Population and economic growth
Population and economic growth
It seems obvious that more rapidly growing populations have fewer natural resources per person, less physical capital per worker, more dependents, and greater needs for new social infrastructure. Perceptibly, they must be accounted as economically worse off. These intuitions shaped the earlier studies of population and economic development such as Coale and Hoover model (1958). Later studies developed more neoclassical versions of these ideas, featuring that more rapid population growth led to per capita income.
Noble prize economist Kuznets (1956), as well as Boserup (1956, 1981) and Simon (1981) suggested many possible positive effects of population growth, including economies of scale, acceleration of technological progress, flexible market response to emerging shortages , induces institutional changes , cheaper communication and transportation, and easier collective social investments. Kuznets examined per capita income growth and population growth rates across nations and found positive correlation, which seemed inconsistent with Koale – Hoover view.
Their study was replicate by many others. In another advance, human capital was explicitly incorporated in growth model, and cross – national empirical analysis in the convergence framework indicated larger positive effects of population growth (Mankiw, Romer and W2EIL 1994). As Dawson and Tiffin (1998, p.149) put it that “ the relationship between population growth and the economic development has long been thought to be fundamental to our understanding of less developed countries . Indeed most text book on economic development includes a section of population and development.”
However there is no consensus whether population growth is beneficial or detrimental in the economic growth in the developing countries. As Thirwall (1994, p.143) commented “the relationship between population growth and economic development is a complex one and the historical evidence is ambiguous particularly concerning what is the cause what is the effect.” It is traditionally seen that the people of Bhutan are, by virtue of the circumstances of their habitat and precipice terrain, subjected to serious handicaps and constrained to scratch the earth for rather squalid and miserable living.
The general impression in the minds of Bhutanese and foreigners alike who visit the nation is one of total abandonment and salutary neglect of the people. For most of the people of rural area, electricity, portable water supply, clinic, health centers and hospital which are by and large concentrated in the alleged urban areas, are just illusive luxurious. High proportion of the population still lives in the state of nature, by –passed by the modernizing influences and forces, which revolutionize traditional societies to progressive modern societies. The state of the life of the population kills its enthusiasm, dampens their morale and mitigates their sense of motivation and initiative.
The scarcity of these pre-requisites in the country is faced for the wanting of human capital that linearly depends upon the size of its Population. For this reason, it seems that low population growth rate of the country has, to large extent, been blamed for its state of affairs. Acrimonious debate regarding the economies and diseconomies of population has spurted between two schools of thought. One argument, presented by Clark and Ohlin, is in favour of unrepressed population growth based on the contention that it stimulates business and general economic growth cycles and therefore necessary for development.
The other argument of Malthus is in favour of repressed population growth on the ground that unrestrained rise in population will mean less resources for individual members leading to considerable reduction in the euphoric life and well being of the people in that society, thus constituting an impediment to the socio-economic development of the society. The practical import of these divergent views is that positively or negatively, population question is intricately related to development which by all considerations is man –centered.
Alluding to the positive and negative impact of rapid population growth, Ude asserted that “though there can be no development without human beings, any development that does not lead to overall increase in the welfare of the people is deficient. However, despite the merit of Malthus school’s arguments in favour of repressed population growth, the rapid population growth has unequivocally been a panacea in dealing with the problem of human capital whereby underdevelopment and poverty was in prevalent in Bhutan.
Therefore Bhutanese in general should be sensitized to the realities of their abject miserable situation. Steps should be taken to mobilize the energies and efforts of the people to increase the growth rate of the population to the level that considered sufficient enough to beget human capital drastically needed for revolutionizing the economy through starting imminent developmental work with their help. In this paper, efforts are made to discuss the issue of population growth in Bhutan in its various ramifications.
In the first place, the author takes the critical look at the deplorable economic conditions of the people. This is followed by an incisive examination of the implications of the phenomenon of population growth on the beleaguered economy. In like manner, the importance of the population growth, particularly in relation to the generation of human resources and consequent development in the country are highlighted. Next, some suggestions and recommendations are made to ameliorate the economic conditions of the people, arising as a result of lack slow population growth rate in the country.
This is paper is based upon literature and theoretical evidences rendered by various school of economic thought. We have used Kuznets and W.W. Rostow model to explain the implication of population and economic development in Bhutan. In addition to this we used time series data for economic growth and population from the different issues of National Accounts Statistics reports of Bhutan, and population and census of Bhutan 2005. The State of Economy in Bhutan
The plight to Communities in Bhutan is the focus of current discussions by many economists and a matter of concern for all levels of government in the Country. The picture of the country is described as being pathetic and the main features of the pre-requisites of economic development are found to be under-developed because of under utilization of its natural resources. In most areas in Bhutan, the basic infrastructural facilities which have been considered by W.W
Rostow as prerequisites for development and tolerable human existence are generally lacking3. One of the pre-requisites of the well being of the community of any country is its roads. there are no functional roads for vehicles in rural areas and in some part of the country, roads construction work has not been yet started, thus leaving the people in those areas in dreary isolation from their own people and the rest of the World.
