The Wednesday Letter #252 - 12/25/2024
THIS WEEK: Christianity Around the World; Gift Card Industry; Latest US Census; What We Know for Sure; Health Care and Medical Devices; Investment Themes to Watch.
🎄🎅 Merry Christmas! 🎅🎄
CHRISTIANITY AROUND THE WORLD
Yesterday, the new Syrian authorities declared Christmas a public holiday. This brought some reassurance to local communities that worried about the new regime and Sunni majority’s treatment of minorities. The Assads, themselves part of the Alawite minority, did not discriminate against other minorities. They were equally brutal to everyone, or on the whole even more so toward Sunnis.
In recent weeks, there had been some worrying but isolated incidents of vandalism at Christian churches in and around Hama. But the new declaration of Christmas as a public holiday will calm spirits and must be counted as a win for religious tolerance, which is sorely lacking in many parts of the Middle East.
Since today is Christmas, we take a broad look at the state of Christianity around the world.
A February article in the Baptist Resource Network states the following:
First, the best news! Christianity is growing! According to the research, Christianity is growing around the world faster than the rate of population! The population growth rate is currently trending at 0.87% growth but Christianity’s growth rate is trending at 1.08%. In fact, the Christian population is projected to top 3 billion before 2050! Among these Christians, Protestants, independents, evangelicals, and Pentecostal/charismatics are the fastest-growing groups.
Also, the fastest-growing areas for Christianity are in the global south, particularly Asia and Africa. By 2050, the African Christian population will swell to more than 1.28 BILLION people! Amazing!
The report also reveals that most new adherents to the faith will come from non-Christian countries and that the global atheist population will continue to decline.
We would treat these figures with caution since these new Christians are not self-identified as such. The report that produced these figures looks at majority religions for each country and assumes that any population growth results in a larger number of Christians. This is a fair approach to some extent, but is like painting with a wide brush. The rising figure ignores the decline of Christianity in populations that are increasingly atheistic, namely the rich countries of the West. The number of Christians in France for example may look like it is growing if we count 85% of France as Christian, but it is in fact declining due to the doubling of non-believers since 1980, as we showed in TWL #249.
Let’s look at Christianity by region to get a better idea. This is only a quick survey and is not meant to be comprehensive.
EUROPE
The trends in Europe show a clear decline. In the UK, church attendance falls every year and is down 40% since 2009. In Italy, church attendance has halved since 2005. In France, the number of Christian believers has fallen by over half since 1950. In Spain, the share of non-believers has grown from less than 10% in 1980 to 41% in 2023. On the whole, about 65% of Christian Europeans believe in God or another higher power, but only 27% believe in God as described in the Bible. About 30% of Europeans say that “science makes religion unnecessary.”
So, how many Europeans can we count as Christian in a specific religious sense rather than just a cultural or legacy sense? Probably no more than 50%.
For a lot more data, see this 2018 Pew Research report on European Christianity.
AMERICAS
A Pew 2019 report is headlined ‘In U.S., Decline of Christianity Continues at Rapid Pace’. In 1970, nearly 90% of Americans identified as Christian; today less than 70% do so. In the same period, the “nones” (people with no religion) have grown from 5% to nearly 25%. The shift is also generational. 84% of the Silent Generation identify as Christian vs only 49% of Millennials. These are 2019 figures and it is probable that they are lower today. Canada is seeing a similar downward trend as the US.
In Central and South America, the percentage of Christians has remained relatively steady at over 80% of the population. Within this percentage, the share of Protestants has grown from less than 10% to now 20%. This increase is due to new conversions from Catholicism to Protestantism. In Colombia for example, 74% of declared Protestants were raised as Catholics. There is a similar shift among US Hispanics with 77% of them raised Catholics but only 55% now identifying as Catholics. Protestants in Latin America are more likely than Catholics to say that religion is very important in their lives, that they pray daily and attend weekly services. See this Pew Research report.
RUSSIA
Data is not as widely available in the Russian Federation. During Soviet times, Russians were reluctant to identify as Christian because the communist regime was intolerant of religions. The number of Russians who identify as Orthodox Christians has risen from 31% in 1991 when the Soviet Union collapsed to about 70% now. About half of Russians say that they believe in God. In theory, Russia is tolerant of other religions or denominations, but in reality there has been discrimination and persecution of Protestants, Catholics and other religions.
