Population Growth and Economic Development: A Close View!
Different Views on the Role of Population Growth:
Population growth plays a conflicting role in the development process of a country. It helps economic development and it retards economic development.
To the Greek philosophers, about 2,500 years ago, population growth was undesirable as it adversely affects economic development. Plato (427-347 B.C.) suggested that the member of citizens of a country should be kept fixed at 5,040 on the ground that this number is divisible by any number from 1 to 12 except 11. Aristole (384-322 B.C.) also argued in the same vein.
He desired that the country’s population must not exceed beyond certain level. Sir William Petty presented an optimistic outlook on population growth. Adam Smith also regarded the growth of population as the basis of wealth. But the classical economists, Especially T.R. Malithus, sounded an alarm bell of rising population growth in a country.
However, Mlthus ‘ argument came under severe attack at the hands of Karl Marx and F. Engles.
Relationship between Population Growth and Economic Development:
The relationship between population growth and economic development may be summarised in the words of Robert McNamara—the past president of the World Bank. He described it as ‘the most delicate and difficult issue of our era… It is overlaid with emotion. It is controversial. It is subtle. Above all, it is immeasurably complex.
Mao Zedong once remarked that “A country’s greatest wealth is its people.”
On the some vein, the then Prime Minister Mr. Pitt of England declared in the 18th century:
“A man could enrich his country by producing a number of children, even if the whole family were paupers.” All these suggest that not only there is no conflict between population growth and economic development but also an increase in population is necessary for increase in wealth and development. But, antithesis to this is the Malthusian version which regards population growth as the number one barrier to economic development. Neo-Malthusians attribute all of the world’s modem problems of underdevelopment to massive population growth.
Thus, there is a conflicting role between population growth and economic development. It can act both as a stimulus and as an impediment to growth and development. Such conflicting roles suggest that the relationship between population and economic development is intricate, complex and interesting.
Benefits of Population Growth:
Population growth helps the process of development in the following ways:
First, an increasing population means an increase in the number of working population who can function as active participants in the process of economic growth and development.
It is to be noted that labour, assisted by necessary tools and implements, was always and still is the greatest productive asset of nations. A growing population leads to an increase in total output. The sheer arithmetical increase in population creates work as well as incentives for production that impacts upon output and productivity quite favourably. Indeed, this argument is empirically important in addition to theoretical reasoning.
Secondly, a growing population means a growing market for most goods and services and we know that division of labour is limited by the extent of the market. A potentially expanding market may stimulate entrepreneurs to invest more and more in capital goods and machinery. Business activity will be spurred as a consequence. And more income and employment will be created in the process. Moreover, it will provide an outlet for the products of efficient, large scale, mass- production industries. The net effect may be favourable to the country.
Of course the size of the domestic market of country does not only depend on the number, but also on the per capita income level. But given the same low level of income per head, a country India offers a more favourable environment setting up heavy capital goods industries which depends so much on the economies of scale their success. In contrast, a thickly populated country with a small population base such as Sri Lanka seems to be especially handicapped by the all size of its domestic market.
Population growth has been a favourable factor in stimulating growth in many a country in; last two centuries, when vast areas remained largely unsettled. Even in the USA, in the 1930s, was apprehended that a slowing down of the rate population growth would lead to long run secular) stagnation. The vast secular boom in the post-industrial revolution England had been largely induced by the unparalleled rise in population’.
Thirdly, an arithmetic increase in population permits in reaping economies of scale in production, greater division of labour, extension of the market, etc.
The World Bank in its 1984 World Development Report argues:
“…there is little doubt that the key to economic growth is people, and through people the advance of human knowledge. Per capita measures of income should not be used to imply that the denominator, people, contributes nothing to the numerator, total income. Nor is population growth in itself the main cause of natural resource problems—air pollution, soil degradation, even food availability.”
Costs of Population Growth:
But Malthusians and neo-Malthusians think otherwise. First, they argue that population growth negatively affects economic development. Their argument is based on the law of diminishing returns in agriculture. Population growth acts as a barrier to economic development since the growth of population grows never in commensurate with the growth of food supply.
Actually speaking, as the rate of growth of population exceeds the rate of production, economic development is hampered. A growing population, within a limited geographical area, usually puts heavy pressure on the existing factor endowments, especially natural resources of the country. Moreover, if the society has a limited stock of capital, labour may have to be substituted for capital, in which case the production function will exhibit the law of diminishing returns. Diminishing returns may become a serious problem if population growth is rapid.
However, empirical evidence suggests that technological change—or the so-called green revolution in agriculture in different LDCs—has greatly offset the effects of diminishing returns in agriculture and the spectre of food problem and its aftermath (huger, famine, etc.,) in most of these countries has virtually vanished. So, one must not view that population growth badly affects economic development.
Secondly, based on the Indian experience, Ansle Coale and E. M. Hoover drew attention to the likely adverse effects of population growth on savings and capital formation through the following effects: the age-dependency effect, the capital- swallowing effect, and the investment diversion effect.