The existing roads are also in deplorable condition. They are generally characterized by innumerable pot holes, deep enough to snap a car’s shockers or give the rim a terminal damage. The sad story of our rural roads calls for great concern when it is realized that over 70 percent of Bhutanese, as noted above, live in the rural areas and that it is from the latter that most of the food products of the country are derived. Without good roads, it becomes a big problem to send food products from these areas to the urban dwellers mainly depend on the rural folks for their food supply.
Hence, every harvest season, thousands of rural farmers watch helplessly as the crops which they cannot evacuate to the urban markets go waste, thus marginalizing their income from farm proceeds over the years. Being an agricultural predominated economy if it cannot able to produce exportable product, it must produce as much as food grain as is required by the countrymen.
The irony of the Bhutanese economy is that all economists see it as rugged mountainous country which has less scope to produce that what is required by its people. They have made such impression Worldwide about this economy that nothing can sufficiently be produced here except remaining dependent on others for each and every thing. Moreover, the Bhutanese economy is suffering of the shortage of pre-requisites necessary for great spurt from backward economy to industrial economy. According to W.W.ROSTW, every developing country has to pass through a certain stages of development that he manifested as per-requisites of economic development.
According to Gerschenkron, the existence of certain necessary conditions (pre-requisites) is not required for industrialization as is put forth by Rostow. He based this view on two empirical observations. First, the preconditions for industrialization that existed in England during its industrial revolution was virtually absent in the backward countries of Europe or existed on a very small scale. Secondly, big spurt of industrialization occurred even in those countries where they were not present at all.
Without having adequate preconditions, these countries like Italy, France, Germany, and USSR (before 1985) had brought big spurt in their economy. Though they had not sufficient pre-conditions for great spurt, they had an adequate human capital because of high population growth to exploit natural resources and utilize them for generating precondition corresponding to industrialization period of these countries.
Since Bhutanese economy is also passing through the same state of affairs by which the present developed nations were passing historically, it can also bring big spurt in its economy provided it should have its own sufficient human capital. This may be possible if it review its National population policy for stepping up its growth to meet the demand of labour force in the country. Population and Economic Growth:
Many dynamic and active debates have been held regarding the impact of the increasing population on the economic development of the country since the existence of the Malthusian theory. No doubt, an increase in the population in most of the countries has adversely affected the per capita output of the nation. Our empirical study related to the impact of population growth rate on economic growth has explored statistically very significant and optimistic findings in case of Bhutanese economy. The basic infrastructural facilities which are required, at the rudimentary development stage of the country, unfortunately found almost missing.
This country needs stringent measures towards establishing more academic and vocational institution so that more academicians, engineers, doctors can be trained to enhance the pool of the human capital. Specialization in the works increase the quality and productivity of the labour and this probably be procured, if the country will have a well- versed pool of human capital.
The massive group of the human capital will automatically enhance the economic growth of Bhutan. Development of the countries such as India and China are entirely impinging upon the human capital. Economic growth rate of these countries, since their independence, has grown very rapidly because of large group of human capital .Though these countries have suffered because of the high growth rate of population; they are progressing at high rate only because of innovations and technology, which in turn, depend upon the human capital which is linearly related to their population.
India is enjoying the status of nourishing almost 16% of the total population of the World and economically stands fourth in the world based on purchasing power parity as per the World Bank report of 2008. Population is not the sole factor for slowdown in the economic growth of the country, but factors like political instability, corruption, inefficient managerial system, misallocation of resources, etc. are more responsible for it.
As the Chinese proverb reflects that “Roads and railways lines are considered as the fate lines of the nation”, the government of Bhutan must pay attention towards the dissemination of the network of roads. Government needs to start some plans and projects to build railway track and Air routes through which tourist can be attracted within the country that will enhance the Foreign Cash Reserves. According to National statistics Bureau of Bhutan (2010), 69%of the total population of Bhutan is living in rural areas (205Gewogs -Bhutan at glance -2008) of the country.
Most of the villages are deprived of the basic amenities like road; safe water supply, education, regulated markets where the surplus product of the peasant could be marketed. There are only 29 hospitals with 145 doctors that are taking care of 6, 71083 people (Population and Census of Bhutan, 2005). It means that there are approximately one doctor per 5000 people that seem to be a very poorest ratio after Ethiopia and many others under developed countries of the world.
There is a need for increasing the health related facilities in the country. Geographical conditions of the country become an obstruction in the way of the masses to avail the medical facilities in the hospital. Empirical findings show very dismal progress in the area of health. These entire problem faced by the people are ascribed to lack of human capital which could be solved by increasing the population of the country. “The economics of scale” phenomenon of population
1. Population and market structure
Despite of the Malthus theory of diminishing return when it comes to scarce resource like food and water , some of optimistic population growth economist , like Kuznets (1956), Boserup (1981), believed that population growth can really help the nation economy to turn from ineffective economy into economies of scale state. According to Kendrick (1977), economies of scale are an important factor to increase the productivity of labour of a country.
