Living in Singapore in the early 1980s, there were two particular sights that you would always see. In areas most frequently visited by foreign tourists, every few meters was someone sitting on the sidewalk with a “boom box” who would copy almost any cassette to order.
While this “pirated” music was not part of the official gross domestic product numbers, it did provide income and a livelihood to hundreds of families—if not more.
The second common sight was a group of six men with old-fashioned shovels digging on both private- and public-works projects like laying new water pipes not unlike what we often see here in the Philippines. For a “rich” country, it was as if Singapore had never heard of backhoes and other medium-heavy equipment.
Over the next decade or so, both of these phenomena disappeared. Instead of five guys with shovels, it was two men and a backhoe. The ones with the boom boxes became factory workers cranking out CDs and DVDs.
Looking back through thousands of years of economic history, only two factors determine economic growth for a city, nation or even a continent: population and worker productivity.
In the aftermath of the Black Plague in the mid 1300s when Europe lost about one-third of its population, unemployment went to virtually zero. There was a great labor shortage that forced higher wages. Not only was there a wage competition for workers but also that labor was required to work more and longer hours to provide the goods needed. However, the lower number of workers could not produce enough to create stronger—pre-Black Plague—economic growth.
While productivity went higher, there were not enough workers to make up the difference.
“Population” is not only the total size but also the demographics of the population, particularly by age. If an economy has an abundance of “too young” or “too old,” economic growth is also inhibited, as these two age groups do not produce much. That is the problem that Japan is facing with its population demographics skewing toward the elderly. It’s also a great concern for China. Further, both nations are actually projecting declines in population in the next two decades.
The Chinese population will peak at 1.442 billion a decade from now in 2029. The Chinese government forecasts that China’s population will decrease to 1.172 billion people by 2065, the same as it was in 1990. That is only one generation from now. Therefore, if China is to maintain its economic growth “miracle,” each worker must be more productive. It is also worth noting that North America’s (Mexico, the US and Canada) median age is currently 37.5 years, 5 percent older than China’s current reading. By 2050 projections have it at 42 years for North America, 7 percent younger than China’s population. That makes it understandable why China is so serious and focused on as much economic growth today as is possible.
The Philippines is pretty much golden when it comes to the population factors of size and age demographics. But it is the productivity factor that needs improving. And this is not just about education and technology, like using a backhoe instead of six shovels.
Every hour in traffic reduces productivity. Standing in line for water does the same. That is why “Build, Build, Build” is so crucial for the future. Anything that makes work productivity easier, faster and more efficient creates greater and stronger economic prosperity.
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