Underinvesting in the Future South Korea, Hong Kong, Taiwan, and Singapore have over 40 years averaged roughly the highest consistent economic growth rates in the world. ... But change the national...

Underinvesting in the Future


South Korea, Hong Kong, Taiwan, and Singapore have over 40 years averaged roughly the highest consistent economic growth rates in the world. ... But change the national accounting principles behind these rosy numbers and a different picture emerges, one that the societies concerned have barely begun to grapple with. In one vital respect these countries (soon to be joined by China) collectively may have the worst record of investment in the future since homo sapiens evolved: Investment in the next generation. They have the lowest fertility rates in the world. ... Economists forget that people as well as buildings depreciate at a roughly predictable rate. Childrearing is at least as essential as building roads. Imagine if these four economies had invested less in infrastructure and ... more in people. ... They would not be facing a situation in which their workforces—unless replaced by immigrants—will decline dramatically within 20 years as the population over 65 continues to grow. The payback for years of what may well have been the misallocation of resources is not far in the future.

a. Explain why the rapid growth rates of these Asian economies might be masking a “misallocation of resources” that will result in lower income per person in the future.

b. Explain the difficulties in balancing goals for immediate economic growth and future economic growth.