The Economic Reason for the Demographic Transition, and the Way to Overcome the Demographic Crisis

we consider human reproduction from the general business point of view, the
economic reason of the demographic crisis in developed countries will become
obvious, as will the ineffectiveness of many expensive efforts, which have
currently been implemented in order to stimulate the birth rate increase.


About a hundred years ago, the patriarchal type of production, based on
family labor, for the first time in human history stopped being the prevalent
way of doing business. At least in Europe, it
was replaced by another economic system, which was based on hired workforce. In
the patriarchal society, children were working for their parents, supported
them during old age, acted as their human retirement benefits. The more
children the parents had, the more people worked for them, the more prosperous
their business was, the more the parents benefited. Families with 10-15
children were quite common. However, when the capitalist system came, a family
was still spending enormous resources on having and raising children, but the
grown children were selling their labor not to father and mother, but to an
outside employer. Now, all the child production spending was not yielding any
profit. Without any profit, human reproduction became a fully inefficient
enterprise -- and, naturally, lowered its output. The only reason the output
did not reach zero is the existing maternal instinct. This social institute,
the non-economic need to have a child, keeps the birth rate in the hired-labor
countries close to one child per woman. For example, the birth rate is 1.66
children per woman in Great Britain,
2.13 in
the USA (mostly thanks to
the Latin American immigrants), 1.41
1.29 in
Russia, 1.22 inJapan.

Meanwhile, in countries where family-type way of doing business is still
prevalent, the birth rate is still high. In India,
it is 2.76, in Afghanistan,
it is 6.58.

Nowadays, the native population of the European countries is being
replaced by the peoples of their former colonies, whose birth rate stays
traditionally high even in Europe. England, France,
will face Kosovo-type ethnic conflicts in the future. If the described tendency
will continue for centuries, the industrial development of Asian, African and
Latin American countries will lead to lower birth rates as well -- and then mankind
will cease to exist as a species.

The meaning of the demographic crisis, which has struck the industrially
developed countries, is very simple. If money is the blood of economy, then the
demographic crisis is the disease of society. The name of that disease is
infertility, and its reason is the lack of blood flow to the reproductive
organs -- i.e. the lack of family financing.

As we can see, the birth rate can be in one of the two separate states,
each of which corresponds to one of the two distinctly different economic
situations. If children bring profit to their parents, they are produced as
often as possible, just as if they were some profitable merchandise, and the
birth rate stays on par with the biological maximum, i.e. 10-15 children per
woman. If, however, children bring the parents nothing but an economic loss,
the birth rate drops to the biological minimum, 1 child per woman. The
intermediate levels -- such as 2.2 children per woman, which corresponds to the
zero population change -- can not be maintained by any economic reasons. By
historical standards, the demographic transition between the maximal and
minimal birth rate happened instantly, while the maximal rate had been being
maintained for millions of years.

What is the way out of this demographic situation, then? After all, the
natural, family-style economy is not coming back.

Obviously, the current attempts to stimulate the birth rate increase by
decreasing the reproduction expenses are absolutely ineffective. No matter how
small child-related expenses are, they are still bigger than the zero profit
children yield in the industrially developed countries. There are a plethora of
different solutions being tried in various European countries – reimbursement
of birth-related expenses, paid child-rearing vacations, tax breaks, subsidies
to preschools -- yet they are make no economic sense. All these breaks and
benefits, which are meant to make having and rearing children less expensive,
simply cause parents to have the first child as soon as possible (while the
benefits are still there) -- but no second child follows, since having a child
is still not economically beneficial. Thus, the birth rate still decreases, and
the government ends up spending enormous amount of money (in Sweden, it's 3.5% of the annual
GNP) simply to make an average couple have their only child earlier. Another
example of an ineffective solution is the newly-introduced payments to the
non-working parents in Germany,
which are equal of 67% of their previous salary. Such payments continue for a
year after the birth of a child, and Germans do put a lot of hopes into them.
Nevertheless, a family with a child is still worse off economically than a
family without one. Even without this payment, the first child would be born
anyway. Thus, no birth rate increase will follow.

At the same time, monetary benefits, given by the state to the parents
for each new child, will indeed increase the birth rate, if the per-child
benefit (i.e. profit yielded by a child) is bigger than the money spent on
having and rearing the child. In that case, the child becomes profitable, and
families start producing additional children. Mostly, it will affect the
poorest segments of society, which invest the least in their children. The
alcoholics, the drug addicts, the beggars will have more children (in fact,
they already do so) even for the sake of the insignificant benefits, but they
will mostly throw the born children out to the street (again, they already do
so) in order to spare themselves the child-rearing expenses. That is exactly what
is happening with the "Mother's Capital" program in Russia right now.

