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A large population is not always the road to economic success

May 29th, 2009 · Greg Atkinson · 8 Comments

Many economists appear to believe that if  a nation’s population is growing then this is  good for the  economy as well, especially in developed countries. But in a world where resources will need to be shared amongst a growing number of affluent consumers I believe the opposite is often true.

A growing population means that a nation’s demand for food, water, shelter and energy will also increase. No major nation I am aware of can satisfy even these basic needs without imports. Even Australia which is blessed with natural resources needs to import energy. (e.g. oil)

On top of these basic needs as a country develops and grows there is an ever increasing demand for everything from consumer goods to rare metals for use in industry. If a nation cannot obtain these goods or cannot afford them, then economic growth is stunted.

In addition a growing population means that a nation becomes harder to govern especially if it is a nation where borders were imposed on it such as  India, or where it has expanded it’s borders such as China. It becomes even more difficult to govern if a country has not only a large population but also a socially or ethnically diverse one that is  spread over a large area.

If we look at the nations of the world with a population over 100 million we can see how the above mentioned factors come into play.

Nations of with Populations over 100 Million.

China. 1.33 billion.
India. 1.16 billion.
United States. 306 million.
Indonesia. 230 million.
Brazil. 191 million.
Pakistan. 166 million.
Bangladesh. 162 million.
Nigeria. 154 million.
Russia. 141 million.
Japan. 127 million.
Mexico. 109 million.

(Source: Wikipedia)

China and India I would suggest are going to have real problems over the next decades keeping their massive populations content. Simply governing and feeding these large masses of people is a challenge enough, but if you factor in the diverse nature of their populations then this becomes a recipe for civil unrest as occurs both in China and India today. If we were to look ahead 50 years is it possible that these two nations will exists in much the same form as they do now, or is it more likely that they will be split into smaller independent states?

I know many people will not agree with me, but China may already have seen it’s best days and the same may very well go for India. Many economists and market commentators believe it is inevitable that India and China will keep moving up the global economic rankings, but isn’t it also possible they may slip backwards?

The United States I suggest is an example of a nation that is at it’s limits. With 1 in 100 Americans behind bars as of 2008 I would say the nation already is experiencing civil unrest. The U.S. in 50 years will be a very different country and it is not in the realm of science fiction to suggest that it parts of the U.S. could break away during the 21st century.

Indonesia,  Pakistan,  Bangladesh and Nigeria I would say will continue to struggle this century. They are simply too large and diverse to govern as they exists today. They also face challenges in meeting just the basic needs of million of their citizens.

Brazil and Mexico have potential if the governments of these nations can get on top of issues such as crime, corruption and civil unrest. But they are perhaps already over-populated and this may hinder any major long term economic growth in the future.

That leaves us with Japan and Russia. These nations both have declining populations at present but if there are two nations with large populations that I feel we do well in the 21st century it is those two. Both are the targets of much scorn and condescension  from the West but they may just have the last laugh. They did go to war with each other a few times last century and have some territorial issues still to work out, but their economies need each other. Russia has energy that Japan needs and Japan has products that Russians want.

So although a large population can help drive a nation’s economic growth the list above clearly shows it can often be a burden as well. Even in nations like the U.S. that seem to have managed quite well poverty still exists, and therefore it could be argued that the U.S even now is larger in terms of population that can be sustained over the longer term.

What I am suggesting may all seem a little too much for many people but let’s just have a look at some of what has happened in recent history. Germany was split into two after War War 2 and then reunited. The Soviet Union collapsed and numerous new nations were created as a result. China took over Hong Kong, Macau and tightened it’s grip on Tibet and the borders in central Europe have shifted so many times it is hard to keep track of them. Finally India and Pakistan as we know them today were only created only back in the 1940’s.

I wonder why many people seem to think that national borders in the 21st century will be any more stable than they were in the 20th century? It  seems to me that with the spread of the internet, that motivating a separatist movement now would me much easier than say 50 years ago. If you scan the globe there are plenty of regions and people who seek to break away from the central government and form their own independent nation.

It also seems reasonable to me to assume that if nations with large populations see the gap between rich and poor grow larger then the forces for change will also grow. Especially if the “have nots” are grouped in regions or by ethnicity.

So the next time you read some long term global economic outlook ask yourself;  is the forecaster simply assuming that all nations will exists as they do now in 20+ years time? Will China still be a communist nation and if not, will the transformation to a democracy proceed smoothly? Will India and Pakistan splinter along religious, ethic and/or tribal lines?  Will the borders of the United States remain as they are today or is it possible that sections along say the Mexican border will split away, or that parts of Mexico actually become integrated into the U.S? How will the Middle East look in 20 or so years?

