic."

Stay tuned: As oil prices climb once again amid increased uncertainty across the Middle East, both sides of the debate should soon have plenty more data.

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