However, there is a much more effective option. It is a mechanism that
would give the parents a significant part of the profit, which is derived from
the exploitation of their children by the employers. That part should be big
enough to make the family child-producing business economically viable again.
The parents' profit should not only compensate child-having and child-rearing
expenses, but also bring at least as much extra money as an average woman would
earn working outside her home. Then, the regained economic viability of having
children will switch the birth rate back to the state of the biological maximum
-- 10-15 children per woman.

There are several possible ways to achieve this goal. The easiest one,
which will require no new expensive and can withstand any inflation, would
require a law that would give the Social Security withholdings from children's
salaries directly to their parents – without the government acting as a middleman.
This way, the economic incentive to have more children, which was so effective
during the old way of doing business, will be back. All that is needed to make
it happen is the political will of the powers that be.

Of course, there is another solution, more painful for the population --
the elimination of retirement benefits altogether. In that case, the only way
for the parents to survive the old age will be to rely on their children’s
help. After a tragic period of time, during which the new system of
parent-child relationships will be established, the tradition of helping your
old parents financially will be reborn. Then, the multi-child families will be
viable again. After a while, the adult children’s salaries will reflect the
increased parent-aid expenses. Of course, a law like this, which was recently
adopted in Turkmenistan,
will swiftly lead to the fall of the government in a country with a more
politically active people. On the other hand, depopulation is definitely not a
problem for Turkmenistan

Purely theoretically, it is possible to imagine other solutions, such as
having a required number of children “by request” – say, by request of the
army. The children would be born by surrogate mothers, who would be given
salary from special firms (farms?), and the child-rearing would be done in
boarding schools. The firms’ owners would reap profit – the difference between
the money paid by the client and the production costs. In that case, children
would become normal business merchandise. Of course, nowadays such solution
would not be realistic.

In any case, the restoration of the natural economic feedback between
parents and their children will lead to numerous beneficial consequences.

Retirement benefits will increase. If you want to have triple benefits,
have three children. If you want quintuple benefits, have five.


Since the retirement money will start flowing to the parents’ accounts
as soon as their children start working, there will be no such thing as
“retirement age” anymore. Everyone will have the freedom to choose when to

It will be beneficial to have children as soon as possible – unlike now,
when young people delay parenthood to no end. The earlier you had children, the
earlier you will start reaping profits. The earlier the children are born, the
healthier they are. The overall health of a nation will improve.

There will be no more orphanages. The profitability of the children will
lead to their adoption. After all, it will take less time to raise the adopted
child than to rear one “from scratch”, and he/she will bring you profit faster.
By the way, adoption will be the perfect retirement solution for the infertile

The profitability of the children will solve the child vagrant problem,
too. Instead of being the source of misery, children will become the source of
income, the livelihood. You do not throw your livelihood out to the street.

A husband will not leave his wife with a child, since that would mean
leaving his retirement benefits, too.

A prospective fiancee with two children will become twice as attractive
as a woman with just one child – her dowry will be twice as big.

If a child leaves the country, his/her parents’ retirement benefits will
leave with him/her. Having that in mind, the parents will raise the child from
birth as a patriot and teach him to love his native land.

Since retirement benefits are withheld together with the taxes, tax
evasion will be denounced by the parents. The children will be taught to
respect the tax laws.

If a child goes to jail, his/her salary will decrease, and so will his/her
parents’ retirement benefits. From birth, the child will be taught to abide the
law. The crime rate will fall.

If a child becomes a drunkard, or a junkie, his/her income, as well as
the income of his/her parents, will also decrease. The parents (even the ones
who like to drink themselves) will fight alcohol and drugs with all their

The education of the new generation will undergo a radical change. The
child will stop being the center of the Universe, the object of everyone’s
idolizing, the only light in the dark. The new generations will not consist of
infantile, selfish, spoiled brats anymore.

And the biggest benefit of this solution is the fact that no government
spending is necessary to make it real. The second-biggest benefit is the fact
that the solution is not threatened by any inflation. After all, we will simply
redistribute the existing retirement benefits in order to increase the
country’s population.

Finally, the birth rate will increase exponentially. The problem of
European depopulation will be solved. Instead, Europe
will face the problem of overpopulation, which it never faced before. However,
as complicated as this problem will be, it is still better than the impending
death of the European civilization.

NOTE: The birth rate data is taken from US Census Bureau (International
Data Base):