Further notes on growth theories

Per capita income of a population improves if the growth rates of the gross domestic product (GDP) are higher than population growth rates. The per capita income and the standards of living in Malawi have not changed a good deal since independence not because there has been no economic development. To the contrary, physical and social infrastructure (surface communications, health and education) have been transformed almost beyond recognition. There are more industries at work than ever before. But this economic growth has been accompanied by population growth rates of between 25 and 30 percent annually. This has meant more mouths to feed.

The first economist to recognise the crucial role that population exerts on standards of living was a Cambridge University don called Thomas Robert Malthus. He observed that while the means of subsistence (food) grow by arithmetic progression (1, 2, 3, 4) population grows by geometric progression (1, 2, 3, 16). Because of inadequate food, populations decline during famine, diseases and civil war.

It is impossible to raise the standard of living permanently because as the means of subsistence increases so do population. These populations depress standards of living.

Malthus has been criticised by western economists for not having foreseen that in Europe and America standards of living were going to grow at the same time as populations grow. This came about because of technological advances. Food production grew at higher percentage rates than the arithmetical progression Malthus had been talking about. Even more to the point, as standards of living increased families voluntarily limited the number of children they decided to have.

Malthus’ view on population still influences government policies. In China, each family is required to have only one child. This is by order of the government. In most developing countries, there are policies designed to persuade people to have smaller families in the hope that the growth of the national population will slow down while that of the GDP accelerates, thereby ensuring that economic growth will result in higher standards of living.

It is proving difficult to convince people of the need for smaller families. Large families have both economic and sociological significance to people. A large number of children are seen as a source of support in old age. With the advent of incurable diseases such as HIV and Aids, a couple sees it as unreasonable to bank its future on one or two children both of whom might die for the same reasons that so many young people of these days are dying.

A large brood is also seen as a source of dignity or honour. Having more children is like having a large following. You may erect a village of your own surrounded by your children.

Family planning is also frustrated by religious and cultural beliefs. Some people say their religions command them to fill the earth with their descendants. And there are those who say terminating a pregnancy when the foetus has formed is tantamount to committing murder.

Time has come for Africans to take out their religion that which is applicable in the modern age. Countries such as France and Italy worry about population decline and in France, families are being urged to have more children. Yet missionaries from the very countries which practice too much birth control come to Africa and indoctrinate their converts that birth control is a sin. It is only in Africa that populations grow to about three percent annually. No wonder standards of living are growing at a snail’s pace in most of these countries.

New growth theory—This holds that real GDP per person grows because of the choices people make in the pursuit of profit and that growth can persist indefinitely.

This theory which began with Joseph Schumpeter, a Harvard University economist in the 1930s contains two facts about market economies.

— Discoveries result from choice.

—Discoveries bring profit and competition destroys profit.

Discoveries and choices If people decide to have new products they engage in research and development. Out of this new technologies emerge and new products are invented or old ones are innovated. Where there is a will there is a way indeed.

Discoveries and profits The desire for higher profits engenders the spirit that brings about technological change. Too much competition is the hallmark of the free market system. This competition squeezes profits. Those who want to earn more profits either introduce lower cost methods of products to undersell their competitors or try to invent products which for a time will enable them to earn monopoly profits.