It is said that a rapid population growth causes an increase in dependency ratio—a high ratio of non-working population to working wage people or active population. When the number of dependents or the ratio of consumers (non- producers) to producers increase, there occurs a diversion of income from savings to consumption and a fall in per capita income. But anti-Mathusians talk in a different vein.
They argue that many young children contribute directly to parents’ income by working in farms and off-farm sectors. Further, additional mouths in the low income families tend to encourage people to work more. In this way, children themselves contribute to household and saving. Anyway, the impact .on household saving can be negative, negligible or positive—the issue needs to be settled by empirical investigation.
The capital-shallowing effect states that a rapid population growth lowers the ratio of capital to labour or workforce thus works with less capital and consequently the poor rate of savings. This then reduces productivity of labour. As children remain engaged in productive works, the family may experience an increase in saving. Under the circumstance, the capital-shallowing effect may remain inoperative. High economic growth is accompanied with overall high savings ratio in many developing countries.
The investment-diversion effect states that, because of rapid population growth a country’s scarce resources get diverted away to the so-called unproductive sectors of health, education and social services from the more productive growth- oriented sectors. This logic assumes that the expenditures on human capital are unproductive. Educated and healthy people are viewed as one of the essential ingredients of economic development. Indeed, there are high returns to investment in human capital.
Anyway, empirical research does not confirm the Coale-Hoover thesis.
Thirdly, Mathusians are convinced that population growth badly affects food supplies. To them, the chronic food problem experienced by many poor developing economies is often attributed to rapid population. It is because of ‘natural limits’ in agriculture population growth would overtake food supply output, thereby leading to famine, hunger, malnutrition, etc.
But the evidence tells a different story. Because of the introduction of green revolution technology in agriculture, yields have increased to such an extent that many countries, including India, have now been exporting food-grains. Unfortunately, the present global world is highly unequal. We see an abnormally high level of malnourished children; starvation and famines occasionally visit in many countries.
However, this must not be attributed to a mismatch between a high population growth and food supply. This can be referred to as the unequal distribution of purchasing power among different groups of population. Hunger and famine, according to A. Sen, is due to ‘entitlement failure’ and not the food availabilities as such.
Fourthly, the question of unemployment and underemployment has assumed serious proportion, particularly in LDCs, because of rapid population growth. But whether population growth is responsible for unemployment problem cannot be said definitively since no such statistical strict correlation is observed. In fact, it is the technology that determines the absorption of unemployed labour force. The experiences of Korea and Taiwan tell that economic development in these countries proceeded successfully despite high population growth.
In recent years, as agriculture is becoming more and more unprofitable, the issue of engaging surplus labour has become a concern to the Government of India. Agriculture’s contribution towards GDP growth is not only falling but the absorptive capacity of agriculture is also falling. This development, consequent upon Mathusian pressure, has been forcing many farm people to migrate to towns and urban areas in search of employment.
However, this argument is a faulty one. Economic development is associated with declining importance of agriculture. Thus, the migration of the productive farm workers in other sectors needs to be attributed to the policy failure and not to the population pressure.
Finally, neo-Malthusians argue that excessive population growth and massive poverty in LDCs have greatly damaged the ecological balance by deforestation and land degradation. Consequently, these countries suffer badly from a variety of environmental hazards. Such canard is made by developed countries who are to be condemned outright for destroying ecological balance.
But today the debate has shifted from population pressure to climate change and environment—perceived as a great threat to humanity. The current ecological crisis is caused by human economic activity or anthropogenic. The way an economy is organised is rather ‘inherently suicidal’.
The whole world is burning fossil fuels to drive the growth economy. Carbon dioxide emission is at its highest level. All these may be linked to a developed rich economy addicted to growth. The US economist Kenneth Boulding made the following statement: “Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist.”
Considering the above-mentioned plus and minus points, economists conclude that hindrances to economic development in LDCs are not to be attributed to population growth. The greatest and real obstacle to development is underdevelopment. Potentialities for development are adequate. By designing their development programmes, LDCs can raise their levels of income and living standards.
Further, they argue that there is no population bomb in these countries. The myth of over-population causing underdevelopment should be given up in any analysis of economic development. It is not to be accepted that a slowing down of population increase might contribute substantially to our development prospects. So what is sauce for a goose may not be the sauce for a gander!
The moot point is that population growth may be either favourable or unfavourable to economic development, depending on where, when, and how it takes place.
Today, an international consensus has been reached. A country may strike a higher growth and development if population increases slowly. No one should exaggerate either the beneficial or the unfavourable effects of population growth on economic development. However, it is to be kept in mind three important issues.
First, all problems of levels of living, inequality and poverty are not to be necessarily linked with high population growth. Secondly, population growth must involve the quality of life, and not the quantity perse. Thirdly, but truly, rapid population growth makes prospect for development rather remote. All these then demand an appropriate economic and social policy so as to improve the well-being of the future world populations in a sustainable way.