The cautionary tale behind population control
Population control, grounded in classic economic theories, has been a double-edged sword. India has scope to cut its population size, but it needs to avoid a trap that awaits it
The Covid-19 pandemic may have fast-tracked the oncoming peak of a global population decline by at least a decade, according to a recent Bloomberg report. The pandemic has slowed the already slowing global birth rates, from the United States (US) to China, experts estimate. Is this good news or bad?
In recent weeks, at least two Indian state governments – Uttar Pradesh and Assam – have advocated aggressive population control, with the chief minister of Assam asking Muslims to adopt family planning and also declaring a policy that large families will stand to lose certain state benefits.
Population control, grounded in classic economic theories, has been a double-edged sword. It has both advantages and costs. In over half of the world’s nations, the rate of population growth is falling behind replacement rates, and, perhaps for the first time, the growth rate in the world’s population is projected to be zero by the end of the century, according to United Nations (UN) data.
My colleague, Roshan Kishore in a data-backed piece titled, Why India can shed its population obsession in Hindustan Times, has provided useful insights into the country’s demographics, which has been a hot-button political issue, urging new economic thinking on the issue.
The economic foundations of population control policy
The economics of population, which started with Malthus, is now undergoing revisions. One example is that China hopes to reverse a fall in its population by raising the maximum allowable number of children per household from two to three.
Some well-known economic hypotheses led governments to aggressively control population to spur growth, the objective of growth being central to the politics of all low- and middle-income countries.
Malthus had predicted that the world’s population would grow at a faster rate than the rate of food production. He was right in flagging these concerns in the Principle of Population in 1798. The population tends to grow exponentially (geometric growth), he argued, but food supply grew in a slower arithmetic ratio. Malthus thought England was foredoomed.
Malthus was ultimately proved wrong as breakthroughs in agricultural technology made countries, such as India, net food surplus. Amartya Sen showed that famines killed millions in Bengal, but some famines were caused not by the absolute lack of food, but its high price.
Harvard economist Harvey Leibenstein had demonstrated, with his famous big-push theory (also called critical minimum effort thesis), how population growth tends to erode incomes.
The main economic argument that follows from Malthus’s warnings was that if per capita income (or pcy, y being the shorthand for “income” in standard equations) is low, then people are too poor to save. Since investment is taken to be equal to savings, low savings would mean the economy doesn’t grow.
Malthus had argued that if per capita income is greater than subsistence level (defined as the bare minimum income that one needs to survive), then the population starts growing initially, but there’s a physical limit to the population growth of around 3% beyond which population growth flattens.
Leibenstein’s main argument was that countries have to invest beyond this level at which population growth stabilises or levels off. This is the famous big-push theory. So, investments need to be beyond this level because population growth will swallow up any small increases in per capita income, according to Leibenstein.
These are the intellectual foundations of population-control policies. And as is clear, they have more to do with economics than politics.
However, while these theories increased our understanding of population economics, many of these theories were later found to have many flaws. Later economists showed there’s no one-on-one correlation between per capita income and growth in y (or income).
The big-push theory did not consider the distributional aspects of income. Higher per capita income may not lead to more savings (and, therefore, investments) if income is not well-distributed.
It is possible that two countries may have the same per capita incomes, but different levels of investment. If investment is very capital intensive, it will lead to inequality. The most important critique is that the big-push theory calls for just that — a massive one-time injection of capital to raise per capita incomes beyond the population growth rate. But capital, as we know, is always scarce.
The reality of population dip
The UN’s data is clear that the decline of the global population has started. This entails serious economic consequences.
“For instance, there would simply not be enough people to work for the economy, (you can have) a large non-productive aging population to support, the government may not have enough resources to support pensions and this would lead to de-industrialisation, as with Japan,” said Arup Mitra, an economist with the prestigious Delhi School of Economics.
Mitra, referring to economist Kuznets, said India is at a stage of demographic transition where mortality rates were declining and fertility rates would decline in the next two to three decades or so.
“There is still scope to cut population growth because India still has a positive growth rate, but our population policy should keep in the mind the larger consequences of zero population growth. You will need some positive growth in population happening to not end up like Japan,” he said.
Once a country falls below the so-called replacement level, which is 2.1 births per woman — the level below which population decline sets in — then it is very difficult to come back up. There can be series of economic fallouts, such as declining demand.
Of 86 countries where fertility fell below the replacement level, only Tunisia managed to raise its fertility back up, according to data cited by David Fickling in Bloomberg.
Many economists have started a rethink of some of the old ideas. As far back as 1937, iconic economist John Maynard Keynes gave a lecture on “Some Economic Consequences of a Declining Population”. His key worry was poor demand for investment in places where companies encounter a falling population of consumers.
Although India has not yet hit the replacement level, many developing countries, such as Iran and Brazil, have. And therein lies a cautionary tale for India.
In a new paper, The End of Economic Growth?, Stanford University professor Charles Jones has modelled the opposite of a Malthusian world, or what could happen in a nation where population growth goes into free fall. According to his model, overall output and living standards fall and ultimately humans simply vanish from that place.
“We are nowhere near that level of crisis. We still have a large population that needs to be controlled with incentives and disincentives. But disincentives for families not following population norms should never be retrospective,” said Anindita Sen, a professor with Calcutta University.
Analysts have argued that India’s current economic demographic dividend, more young people than old, needs to be tapped fast as economic resources before it vanishes, and the country enters what demographer Wolfgang Lutz and colleagues call the “Low-Fertility Trap Hypothesis”. The hypothesis states that low fertility in one generation caused low fertility in the next, creating a demographic dead-end.