Population and Economics

By William Ryerson, MPhil | 27 March 2024
Population Media Center

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The assertion that rapid rates of population growth somehow stimulate economic growth has been made by economists for a long time but achieved prominence during the Reagan Administration.  As advocated by Julian Simon, Malcolm Forbes Jr. and others, the contention is that rapid rates of population growth stimulate consumerism and that the added demand fuels economic growth.

The opposite may well be true.  As explained by Ansley Coale (1963) of Princeton University, there is a direct relationship between rapid rates of population growth and declining economic conditions in underdeveloped countries.  The economies of many developing countries, such as those in Africa, are being damaged by the fact that a high percentage of personal and national income is spent on the immediate survival needs of food, housing and clothing–because there are too many children dependent on each working adult–leaving little income at the personal or national level available to form investment capital.  Lack of investment capital depresses growth of productivity of industry and leads to high unemployment (which is exacerbated by rapid growth in the numbers seeking employment).  Lack of capital also contributes to a country’s inability to invest in education, government, infrastructure, environmental needs and other areas that can contribute to the long-term productivity of the economy and living standards of the people.

In the 20th century, no nation has made much progress in the transition from “developing” to “developed” until it first brought its population growth under control.  For example, in Japan, Korea, Taiwan, Hong Kong, Singapore, The Bahamas and Barbados, rapid economic development, as measured in gross national product per capita, occurred only after the country had achieved a rate of natural increase of its population below 1.5 percent per year and an average number of children per woman of 2.3 or less.  Herman Daly, former Senior Economist at the World Bank, believes that similar criteria probably hold for other countries. Simply put, if the assertions by Simon and Forbes were true, the slow growing countries of Europe and North America would have weak economies, while the economies of sub-Saharan Africa would be robust.

Worldwide, according to a comprehensive report by Bruce Sundquist (2005), developing nations now require about $1 trillion per year in new infrastructure development just to accommodate their population growth – a figure that is very far from being met and is effectively impossible for these countries to generate.  This explains why developed-world humanitarian aid and loans to developing nations of $56 billion per year have been ineffective in improving their infrastructure and why the infrastructure of the developing world is sagging under the demands of the equivalent of a new Los Angeles County in additional population numbers (9.5 million) every six weeks.

The correlation between external debt of developing countries and population growth rate is strong.  Of the 41 countries designated as “heavily indebted poor countries” by the World Bank, 39 fall into the category of high-fertility nations, where women, on average, bear four or more children.  Similarly, the 48 countries identified by the U.N. as “least developed” are expected to triple their population by 2050.  As a whole, the developing world is struggling to make payments of $270 billion per year on its $2.5 trillion external debt – a debt that is increasing by another $1 trillion every decade.

The capital shortages caused by population growth make it increasingly difficult for developing countries to keep pace with the growing need for schools.  One of the main reasons for the intelligence community’s pessimistic forecast for the growth of terrorism in the Middle East is the region’s weak educational system – a capital cost associated with population growth.  This produces generations lacking in the technical and problem-solving skills required for economic growth.

On top of this, Sundquist notes, massive rural to urban migration in developing countries is making the situation in large urban centers increasingly desperate, with growing slums that lack basic sanitation and water.  In fact, it is likely that this migration will greatly increase in future years.  As agricultural systems become more capital-intensive, huge numbers of people in rural areas will become unemployed.  Given higher rates of population growth in rural areas, projections of rural to urban migration over the next 30 years are startling.  During that time, as many as four billion people may migrate from rural areas of developing countries either to join the one billion living in urban slums or emigrating to developed nations.  This is a formula for political, social and economic instability worldwide.

Developed countries are not immune from these economic realities.  For example, at the current rate of growth, in just 15 years, the U.S. population will grow by the equivalent of a new Los Angeles, plus New York City, Chicago, Philadelphia, Baltimore, San Francisco, Indianapolis, San Jose, Memphis, Washington, Jacksonville, Milwaukee, Boston, Columbus, New Orleans, Cleveland, Denver, Seattle, El Paso, Atlanta, Miami, Pittsburgh, Hartford, Newark, St. Louis, Kansas City, MO, Phoenix, Honolulu, Houston, Dallas, San Diego, and San Antonio.  All of these to be added in just 15 years!  The cost of building this added infrastructure will be immense.

The real measure of economic welfare is not gross national product or national income, but the median income on a per capita basis.  Stimulating gross national product by having more and more people buying fewer and fewer necessities does not enhance economic welfare.  It may be true that a few people profit from population growth, but the mass of the people do not.

