Population Growth and Economic Development: Key Relationships

Introduction

This report discusses some of the key relationships between population growth and economic development. Economic growth is an objective of every nation in today's highly globalized economy. Nations across Africa, Asia, and Europe aspire to replicate the economic production levels of the United States and China. As each nation attempts to grow its own Gross Domestic Product (GDP), one might assume that every citizen of those growing nations would benefit in direct proportion to that growth.

The Gross Domestic Product has most often been used as one of the world's primary economic growth and well-being indicators because it represents the total value of all products and services bought and sold. However, as the world's population has continued to expand rapidly, GDP as a growth indicator does not always appear to be an accurate reflection of a healthy economy. As Harte and Socolow (1971) observed, "Any discussion of the relative merits of a stationary, no-growth economy, and its opposite, the economy in which wealth and population are growing, must recognize some important quantitative and qualitative differences between rich and poor countries and social classes."

For any economy to grow sufficiently, some portion of the nation's population is inevitably left behind. Existing economic processes cannot make everyone wealthy. In fact, as the world's population continues to grow, there will be a proportionately larger majority of poor people that wealthier segments of society must contend with.

Economic Indicators and Their Limitations

The world has gradually and consistently become more of a "have / have-not" scenario as new welfare states emerge alongside new emerging economies, technological expansion, and novel approaches to economic distribution. As Antle (1999) noted, "The period of modern economic growth gave rise to a phenomenon never before experienced in human history, namely, a sustained, positive rate of growth in real per capita income. Moreover, although income distribution remains unequal to varying degrees in both low- and high-income countries, this income growth was enjoyed by all segments of the societies that experienced it." The problem for these countries and economic blocs — such as the European Union — is that economic indicators do not always take into consideration the true connection between a population's well-being and the economic wealth reflected in a nation's accounts.

Consider the example of North Korea. The nation consistently produces economically valuable weapons and munitions systems, yet it frequently cannot feed its own children. Ironically, famine in North Korea can actually cause the nation's GDP to rise, because illness increases economic activity: the sick are treated in hospitals that require their own goods and services. This is one clear example of a nation's GDP rising even as the quality of life declines and population growth is adversely affected.

To truly understand any national product indicator, an additional dimension is needed to gauge genuine wealth. As Harte and Socolow (1971) explained, "Consider the familiar ratio of gross national product (GNP) to total population (P). This ratio — per capita annual product (GNP/P) — is the measure usually employed to distinguish rich from poor countries. In spite of its many shortcomings, it does have the virtue of reflecting in one ratio the two fundamental life processes of production and reproduction." As demonstrated by the North Korea example, it is far more important to ask both rich and poor nations not only what their quantitative rate of growth is, but also what their qualitative growth means for the well-being of their overall populations.

Population and economics intersect in many ways. The challenge of providing adequate housing for the world's population is one problem that carries significant economic implications. In the United States, for example, population growth has affected many aspects of the housing industry. Macchiarella (2004) reported that "in the past 14 years, Ventura County added 133,000 people, or a 17% increase, to 802,000. The population of the county is forecasted by the state to be 930,000 by 2030, and building has been on the decline. If the ratio of people to housing had stayed constant, the county would have added 45,565 housing units to match the population. But only 36,105 units were built — a shortfall of 9,460." These types of population-driven housing pressures affect nations around the world and have led to many unintended economic consequences.

Population Growth and Housing

Communities must also deal with traffic congestion, strains on infrastructure, and a range of other economic factors when planning for population growth. Supply and demand dynamics have obviously shifted as more people compete for less space. As Macchiarella (2004) noted, "The average home price in the county has increased $155,621 since 2000. The median home price in Ventura County was $626,730 in August, up 30.5% from a year earlier."

The economic effects of housing shortfalls will continue to intensify as the global population grows. These effects directly impair both emerging and developed nations' ability to offer attractive business environments for employers and workers alike, and they create significant obstacles to stable employment conditions.

Housing is only one dimension of the economic and population growth nexus. The world must also feed and clothe its expanding population. As Antle (1999) observed, "Agriculture in the twentieth century was characterized first and foremost by technological innovation that began in the industrialized world and spread to the developing countries as the Green Revolution. This revolution in biological, chemical, and mechanical technology made it possible for agricultural production to grow faster than the demand for food despite a rapidly growing world population."

Conclusion

Economic growth will continue to be an objective for every nation in our highly globalized and technologically advanced world economy. The world has been doing all in its power to try to duplicate the economic accomplishments of the United States and China. Each nation will continue to attempt to grow its own Gross Domestic Product, but this is no guarantee that its citizens will benefit proportionally. GDP is used as an indicator of economic growth and well-being because it represents the total value of all goods and services produced, but our current economic system inevitably generates a class divide between rich and poor. Each nation may grow in aggregate, yet that economic success inadvertently leaves behind a large number of citizens.