Lecture 5 1 Economics of World Agriculture

Population & Economic Development L11112 and L11113

Population and Economic Development

Introduction
In the last lecture we introduced the links between food production, population
growth and economic development and in particular focussed on the traditional
sector giving some idea as to why low incomes are the ‘economically optimal’ or
rather logical outcome of a system starved of technology. As we will see,
technology is the engine of economic growth.

In today's class we will discuss the implications of population growth on

economic development. Will we show that food availability is the
constraining factor on population growth. As more food is produced, so the
population rises. What is key if we are to observe economic growth is growing
income (food) availability per capita. If, however growth of population exceeds
growth in food production, the population will at best remain poor, at worse become
poorer, all the while being increasingly vulnerable to disease epidemics famines –
both of which leads to violent swings in population and economic development.

Clearly, the link between population food production and economic development is a
complex one: whilst rising population is generally beneficial to development (we
require a certain population density for efficient infrastructure and markets to
develop), too rapid population growth impedes economic development and it lowers
food availability (income) per capita. Moreover, rapidly growing populations have
strong demand for food, and this may even put pressure of food prices leading to
many problems, starvation and the prospect of famine being the most alarming. This
is something to which we will return in lecture 6.

Malthusian Demography
If you've ever wondered why economists are sometimes referred to as 'dismal
scientists' then the Reverend Thomas Malthus is blame. Although the first ever
Professor of Economics (Cambridge), or political economy as it was called then, his
belief in a rather fierce some brand of Christianity shaped his economics. Born in
1766 he became very influential (along with his contemporaries, David Ricardo and
Adam Smith) in the new 'science' of political economy. He his most famous for his
Essays on Population (1799) which painted a very grim course of economic
development in which subsistence agriculture was the long run equilibrium condition
for the economy interspersed by period of rapid population growth followed
'inevitably' by population crashes. Writing at a time when agriculture dominated the
economy (and prior to the technological advances that associated the Industrial
Revolution in England) he believed that population was governed by food availability.
Periods of abundance would cause rapid population growth as 'vice' was allowed to
take hold. This momentum would be arrested violently as hunger and destitution
suddenly rained population in. In essence, cycles of vice and misery (his 'principle of
population') could only be avoided if subsistence existence could be maintained. In
his view, it just didn't get any better than that. But it could get a lot worse, since the
potential for population growth could be thought of as exponential, whereas food
availability could at very most be assumed to grow linearly. Although some of his
views seem wildly pessimistic, they were probably fashioned by much of what he saw
in England at that time, food availability certainly did govern population and where
destitution and hunger were commonplace in periods of poor harvests. Fortunately,
for us he did not foresee the steady and sustained growth in agricultural productivity
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Population & Economic Development L11112 and L11113

nor the industrial revolution that would follow to diminish our reliance on agriculture
for wealth creation and diversify the economy. This change of course transforms
children form economic asset to economic liability, and acts as a natural brake on the
desire to procreate. Moreover, his moral position may have blinkered his eyes from
the desire for betterment and the ingenuity with which we humans can achieve this
goal. Whether this 'desire for betterment' might be better described as materialism is
a moot point. Even more ironically, he underestimated the role of the market in
encouraging invention and innovation through high prices that high population
growth might create.

Demographic Transition Model (DTM)

This is merely a descriptive device but it will be useful tool to categorise countries
simply because certain aspects of population play a key role in determining economic
development and the levels of economic growth that are attainable. As we will see
the triggers for the DTM are essentially economic, and moreover, they occur in
agriculture. This is no accident, it simply reflects the importance of agriculture in the
economy of a developing country.

Figure 1 : The Demographic Transition Model

Stage I : Low stationary population

High birth and death rates; fluctuating population results from poor diet, sanitation
and living conditions. A few (easily preventable) diseases are principal reason for
high death rate. Life expectancy around 40 years, most die in childhood. Poor
general health leads to vulnerability to diseases, epidemics and famine thus
population fluctuates.

Stage II : Early Expanding population

High birth rates, falling death rates (first signs of better nutrition, increasing food
production per capita). Most of population of childbearing age and thus rapid
population growth, large families. Life expectancy grows to 60 years. Children are
an economic asset (earners, insurance in old age, large families needed due to high
death rate). Religion. Very youthful population, 50% under 15. Education
rudimentary children become net contributors to household around 12 years of age.

