Does Azerbaijan need population growth? A look not from the cabinet

He literally said the following: “So, the new government will concentrate on major challenge, which is growing population. Therefore, our economic growth must be in line with growth of population. During the time of independence, we came from seven million to ten million people. Therefore, it needs additional infrastructure. It needs additional food supply, and our population grows every year more than hundred thousand that means we need at least hundred thousand jobs, annually and it is not easy. Therefore, the government will address that.” 

It follows from the president’s words that the government sees population growth as a serious obstacle to the growth of welfare. It believes that rising government revenue eats up population growth.

Is it so? From the point of view of a weak economy, an import-dependent state, such as Azerbaijan, it is. However, from the point of view of a strong and self-sufficient economy, for example, German, population growth is a blessing, as it grows as a challenge - consumption and as an answer - production, GDP and income.

Various authors note that low birth rate leads to a reduction in the share of the working population, which reduces the amount of human capital. A decrease in the birth rate, and thereby a reduction in the share of the able-bodied population, the active emigration of the young, economically active and most able-bodied people to the richer countries of the world, slows down the country's economic growth and, as a result, slows down the growth of wages and living standards.

However, if you look at the situation not from the offices of the Government of Azerbaijan, you can see that a population growth of 100,000 a year increases annual consumption by $ 90 million only for children under 1 year old. I proceed from the cost of living for children (160 manat), approved by the government. This includes food, hygiene items, clothing, and medical care. However, in practice, food, hygiene items and clothing are imported, starting from infant formula, ending with diapers. If the government took care of this in a timely manner and provided much at the expense of local production, this would give industry and the agricultural sector annual orders of tens of millions of dollars. This is only for children under 1 year old.

The President noted that since independence, that is, since January 1992, the population has grown by 3 million. The fact is that over 18 years this increase in consumption only due to population growth averaged at least 360.7 million manats annually, or 6.50 billion manat for 18 years (average annual population growth of 167 thousand x living wage 180 manat x 12 months x 18 years = 6.5 billion manat, or $ 3.6 billion if we take 100 dollars per person as a reference per month.)

Production capacities have not received an additional order for $ 3.6 billion during this time. They were so weak that they were not able to satisfy growing consumer demand. In food, imported products occupied more than 50% in 2017, tended to constant growth, and in 2019, its share grew by 20%. There is no need to talk about industrial goods - almost 90% is dependent on imports.

The president is right about the government’s concerns. The government should think not about population growth; it should think how to create production capacities to meet growing needs. This is indeed a challenge that the government has not been able to answer since the country's independence.

By the way, developing and developed countries oriented towards the growth of domestic production are striving to increase the population both through internal stimulation of the birth rate and by emigrants. For example, developing Russia and developed Canada have an active incentive policy in this direction, based on simple arithmetic: population growth - consumption growth - production growth - income growth. Even the 1.4 billionth China, in search of increased consumption, has launched discussions on measures to stimulate fertility. A number of Chinese scholars propose taxing every adult Chinese under 40 years old with fewer than two children. No kidding.