The conflicting role of population growth in the development process

The world population has reached around 650 billion by 2020. There is now a wide gulf between the regions of the world with slowly growing population and those where population is growing rapidly.

Europe, North America, Japan are regions where the population growth rate is slow. Regions of the World where growth rates are high are found in Africa, Central and South America, the Indian Sub –Continent an d South East Asia. Data reveals that remarkable escalation of population has occurred in the rate of world population grew in the last century. This phenomenon has been described as population explosion.

The basic problem in the developing economies is the fact that they are still agricultural societies. In Europe the growth of population accompanied the Industrial Revolution and the growth of production more than kept pace with population growth. In the developing countries rapid population growth has tended to precede economic development. Population growth plays a conflicting role in the development process. It can act as a stimulus and an impediment to growth and development. The question, to which there is no easy answer, is at what point do the economic disadvantages begin to outweigh the advantages? Where does the balance lie?

The common view as far as the developing economies are concerned is that rapid population growth presents an obstacle to the growth of living standards. The argument is that rapid population growth acts as a barrier to capital accumulation and capital deepening retards the rate of productivity growth and in general adds more to the numbers to be supported than to the level of output.

The economic danger of rapid population growth lies in the consequent inability of the country both to increase its stock of capital and to improve its state of art rapidly enough for its per capita income not to be less than it otherwise would be. If the rate of technical innovation cannot be forced and is not advanced by faster population growth, a rapid proportionate growth in population can cause an actual reduction in income per capita. Rapid population growth inhabits an increase in capital per worker, especially if associated with high crude birth rates that make for a young age distribution.

In a study of population growth and development based on Indian trend economist Hoover and Coale remarked that while greater numbers in the labour force add to the total product, faster growth of the labour force implies a lower output per worker than slower growth. The reason for this result is that with faster growing labour force more capital should be diverted to provide tools and equipment for the extra workers so that they would be as productive as the existing labour force and thus less would be available, certain paribus, for increasing output per worker.

The arguments made do not sound unreasonable but they are rarely backed by direct empirical evidence nor do they recognize the finding in some economies that increase in capital per worker account for a small proportion of increases in output per worker. The major part of the increases in output per worker appears to be due to increases in output per unit of total inputs.

The effects of population growth on savings would be good deal more complex than the above arguments suggest. The argument is that population growth reduces the community’s savings ratio by leading to a high dependency ratio of children who consume but do not produce. On the other hand many young children (in spite of a ban on child labour) work in many developing countries negate the argument of fall in savings ratio with increase in population. Rather a raise in the working age structure would impact the savings ratio as total working population increase due to participation of working children.

In the process, however, it must be remembered that many old and retired persons in the community consume without producing and the proportion of retired persons in the community to the total population will rise as population growth slows.

As such the aggregate savings ratio as the population growth rates changes will depend on how the composition of the total dependency ratio alters and on the propensity to save of the two groups of dependents.

If the propensity to dissave of retired persons is greater than that of the inactive young, the aggregate savings ratio might fall with a fall with a reduction in the birth rate as the retired persons’ ratio rises. While it is certainly true that both groups of dependents dissave, it would be wrong to conclude that countries with high rates of population growth will necessarily have lower savings ratios, other things equal, than countries with lower rates of population growth. In fact, in the long term the savings ratio will tend to rise with the rate of population owing to the increase in the rate of active to non-active households.

The question of an output response from population pressure comes back to the point of a positive relation between population growth and total productivity growth. The argument that a slow-down of population growth would raise the savings ratio assumes that the factors that determines output are independent of the number of dependent for whom provision has to be made. But it well be that the sheer increase in number creates work and production incentives which affect output and productivity favourably.

In fact there is a good deal empirical evidence suggesting a positive relation between population growth and the growth of output per worker, especially in the manufacturing sector, assuming some growth in the labour force as population expands. In this regard three views stand. They are (i) It has been argued that an economy with a faster rate of growth of employment and output may be able to learn quickly and hence raise its rate of technical progress. (ii) If there are internal and external economies of scale in production, increased employment and output will lead to a faster rate of growth of labour productivity. (iii) There are likely to be economies of scale in the use of capital. Capital requirements, in most of the cases do not increase in the same rate as that of population . There may even be capital deepening if the life –cycle hypothesis of saving holds, which predicts a positive relation between the savings ratio and population growth.

It would be misleading to give the impression, however, that all population economies are pessimistic about the influence of population growth on living standards. It has been argued that a classification of the developing countries shows that those with the highest rates of population growth have the highest rate of increase of production per head .Economist like R.A. Easterlin in a write up in the Effects of Population Growth on the Economic Development of Developing Countries suggested that population pressure could favourably affect individual motivation and might led to changes in production techniques which overcome the consequence of population pressure. In the connection it has been argued that a major stimulus to the ‘green revolution’ has come from the pressure of population on food supply.

Richards Easterlin, the noted economist, claimed that the young age structure of a country made it more amenable to change, more receptive to new ideas, more willing to shift resources from low productivity to high productivity sectors, and all of which might raise income per head.

The potentially conflicting role of population growth in the development process is highlighted by the difference in the attitude towards population increase between the developed and developing countries and between developing countries themselves.

In most advanced countries population growth is welcomed by the government.

In some countries it has been actively encouraged by generous family allowance provision and liberal immigration policies. In the developing countries a view is held that population growth and abundant supplies of labour are serious obstacles to development. But this view is by no means unanimously held.

There is nothing either in experience or in economic theory to indicate that a rapidly growing population makes it easier or more difficult to keep the rate of growth of the national product ahead of that of population.

Such empirical evidence has been based on international comparison, seems that there is no pronounced relationship between the rate of productivity growth and the annual increase in the supply of labour. Whether the rate of growth of national product keeps ahead of that of population depends largely on the balance of other factors. All that has been discussed so far is that population growth presents a paradox. On the one hand increase in population may reduce living standards owing to thye adverse effect of population growth on savings and capital per head. On the other hand increase in population and the labour force can raise the living standards through learning specialization and economies of scale ensuring quality output, wider markets and higher volume of output.

The debate as to whether population growth is a stimulus or an impediment to the growth of living standards is largely a question relation between population and output in positive or negative form. If the relationship is positive then the effects of population growth on the growth of output and output per head is favourable and vise-versa.

The writer is former Director General, EPB. He can be contacted at hassan.youngconsultants@gmail.com