ASIA AND CHINA
The Asian country with the most Christians is the Philippines with an estimated 93 million adherents. The second country with the most Christians is China, with an estimated 40 to 70 million. The third, fourth and fifth are Indonesia (30 million), India (26m) and South Korea (14m).
The Gordon-Conwell Theological Seminary says that “Christians [in Asia] grew twice as fast as the general population over the 20th century and represent 8.2% of Asia’s population in 2020.” Because Christians are a minority in all large Asian countries (except the Philippines), estimates of the number of Asian Christians are not clouded by legacy or cultural Christians as they are in the equivalent count in Western countries.
The same report from Gordon-Conwell writes about the Middle East:
While Christianity has grown rapidly in three of the four regions of Asia, Western Asia has seen a steady decline, from 23% of the population in 1900 to 5.4% by 2020. This is largely the result of emigration, and the exodus is still taking place from some parts of the region. In Iraq and Syria, historic Catholic and Orthodox populations have suffered terribly at the hands of violent religious extremism and Western military involvement.
It is not known how many Christians there are in China, but their numbers have grown in the past few decades. Estimates vary from as low as 30 million to as high as over 100 million, with a Chinese government 2018 White Paper putting the total at 44 million, of which 38 million Protestant and 6 million Catholic. Pew Research wrote a detailed report on these estimates in August 2023.
The 2018 estimate of 44 million is likely too low for 2024 because there has ostensibly been some growth since 2018 and because the figure never accounted for “underground churches”. All in, an often-used range today is 50 to 60 million but even that may be too low.
The Communist party discourages all religion but it views Islam and Christianity in particular as undesirable and foreign, with ties to far-away centers of influence. An article from the Council on Foreign Relations last May stated:
The CCP [Chinese Communist Party] is worried about these faiths’ [Islam and Christianity] foreign affiliations. Muslims are part of Islam’s global umma (Arabic for “community”) of believers, and until recently, young, pious Chinese Muslims often studied in Muslim countries, such as Malaysia and Indonesia. In addition, one of the five pillars of Islam is the pilgrimage to Mecca in Saudi Arabia.
Christians, meanwhile, are thought to have strong overseas ties either to the Vatican, for Catholics, or to overseas Chinese communities in Southeast Asia and the West, for Protestants in particular. By contrast, Buddhism, Taoism, and folk religions are seen as indigenous faiths with fewer overseas ties (the main exception being Tibetan Buddhism, whose spiritual head, the Dalai Lama, lives in exile in India).
AFRICA
Nearly all of sub-Saharan Africa is considered Christian, a legacy of European colonization. To the extent that the sub-Sahara is the most demographically dynamic region of the world, it is estimated that the number of African Christians will more than double in coming decades. But here again, these estimates are obtained by simply counting as Christian all the new births in countries that are majority Christian. They are not based on surveys on the ground. The number of Christians in Africa is estimated at 650-700 million today, and is expected to rise to 1.1 billion in 2050.
The total number of Christians worldwide is estimated at 2.4 billion. Our own estimate based on all the above is a total of less than 2 billion, broken down as Americas 650 million, Europe 350 million, Africa 700 million, Asia 300 million, Oceania 30 million. Even our estimate is too high if we exclude those who are assumed to be Christian for country legacy reasons and those who are areligious but identify as Christians for cultural reasons.
GIFT CARD INDUSTRY
Odds are that you received or gave some gift cards during this holiday season. The gift card business has become a sizable industry in its own right, with a 2023 face value of $1.1 trillion globally, of which $344 billion in the US. Both of these figures are growing at an annual rate in excess of 15%. Issuers of gift cards love them for several reasons, including the fact that many cards are never completely redeemed.
For a retailer, the profit margins on products sold through gift cards are larger than for products sold through cash or credit cards. The reason is that 5 to 10% (estimates vary widely) of the nominal value of gift cards is never redeemed. If for example a $100 gift card is used to purchase a $90 item and is then discarded or forgotten, the profit margin on the item sold is the usual operating margin of 3 to 5% and the additional about 10% of the gift card value that is never used. The purchaser of the gift card essentially gifted the recipient a $90 item but paid $100 for it, boosting the operating profit from $5 to $15. This math has to be somewhat reduced by the cost of producing, promoting and processing gift cards, but the overall point stands.