Stage III : Late Expanding Population

Birth rate declines as well as Death rate: Population growth positive but slows. BR
falls as children become an economic liability not economic asset : compulsory
schooling, particular involving females lowers BR significantly. Welfare infrastructure
& higher incomes provide means for saving and hence insurance motivation for large
families declines. Emerging materialism.
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Stage IV : Low Stationary Population

Birth rates low death rates low ; population stable. High cost of child rearing, Welfare
state. Materialism. Workforce (15-65) accounts for 2/3rds of population. Healthy and
wealthy although ageing population.

Population Pyramids
Another device that demography often employ to describe the changes in a
population during development is to construct population pyramids. A population
pyramid displays the population as a frequency distribution in that it plots age on the
vertical axis against the proportion of the population (on the horizontal axis). It
divides the population according to gender, allowing us to see gender-based
differences in the birth and death rates. A symmetrical distribution is indicative that
there are no such differences in a population. Other things to look out for are the
height of the pyramid, which indicates the age of the oldest members of the
population, and the general shape: the age range covered by the mass of the
distribution points to an ageing or youthful population. As with the DTM, it is simply
a descriptive device, but it is useful visual aid in fixing key characteristics about the
population, which changes dramatically as we go through the development process.

Figure 2: Population Pyramids of Stage I to IV Populations

Relationships between Demography and Economics

It may be pertinent to ask what are the implications of demography for economic
development? The triangle of food production, population and economic development
clearly suggests there are some. What are they?

1. Economic Development is also a Process of Transition

If we superimpose GDP per capita, (a commonly used measure of ‘development’,
strictly speaking just an indicator of measurable income) on to the DTM we see a
process that is also characterised by 4 stages. The stylised pattern that is revealed
indicates has the following form.

Income GDP/Capita

Stage I: Peasant based agriculture predominates, output form which is low and
volatile owing to an absence of technology. Food production (income)
vulnerability to the vagaries of weather and disease.

Stage II: Rising food production hence income per capita rises in this agrarian
economy owing to increasingly widespread adoption of basic
technology. This phase is characterised by the emergence of a
marketable surplus, allowing a growing proportion of the population to
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leave agriculture and find work in other higher productivity

occupations.

Stage III: Rapid growth in income as the (increasingly urban) population

becomes specialise in higher productivity (requiring education)
occupations in industry, commerce and services. Agriculture, although
important, is no longer the dominant industry in the economy.
Commercialisation of agriculture allows the industrialisation of the
economy to occur.

Stage IV: Slower but stable rates of economic growth although the economy
generates high levels of income levels. A highly educated population
and increasingly urbanised population. This is the post-industrial
society in which agriculture represents a small fraction of total output.
Despite employing a fraction of its earlier workforce output is many
times higher than in earlier times owing to the on-going impact of
technology. It is in this phase that agriculture may be financially
supported.

2. Stages of DTM have Agricultural Economic Triggers

Stage 1 is characterised by subsistence agriculture. Adoption of technology in
agriculture allows for the emergence of a marketable surplus, which marks the onset
of Stage II. This better nutrition causes a fall in the death rate and allows population
to expand and seek higher productivity employment in urban centres where skills
and education are better provided. Furthermore, the fall in the birth rate that
characterises Stage III, results from the urbanisation of society which can only
happen when agriculture is sufficiently productive to release the majority of labour in
to non- agricultural occupations. These require education and thus children become
an economic liability rather than economic asset. However, without the
commercialisation of agriculture, urbanisation would not be possible.

3. The Transition into Stage III is Vital for Development

It is important to realise that the length that the economy remains in Stage II
not only determines population size but the pace of economic development. This
is because it is in this stage that population is growing most rapidly. However, during
Stage II at least some of the increased growth in food production is offset by the
rising population. The faster the economy can get out of stage II the sooner it will
enter Stage III – the period of rapid economic growth, which is made all the richer
by a relatively smaller population. Moreover, during this rapid Stage II growth phase
a population time-bomb is ticking away since half a century later they will be old
and be dependent once again. If incomes haven’t risen rapidly then they will
represent a significant burden on the working population. The longer the economy
remains in Stage II the less likely it is that it will be able to get out of it, owing to the
burdens of an ageing population.