China's Dependence on Tobacco and Smoking

Last week, the Wall Street Journal ran a piece on China's dependence on tobacco as a centerpiece of its economic development.

The article focused initially on the province of Kunming, which has based much of its economic growth on the product. However, as the piece began to broaden to encompass all of China, the information began to look truly scary.

The Chinese death number is expected to double by 2005.

"One third of all Chinese men now age 29 or younger will die prematurely from tobacco-related diseases."

Allegedly, more Chinese people smoke than are in the US. One estimate of the cost to China last year from smoking was $5B, in medical expenses and lost productivity.

There are many details about the Chinese tobacco industry in the article, but I'm not really interested in recounting or commenting on them in this piece.

Rather, I have two major questions, as a result of reading the Journal piece.

First, can a country afford to either kill off its productive assets, i.e., its citizens, prematurely, and/or foot the immense medical costs for their smoking-related illnesses? Second, could tobacco become the achilles heel of the Chinese economy, in much the same way that a lack of focus on profitability and, then, borrowing in a foreign currency, were to the Japanese economy in the 1970s?

On the matter of the first question, I suggested to some friends that the Chinese economy would have to absorb a massive amount of healthcare-related costs, much as America's automakers have had to do for their retirees. My cynical friends opined that, 'no,' the Chinese would not be so burdened, because the Chinese government will simply let its smoking-induced ill citizens die without much medical care.

If that's true, then let's simply examine the consequences of that. How much premature loss of trained economic assets, in the form of a society's people, as workers, can a country sustain, before its productivity is affected? The ultra-low-wage jobs will soon migrate elsewhere, so, like all other developing economies, China will have to sustain its economic development upon creativity and productivity. How can it do that if it only gets 20-25 good years, on average, per worker, before they become ill? I don't know the exact life-expectancy loss from the Chinese smoking habit, but you get my point. It's surely a drag on the Chinese economy, if only as a simple ratio of reduced lifetime economic output per trained worker.

Thus, my second question. Could this seemingly incidental facet of Chinese society eventually torpedo its plans to dominate global economics? I guess, on one hand, premature deaths from smoking will lower the average age of the population, and reduce the pension cost problems. However, more seriously, is it possible that a significant loss of economic capacity, productivity, and skill, from premature worker deaths, could hamper China's ability to compete with healthier society's?

Will the health and producitivy penalties of tobacco in the long run offset its near-term boost to the Chinese economy? I recall that, in the late 1970s and early 1980s, the American business media was fixated on the coming economic domination of Japan. The country seemed unstoppable. Until, that is, its obsession with market share and growth, to the exclusion of profits, hollowed out its financial strength. Then, its dollar-denominated debt proved a crushing burden, because they had to service it with their own yen.

After all the loss of productivity, via healthcare and legal costs, that America has suffered from asbestos and tobacco, one would think the Chinese could build upon such lessons and avoid the same fate. Evidently, as a society, they aren't yet that smart.

Finally, for the moralists among readers of this blog, what, if anything, can other societies do, as they watch the Chinese promote the early death of their own people? Is there any appropriate action other societies can take? Or would that constitute unwanted, baseless interference in the civil affairs of another society?