So many questions but so few answers…..

8 responses so far ↓

  • 1 Phil // Jun 1, 2009 at 12:55 am

    Hmmm, if we go back to first principles.. Population isn’t so much important as the ability to trade, specialise and generate large amounts of capital to invest that it can provide. Population + rule of law, common language/culture -> growth (Japan, USA). On the other hand Taiwan with it’s small population could get it’s act together much better than China.

    Japan might be nicer with a smaller population, there’s still plenty of room for productivity growth, and if they could un/re-develop chunks of the countryside it would be much nicer, and more productive (larger scale agriculture, less spread out industry etc).

  • 2 Greg Atkinson // Jun 1, 2009 at 8:50 am

    Phil I agree with you but especially regarding Japan. The rural sector is Japan has plenty of room for improvement and many farms simply sit idle because the owners are now too old to work the fields. One of the by products of the recession in Japan has been a trickle of younger workers into rural areas to work in farming and the fishing industry. But I wonder how many workers will stay there once the urban jobs come back?

  • 3 Senator13 // Jun 1, 2009 at 10:12 pm

    Would you say that in the case of Australia it would be good to continue to increase the population so that there are a sufficient number of younger people to fill the vacant jobs left by the baby-boomer generation?

  • 4 Greg Atkinson // Jun 2, 2009 at 8:26 am

    Hi Senator 13 – I am not really sure about that. I think in the future we need to think about things like:

    – Will the same type of jobs be around? For example will there be any significant car industry in Australia or will most of these jobs simply vanish.

    – Will productivity be increased further by automation etc. (seems likely) Therefore can the nation do more with around the same number of workers?

    – Will we see a truly global workforce? In other words perhaps there will be hundreds of thousands of skilled workers who spend most of their working lives moving between countries to find work and thus a pool of workers is available to fill labour shortfalls where needed. This already happens now to some extent.

    – Will older people in some professions work much longer than now..say up to 80?

    – Can some Australian cities actually hold more people..for example Sydney? Maybe we need new cities? Can the nation’s resources (in particular water) support continued population increases?

    So it is a complicated issue…and I just do not have simple answer for you. Personally I think there needs to be a serious debate about the issues above because at the moment I do not think there is any clear population target in Australia. (or any plans how these people will be housed and what sort of jobs will be available)

  • 5 Senator13 // Jun 20, 2009 at 11:13 am

    Good points Greg. It is something that I think needs a lot more attention paid to it. Many of the cities are “bursting at the seams” so to speak. Besides flight, it is also very difficult to travel between cities (and within them). An increase in population would make something simple like that much more difficult. Water management is another difficult question… But, could an increased population expand our means to enable us to combat these things? I don’t know, but I think your right that a population target is needed to better manage all of these things.

  • 6 Greg Atkinson // Jun 21, 2009 at 9:23 am

    Senator if political leaders want to be truly visionary then they should be setting things like population targets and developing plans on a national level to support this population. At the moment Australia just seems to have an increasing population without any plans on where these people will live or what jobs their children will have.

    The current government spending spree would have been a great time to do something a bit radical like pushing ahead with a high speed rail link between at least Sydney and Canberra. This would open up a lot of possible areas for people to live along the train line and if powered by “green” electricity then it would help reduce carbon emissions. (since there would be less people flying between Sydney and Canberra)

    Better still the high speed rail link could have been powered by a nuclear power plant and surplus power pumped into the electricity grid….yes this would be radical but isn’t what we should be looking at now as we are about to enter the second decade of the 21st century?

    You could even get the private sector to probably fund most of the high speed rail network if the government committed to developing some urban centres along the train route or setting up some low tax developments zones for high tech industry. But alas we get school halls for schools that don’t even need them!

  • 7 Senator13 // Jan 7, 2010 at 2:16 pm

    Looks like Rudd has stated a population target of 35 million.

    Not sure where he got this figure from or if there is any planning to sustain it… I still have not seen anything to substantially improve transportation between our cities and regional areas…

    I think this is an issue that is going to cause Australia more of a problem then the likes of having an emission trading scheme or not.

  • 8 Greg Atkinson // Jan 11, 2010 at 11:41 am

    Rudd is a curious fellow isn’t he? He reckons he can reduce our CO2 emissions via a tax while ramping up our population all without using nuclear power and investing in technological solutions.

    And where will these people find jobs? Mainly in the domestic focused economy I suspect which means the nation needs to consume more to create how exactly will that save the planet?

    So Rudd’s plan in a nutshell is to introduce a tax, encourage population growth, bury some C02 underground and hey presto..we have changed the climate of the planet! He really has no idea.

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