The Relationship Between Population Growth and Economic Development

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The Relationship Between Population Growth and Economic Development

Economic development is concerned with the improvement of the well-being and socio-economic state of people, and it is the main concern of many countries. Planning, aid, investments and policies are some of the avenues that are used in an attempt to achieve this (World Bank, 2020a). While Gross domestic product (GDP) and Gross national income (GNI) may not fully represent the state of a nation’s economy, they have been widely accepted as an indicator of the general state of the nation at a given point in time.

Figure SEQ Figure * ARABIC 1

Figure SEQ Figure * ARABIC 2

Figure 1 above illustrates how the US GDP has changed over time from 1960 and allows us to compare this to the changes in this population over the same period. The data used was obtained from the World Bank database (World Bank, 2020b). We note that both population and GDP have been on an upward trend. However, while population growth seems to be linear, GDP growth curve is exponentially telling us that GDP has grown at a faster rate than that of the population for the past 60 years. It is maybe inferred from the above trends that there exists some positive relationship between population growth and economic development.

There has been controversy, however, when evaluating the relationship between these two variables. A huge rate of population growth may actually cause stress to the social and economic state of a low-income country. In contrast, a slow rate of growth in the population may become a problem for countries classified as high income. One argument explains that population growth in high-income countries is slowing down, and this will slow down economic development in the future (Peterson, 2017). This argument supports the existence of a positive relationship between the variables.

An argument that seems to contradict this assumes that with limited resources, an increase in population increases the strain on the resources, eventually leading to a slowdown in economic growth. For example, high population growth may have negative implications on the welfare of citizens in low-income countries. However, it is likely to last only in the short and medium-term as the increased population would one day become of productive age and lead to an increased rate of development (2020). In practice, the relationship between the two variables is circular, i.e. population growth affects economic development which in turn affects population growth. Malthus (1993), for instance, showed that trying to increase the welfare of low-income individuals by raising their income does not bear fruit. Instead, he explains that doing this often increases this population which brings back their income to the level of subsistence.

According to Malthus (1993), there are two components of economic growth that need to be viewed distinctly. One concerns itself with the demography while the other is purely economic, which is what Thomas suggests, affects the well-being of the people. Advancements in technology are one of the factors that have been used to explain the discrepancy between population growth and economic development. Technology has facilitated the exponential growth in per capita productivity which explains the exponential growth in per capita GDP (Jardat, 2015). When we compare this to what was proposed by Malthus, they seem to contradict. This is, however, likely to the fact that Malthus did not take into account the effects of technology on productivity.

While economists may have different views on how population growth and economic development affect it other, it is evident they agree that a relationship exists. The current economic state of a country will have a great impact on how they relate.

References

Jardat, R. (2015). Capital in the Twenty-First Century by Thomas Piketty. European Management Review, 12(1), 3-6. https://doi.org/10.1111/emre.12040Malthus, T (1993). An Essay on the Principle of Population. Retrieved from http://www.esp.org/books/malthus/population/malthus.pdfPeterson, E. W. F. (2017). The role of population in economic growth. SAGE Open, 7(4), 1-15. DOI: 10.1177/2158244017736094journals.sagepub.com/home/sgoWorld Bank. (2020a). Population, total. Retrieved from https://data.worldbank.org/indicator/SP.POP.TOTL?locations=USWorld Bank. (2020b). GDP (current US$) – United States | Data. Data.worldbank.org. (2020). Retrieved from https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=US