Is population growth good or bad?
When exploring population we fundamentally need to know whether it is good or bad for economic growth and development. There are various reasons and models to believe that population growth does indeed promote growth, but many others which refute this and argue that high population inhibits growth. The Solow model is one such model which would imply that high population growth reduces economic growth, because if there are more people then we need to train them and provide them with capital which depletes the fixed level of investment spending. If we are spending more investment money on equipping workers with basic tools, then we have less money to invest in better tools which may enhance economic growth and permit the economy to emerge from a poverty trap; for example, by allowing it to move into the manufacturing sector, with higher incomes than the more basic agricultural industries. Similarly, evidence from Britain’s Industrial Revolution suggests that high population growth is bad for economic development, because it lowers wages and thus disincentives inventors from creating labour-augmenting technology which propels the economy. However, it could be argued that when developed countries already exist which are able to produce such technology, it is irrelevant to a developing country which can just copy this technology, and has no need to develop its own. Traditionally, Malthus would have argued that population growth is bad as it results in greater pressure on food (and other) costs, which then leads to a fall in the real wage. In countries with preventive checks (such as North-West Europe – Hajnal) this lower real wage would reduce marriages – due to the social norm of not marrying until one has enough income to establish a household and then have children – and thus fertility. In countries with positive checks the higher food costs and overpopulation would result in higher mortality as a result of famine and disease. In either case, high population growth is not considered sustainable and mechanisms will eventually reduce it. Fortunately, developments in agriculture have meant that population growth is no longer necessarily constrained by food prices, and so these mechanisms have largely disappeared. However large population growth may still lead to diseases and it certainly has a negative effect on the environment. The Malthusian theory also fails to explain why higher incomes (beyond a certain level) have led to reductions in fertility and does not provide much insight into fertility decisions themselves.
Conversely, economists such as Simon, Kremer and Boserup would argue that high population growth can be good for economic growth. Simon argues that the more people we have, the more chance we have of finding a genius who can develop new technologies to propel the economy; models of endogenous growth show that new ideas and knowledge are the main source of economic growth. But these people might require educating for us to realise their potential; this is costly and may mean money is diverted from investment purposes to educating a larger population. Boserup believes that having more people means there is a lower per capita cost of infrastructure, which should increase the provision of such infrastructure which is likely to increase economic activity. Furthermore, a greater population will mean a larger market and hence greater potential for increasing returns to scale. Whilst this could be countered by the growing importance of international trade making the market almost infinite, it is still the case that there are barriers to trade, particularly for poor countries. It is easier to trade domestically due to international transport costs, trade barriers, and the need for a homogenous market to sell standardised goods to. This means that increasing returns to scale arising from a greater population is still an important consideration.
Iyer notes that there has been an improvement in development indicators since 1945 with world food production, infant survival, life expectancy at birth and literacy rates all having improved, despite rapid population growth, maybe suggesting that population growth is not a development issue or that it could even have a positive effect.
Bauer questions whether if high population is bad for development, then why do poor people have so many children. Do we really believe that they are that irrational? Is this not quite derogatory if we do. However, we may have coordination failures which can mean that individuals are still rational, yet we end up at a socially undesirable outcome. Household surveys inform us that people believe that high population is bad for living standards, yet the same people still have too many children!
High population growth can have negative consequences for the environment as it leads to degradation and a lack of resources: overcrowding means that land is taken over to house people at the expense of wildlife and animals’ habitat, deforestation occurs to provide wood for heating, an income and to make room for food production, water sources are polluted as is the air. These environmental issues can lead to a poverty trap whereby the ruining of the environment as a result of low incomes, leads to even lower incomes.
Whilst most economists would largely conclude that population growth is negative on the whole, this may not be the case for every country. Many developed countries are now facing situations where their population is declining which is causing issues on the age structure: there are many old people who are becoming dependent, but fewer working age people who can be taxed to look after the old. During the period 1995-2000, 61 countries representing 44% of the world’s population were at or below replacement fertility. The solution is either an increase in population growth in these countries, or immigration.
Trends
Worldwide population growth is at 1.5% per year, a level which is expected to continue into the future, meaning that the population is growing by about 230,000 people a day. Between 2030 and 2050, 90% of this increase is forecast to be in less developed countries. These countries already tend to have large populations – who have a low standard of living due to poverty – whereas the developed countries who see falling populations may struggle with these issues, and may require a change in immigration policy to rectify this regional imbalance.
The spread of medicine and medical technology after World War II has meant that mortality has fallen much more in the 20th Century for LDCs than it did for 19th Century LDCs, by 50% since 1960 (Schultz). As such, this means that today’s LDCs are facing a different demographic transition than their counterparts a century ago, with LDC fertility being 150% greater than the maximum achieved in 19th Century. This may mean that the experience that Western Europe went through during its transition is different from what current countries today will experience, and hence may make historical empirical advice redundant.
Empirically we see that there is an inverse relationship between population and economic development: higher average income countries have lower fertility, although the Middle East, China and India are outliers in this relationship. For the Middle East this may be due to its natural resources; for China its political structure; and India due to religion. Note that the direction of causation between population and development is unclear; it may be that high population leads to low income, but it could equally be true that low income instead leads to high population.
Demographic Transition Theory
The demographic transition theory is purely descriptive and not explanatory in how demography is determined. It breaks down the transition into 3 stages:
Stage 1: High birth rates and high death rates
Results in slow population growth of around 0.5% per year
Stage 2: Modernisation
Death rates fall from around 30 per 1,000 to 20 per 1,000; the life expectancy rises from less than 40 to greater than 60; birth rates remain at around 35 per 1,000 and a as result we see faster population growth of around 1.5% per year.
Stage 3: Further Modernisation
The birth rate falls from 35/1000 to 10/1000 whilst the death rate halves to 10/1000 and so the birth and death rate have converged such that we see zero population growth.
However as a result of different marriage behaviour, we see much higher birth rates and death rates in modern LDCs than in Europe at the same stage. Advances in technology meant that the death rate fell much faster, effectively skipping Stage 2 and jumping from Stage 1 to Stage 3, and as a result LDC populations were able to grow much more quickly. In Stage 3 there is the issue that mortality hasn’t declined as in the European experience because of widespread poverty and AIDS.