Retailers claim the unredeemed portions of gift cards as ‘breakage revenues’, converting liability into income. Yet this margin windfall is not captured by issuers everywhere. In some countries and US states, the unclaimed portions of gift cards have to be turned over to the government as “abandoned property.” In New York State (of course) for example, “after five years, unused gift card balances are turned over to the Comptroller’s Office of Unclaimed Funds.” If the card recipient finds an old gift card in the back of a drawer, he can obtain the remaining value on the card from the Comptroller’s Office.
There are many reasons to give a gift card instead of a boring check or wrinkled cash that has gone through many hands. Cards are festive and enticing for their colorful and creative designs. If the giver and recipient wanted to optimize the use of their money, they would both be foregoing the small pleasure of handing or receiving a beautiful card.
There may also be a good reason to give a friend or relative a gift card instead of an actual in-kind product or service, and that is to reduce what economist Joel Waldfogel called the “deadweight loss of Christmas.” Waldfogel wrote in 1992 that “between a tenth and a third of the value of holiday gifts is destroyed by gift-giving.” Here is how the blog Economics Declassified explains it (my emphasis):
To put it simply, while the gift-receiver knows exactly what he would like to receive, the gift-giver does not know. We all have that one dinner set that we received as a gift and we don’t know what to do with it. We can’t wait to pass on to another as a gift. In other words, a part of a gift’s value is destroyed when the recipient does not appreciate it. This is what Waldfogel called a ‘deadweight loss’. It is defined as the loss of economic efficiency for consumers/producers such that the optimal or allocative efficiency is not achieved, in terms of utility.
Gift cards provide a possible market solution to the deadweight loss associated with in-kind gifts. They help eliminate the ickiness of gifting cash. In recent years, gift cards have become highly popular. Gift cards illustrate a compromise between gifts in-kind and cash. Nonetheless, in addition to restricting recipient choice to specific stores, gifting cards frequently impose non-usage fees and expiration dates which erode their value.
A research paper by Jennifer Pate Offenberg came to the conclusion that the average welfare loss on gift cards was 15%, considering the difference between the face value of the gift card on eBay and its resale value. She found that recipients were willing to sell their gift cards online for 15 percent less than the original cost of the cards, on average, excluding shipping fees. (Offenberg, 2007)
Another research paper concludes that a deadweight loss for gift cards is more than 14% which is nearly twice the average loss on gifts in-kind (Kristine E. Principea, 2009).
So, there is no consensus on whether gift cards reduce or increase the “deadweight loss of Christmas.” They reduce it by enabling the gift card recipient to get exactly what he wants, but they increase it when a portion of the gift card is unredeemed.
The rise of digital gift cards will move the needle in the right direction. Gen Z’s have a clear preference for digital gift cards that are less likely to be lost or forgotten. A “card” on your phone will be more easily remembered and accessible than a plastic card that you may misplace or forget. As the percent of digital gift cards rises, gift cards will become less profitable for issuers and we may as a result see less of an effort by issuers to sell them everywhere.
LATEST US CENSUS
The US Census released a new batch of figures this month. It said that the US had population growth of nearly 1% in 2024, the highest rate in decades, because of international migration. The size of the US population is now over 340 million. The total 2024 increase was 3.3 million, of which 2.8 million were new migrants. The numbers of new migrants in 2023 and 2022 were 2.3 million and 1.7 million. The natural addition to the population from native births in 2024 was 519,000, which is the total number of births minus deaths. I have written previously that the US population would not grow at all without immigration in the late 2030s and 2040s.
Here are the states with the fastest growth in 2024, per the latest US Census release (table). In Texas, new migrants added 563,000 residents to the state or 1.8% of its population. Our own unscientific rule of thumb is that it is relatively easy to integrate new immigrants so long as their numbers are 0.5% or less of the existing population, but that it is difficult to do so when their numbers exceed 1%, in particular if the high numbers recur for several years in a row.
If President Trump delivers on his pledge to deport recent immigrants, the numbers above could very well reverse in 2025 and 2026, with large consequences for the economy. There would be less pressure on local government, school and health care budgets but there could be a labor shortage and a return of wage inflation.