A country with rapid population growth can suffer many maladies like capital dilution, shortage of necessity resources and the causality could lead the whole population to poverty, famine and starvation. However, there are three arguments supported for the idea that population growth can boost the country economy by economics of scale phenomenon.
Firstly, a nation, which has a rapid population growth rate, means that its population size will develop with a quicker rate. The bigger the population size is, the larger the market size becomes. In order to meet the product demand of the large –size market, bigger and more effective as well as longer performance period manufacturing plants are required to develop (simon, 1994). Countries in the world with larger population size like India and China are growing faster than any other country of the world because of their strong market network. Market base not only generate entrepreneurship among nationals but also causes induced foreign investment in the country.
All developing countries like Bhutan need significant funds to expedite economic development programme for making provision of amenities required for higher living standard of the people of the country.
The present state of economic affair of Bhutanese economy necessitates the expansion of market base to have an induced foreign investment and the generation of entrepreneurship among nationals to establish spectrum of industries in country to bring about industrial revolution. “All the developed countries of the present world were backward historically” (Gerschenkron 1947). Germany, Italy, USA, and England have achieved a status of advance industrialized countries, which were also backward in past, due to their strong army of human capital.
Therefore, we can conclude that if Bhutan intends to be a developed country, it will have to acquire more human capital but that would be possible only if it increases its population. Population and specialized labour force
Large size of the population not only expands a market structure but also possess an impressive number of labours. Because of the avail ability of the labour force it is possible for firms to divide their labor into particular division of labor to do specific tasks. An excellent example of specialization is car assembly line in which each division just takes responsibility of installing only one part of the car such as engine or car wheels. According to Adam Smith, “division of labor has caused a greater increase in production than any other factor. This diversification is greatest for nations with more industry and improvement, and is responsible for “universal opulence” in those countries”.
Moreover, through specialization, working skill of labor force is likely to improve more quickly with learning-by-doing. Since a large size of population demands a tremendous number of products, these workers have more chances to improve their working skill. As a result, the average time spending for producing one unit of output have tendency to decrease more quickly than in smaller market-size. Correlating with saving producing time, the cost per one product is also deducted and firm is more efficient through specialization. Finally, the rapid population growth rate could cause a positive effect on communication and transportation.
Transportation plays an important role in economic development. A good transportation system can help reduce transportation cost and travel time. Along with high population growth rate, the increase in population density is inevitable. A dense population is likely to pressure the government to develop more in transportation system such as railroad, highways and road. Take China as an example, according to United Nations Population Division, in 1985, its population density was 110 people/km2 and the total amount of railroad was 52,000 km while in 2010, the total length of railroad is 91,000 km (increase 75%) and its population density is 141 people per square kilometer (increases 28%).
Transportation improvement is surely a general trend for every economic development, but it is not deniable to state that the population density has a strong impact on number of construction of transportation. As Julian L. Simon stated in “The Ultimate Resource”, “population growth clearly leads to an improved transportation system, which in turn stimulates economic development”. Population and self reliant in food grain
The falling trend in total arable land is a serious concern for the government of Bhutan .These appalling trend cannot be owed to an increase in population but to an occupation changes in the economy which inherited due the occurring structural changes via economic development as is put forth by Schumper .
Since the economy has started growing, the corresponding sector of agriculture sector like service sector and industrial sector have also started developing whereby the agriculturist are induced to migrate from their agricultural occupation to service and industrial sector. When the land owner shifted from agriculture to service and industrial sectors, their land turned barren.
Migration of the masses from their earlier main occupation to services and industrial sector must be considered as main cause of fall in arable land but not the pressure of population. we can emphatically favour the economies of population that if the size of the population had high, the size of arable land would not have decreased rather it would have increased.
We corroborate our views with the help of classical economist hypothesis that “supply creates its own demand.” we can apply classical theory to endorse our theory that an addition to the supply of labour because of increase in population will exploit the latent natural resources of the country to meet their demands. An addition to labour force will not only exploit natural resources for their survival but also help in filling the lag of supply of them to give impetus to the economic growth.
Therefore, increase in population will not exploit resources and find new mode and means for the country but will also make this country self –reliant for food grains and many other things including labour force for which this country is totally dependent on other nations. In essence, development of the Bhutanese economy necessitates high growth of population. CONCLUSION
The authors optimistically weaves fabric of hope that if the measures outlined above are emphatically implemented, the population itself will be brought to the optimum size and aligned to match its requirement in exploiting and utilizing the latent natural resources of the country for giving impetus to the economic development of the country.
Structural changes of the economy via disseminating the spectrum of industrial base are not possible in wanting of human capital that linearly links with size of population of the country. The country’s overdependence for outsourcing all kind of works will dampen if the planners review its population policy to increase it to that level necessary for exploiting the latent resources required for economic development.
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