by Gary Alexander

March 7, 2023

A few years ago, I wrote a multi-part series here on “Who will dominate the 21st century – China or the United States?” There was no firm answer, since it depends on what both nations do, but there are some new realities to consider, so you can think of this week’s column as a post-COVID update to that most important question facing investors, politicians, historians, and most others in the coming few decades.

Who will rule the future – a relatively free America, or a still-Communist centrally-controlled China?

In a rough cook’s tour of the last millennium of European expansion, Italy got the first at-bat with Marco Polo’s trips to China. Portugal claimed regions of Africa in the 1400s, then Spain dominated global expansion from 1492 to the loss of its Armada in 1588. France and Britain fought for control the next 300 years, then America became the dominant global power in 1900 and certainly by 1919, after World War I.

Who Will Win Boils Down to a Demographic Duel – And Choices

Perhaps by 2030, the Gross Domestic Products (GDPs) of China and America will be equal, but China has over four times as many people, reducing its per capita wealth. However, as Julian Simon pointed out, populations comprise our greatest natural resource, especially when they are well-educated and highly motivated, which the Chinese seem to be, by all indications. The main problem is in their demography.

After decades of a punitive one-child-per-couple limit, that policy was replaced in 2016 by a two-child limit, but most couples have not even expanded to two children yet. The result is a geriatric tilt to China’s population curve, with fewer young workers to support an army of retired grandparents. No welfare state can support a 1-to-1 ratio of worker-to-retirees. The Financial Post reported last week that retirements, plus the death toll from the Wuhan Flu, has cut China’s workforce by 41 million over the last three years (from 774.7 million in 2019 to 733.5 million in 2022), the equivalent of losing the workforce of Germany.

Chinese Workers Lost Bar Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

According to UN projections, China’s working-age population will continue to decline for the rest of this century, while U.S. workers will keep increasing. China’s government, being a command-and-control operation, may approach this challenge as its leader-for-life Xi Jinping has handled several other reversals recently, by ordering the masses to change their behaviors – by raising the age of retirement, and perhaps rewarding parents for having more than two children, akin to Hitler awarding gold medals for mothers bearing eight Aryan children, silver medals for six, and bronze medals for four blonde, blue-eyed babies.

Working Age Population Charts

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Like China, American workers have an aging (retiring) population, since Baby Boomers are now moving through retirement age – like the “pig through the python” – until 2030, when the last of the cohort turns 65. (Baby Boomers, born 1946-64, turn 65 from 2011 to 2029.) This retirement surge since 2011 is one big reason for the worker shortage. COVID also convinced many over-55s to accelerate retirement plans.

Virtually all of the recent increase in the U.S. population over 16 has been seniors. In 2022, the number of those age 25-to-54 (‘prime-age workers’) grew by just 40,000, while those age 65 and over grew by over two million. Since 2019, prime age worker population was flat, while those over 65 rose by five million.

A Gray Wave Bar Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The number of workers is one thing. The quality and motivation of those workers is another. America needs to scrap or revive its educational system to meet the global challenge, particularly from China, and we also need to get our army of unemployed workers outside the labor force motivated enough to accept the millions of job openings going begging now. Those are two huge hurdles that require moral fiber.

First, our schools are a disaster, and rapidly getting worse after up to two years of senseless closure during COVID. A February 14 review by Wirepoints found that 53 Illinois state public schools had no students (zero) that could perform math at grade level. Baltimore has 23 schools in which not one single student tested proficient in math. In Minnesota, there were 19 schools with zero kids at grade level, 11 of them public charter schools. Per-pupil spending at some of these failed schools runs over $32,000 a year.

While we dumb down schools to create grade inflation, we are also removing honors classes in the name of equity, frustrating smart kids. You can’t create excellent workers from illiterate or unmotivated kids.

Addressing the “Third Rail” of Social Security and Medicare

The one thing politicians of both Parties have in common now is saying: “I won’t touch your Social Security or Medicare!”  Well, why not? These programs are demographically doomed, and they are the gigantic monsters eating up the budget each year. What’s more, anything we refuse to look at is often open to the most corruption, fraud, and abuse. Anyone who looks at a Medicare cost sheet can see that.

As the chart below shows, mandatory spending and defense eat up all our tax revenues – which I showed on February 22, are up 45% since 2018. That means almost all of the interest on the national debt and any new discretionary spending programs are created out of “thin air,” using fiat inflationary bucks.

Federal Spending versus Tax Revenue Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

New spending programs (orange bar, top) rained down on America like a record monsoon during the first two years under Biden and his rubber-stamp Democratic Congress – so much so that CBO debt estimates soared by $8 trillion between 2021 and 2023. Economist Steve Moore offers this graphic look at how fast the national debt is accelerating, with estimates for the 2033 debt level soaring by $8 trillion in two years:

National Debt Forecast Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

So far, the Republican majority in the House of Representatives doesn’t seem to care, but both Parties seem to care about increasing retirement funds for Ukrainians, which tells me they have lost all concept of the meaning of money, or fiscal responsibility. (President Biden promised that aid to Ukraine will include “pensions to be paid to the Ukrainian people so they have something in their pocket.”) We love to help, but the U.S. has sent over $100 billion to a notoriously corrupt government without sufficient accounting.

Who’s #1? The jury is out. China’s demographics and soaring debt may doom its goal to be #1 by 2050, and the U.S. may fail to hold on to the top slot, so maybe it’s a Conglomerate. Maybe a United Europe?

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
M2 Money Supply Shrinkage Accelerates

Sector Spotlight by Jason Bodner
A Short Course in Market Timing and Sector Selection

View Full Archive
Read Past Issues Here

About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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