Is population growth an economic burden?

Speaking at the Davos Economic Forum, while addressing the problems facing our economy, President Ilham Aliyev said: “The government will focus on the big challenge of the growing population.” Therefore, our economic growth must coincide with population growth. Over the years of independence, our population has increased from 7 million to 10 million. Thus, the population needs additional infrastructure and additional food supply. Our population grows by more than 100,000 annually. This means that we need at least 100,000 jobs a year. It’s not easy. That is why the government will deal with this issue.” The head of state pointed to the fact that population growth poses additional challenges for the economy. Then additional logical questions arise. But what is the relationship between population growth and the economy? Is population growth a burden on the economy? Can the growing population be considered a source of social tension?

We will try to interpret these questions not on the basis of subjective opinion, but on the basis of the postulates of economics.

Population growth, economic growth, and economics. Indeed, one of the factors that affects the increase or decrease of GDP in countries is the population of that country. That is, the population is also one of the factors contributing to economic growth. In other words, since GDP is decided by dividing by per capita, it is understandable that the population here plays an important role.

The economics considers three factors influencing the size of the economy important: consumption expenditures of the population, private sector investments, and public expenditures. According to recent changes, the difference between imports and exports is also a component of GDP. Consequently, goods and services consumed by the population also increase GDP. The more people consume, the more they will need to produce and import. Consequently, population growth is a factor that increases GDP, not a factor that complicates the economy. However, when the working population is faced with problems such as unemployment and poverty, it creates an understanding of the effectiveness of governance.

On the other hand, population growth is becoming a heavy burden for the economy when the demographics of the population are more physically and mentally able than the able-bodied population. As they say, those who do not work should live at the expense of those who work. This is known as the “demographic burden” in social policy.

There is also an interesting correlation between population growth and development levels in the world. According to statistical data, the dynamics of population growth in economically backward countries continue to grow at a greater margin than in developed countries. Meanwhile, in countries with high rates of economic growth,  population growth is more prone to undermine economic growth.

As you know, China is the first country in terms of population. China, which consists of about 20% of the world’s population, has 2.5 times more GDP per capita ($ 10.4 thousand, 2019) than Azerbaijan. Thus, the population is growing and it is not a natural resource country, but it is ahead of us many times in terms of per capita GDP. However, China suffers from overcrowding rather than a low population. So, the working economic systems can even “win” the growing population.

Population growth wants proper guidance. The Azerbaijani population should not be included in the list of nations with significant growth. Because we have a rather soft population growth than a rapid one. In many parts of the world, on the contrary, the aging process is underway. Experience shows that the more the population is “aging”, the lower the demographic potential is.

Although there are several factors that affect the composition of the population, they can be divided into two main groups: (i) the population is affected by marriage, divorce, and marital status, and (ii) the population growth rate is linked to the death rate.

The increase in our population in Azerbaijan is not a source of internal tension. About 2-3 million people have left our country for some reason. Our economy does not spend money on them, their value does not “sit” in our GDP. Therefore, it is impossible to agree with the fact that our population growth is a burden on the economy. However, it is a prospective responsibility. Because we need to look at the GDP formed by the population, not only as a macroeconomic indicator but also as a service factor for the person. Muhammad Yunus, who was awarded the Nobel Peace Prize, believes that if the national economy rises, the development should be viewed as human rights, not as a GDP issue when it is assumed that it will benefit the poor.

According to Adam Smith, the father of economics, society is a big family. According to Ricardo, it is like a divided army from within. Numerous fundamental studies show that a declining population is actually the worst situation that can make the state poorer, and that increasing population is a powerful potential that can go toward all kinds of goals. And this only depends on one factor: the quality of administration!

If the economic system in any country is dynamic and efficient, the increasing population will keep it in balance. If states are weak and unable to keep their citizens internally, then not only population growth but also the decline of the population will still be a burden for those countries.