Old age security may be a motivator for childbearing and, in some countries like India, is clearly related to the preference for male children.

Nevertheless, how much do we really know about the extent to which economic security in old age is a motivating factor in childbearing?

Progress has been achieved in reducing fertility rates in many countries that have not instituted old-age security programs.  That is not to say that such programs should not be put in place.  Where they are established, however, it would be useful to carry out studies that attempt to measure the effect of such programs on family size preferences.  It would also be valuable to conduct studies of the motivations that have reduced family size in countries where there are no old age security programs.

For many couples, the strategy of having a large family to provide old age security can be questioned effectively.  If large family size leads to a division of land into very small plots, poverty and resulting rural-urban migration may make adult children unable to care for their parents and their own children.  Many couples can find better security by having fewer children and educating those children so they can become gainfully employed.  One child with education and a job can provide more old age security than 10 children who are, themselves, starving.

At the 1974 World Population Conference, the phrase “Development is the best contraceptive” was on the lips of many delegates from developing countries. The example of the naturally-occurring reduction in fertility rates in Europe and North America over the last two centuries was proposed as evidence that improved economic welfare would lead automatically to such a demographic transition in the developing countries.

If one looks at the Demographic and Health Survey reports on 18 countries, it is clear that desired and actual levels of fertility are higher in countries with low levels of economic development and lower in countries with high levels of development.  To what extent each is cause and effect, however, is open to question.  As mentioned earlier in this paper, there is strong reason to believe that lower fertility rates lead to improved economic development.

Abernethy (1993 correspondence) points out a number of cases that cast doubt on the theory of an orderly demographic transition:

Land redistribution in Turkey promoted a doubling in family size (to six children) among formerly landless peasants.  In the United States and much of Western Europe, a baby boom coincided with the broad-based prosperity of the 1950s.  More water wells for the pastoralists of the African Sahel promoted larger herd size, earlier marriage and much higher fertility.  The introduction of the potato into Ireland in about 1745 increased agricultural productivity and caused a baby boom.

Some further examples from Abernethy include the 17 percent drop in Sudan’s fertility rate during the late 1980s at a time of extreme deterioration of the economy and a similar correlation of falling fertility rates and declining economic conditions in Brazil in the 1980s.

It is also true that the United States had its lowest fertility rate in history prior to 1970 during the Great Depression.

Robley, Rutstein, and Morris (1993) cite Bangladesh as a perfect example of how the theory that economic development must precede fertility declines has been disproved:

It is one of the world’s poorest and most traditional agrarian countries. Infant mortality is high, women have low social status and most families depend on children for economic security.  Nevertheless, fertility rates there declined 21 percent between 1970 and 1991…During this period, the use of contraception among married women of reproductive age rose from 3 to 40 percent.

The above indicate that economic prosperity may lead to higher fertility levels and that economically depressed conditions may motivate people to limit family size.  The theory that prosperity causes fertility declines cannot explain many situations in both developed and developing countries.

Despite the above examples, improved economic conditions in many societies may actually lead to reductions in fertility levels.  As mentioned above, there is a strong inverse correlation between levels of economic development and levels of fertility in many countries of the world.  While there is a link between industrialization and lower fertility levels, the nature of the relationship is not well understood.  But few would take the position that poverty is a solution to high rates of population growth.

In general, the evidence would lead us to conclude that not only will people’s lives be improved through economic development, but that, in most cases, such development is likely to be associated with smaller family size.

The point of this section is that economic development by itself, without other measures that affect family size desires or the ability to achieve those desires, is not necessarily a cure-all for the population problem.  Nor is there any clear understanding of the length of time that may elapse in various societies between achieving higher standards of living and reduction in fertility levels.

Countries with similar levels of economic development may have markedly different fertility levels, indicating that factors other than economic welfare, such as access to family planning services and cultural norms regarding childbearing, may be far more important in determining completed family size.

Delaying the establishment of family planning programs until economic development occurs may well have the effect of ensuring that economic development will never occur.

If development does work as a contraceptive, it appears to have a high failure rate.  Where it does work to lower fertility, the effect may be indirect: the growing economy may include opportunities for women’s employment outside the home, thus giving childbearing a greater opportunity cost.  On the other hand, while improvement in the standard of living in developing countries is desirable, economic development does not appear to be a necessary precursor to lowered fertility.

Reprinted with permission.

Bill Ryerson at EMA Impact Summit 2017

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