Wednesday, May 24, 2017
  Search 
Home
Opportunities
Partners
Publications
About Us
 
 
Please enter your email here, we would like to keep you informed.
 
 
Connect With Us - Facebook RSS
<May 2017>
SuMoTuWeThFrSa
123456
78910111213
14151617181920
21222324252627
28293031
Sections
Liberty In The News
Liberty Events
Conference Proceedings
Culture
Agriculture
Democracy
Development is the Key
Economic Freedom
Education for Life
Enterpreneurship
Environment
Freedom of Expression
Freedom to Trade
Globalization for the Good
Health is Wealth
Intellectual Property Rights
International Relations
Liberty is Security
Limited Government
Principles of Politics
Privatisation
Population - the ultimate resource
Property Rights
Regulatory Affairs
Rule of Law
Tax Freedom
Facts & Figures
Opportunities
Competitions
 Population - the ultimate resource
 
Falling population will hurt economic recovery
Daily News And Analysis, India Thursday, September 09, 2010


Demographics — or population growth is so long-term in its influence that economists and observers are inclined to explain the functioning of economic society without factoring in the essential part that it plays in growth. Production depends upon people, not only in the actual process, but because of the final demand that justifies its existence. The more the consumers, the more the need for things to be produced, writes Vivek Kaul in Daily News And Analysis.

"Mumbai gets claustrophobic after a point,” I said.
“Oh, really?”
“Another way to look at it is that we are helping the Indian gross domestic product (GDP).”
“And can you tell me how?”
“Well, the GDP of a country can be expressed using the equation: Y = C + I + G + NX.”

...

“Okay. Y stands for GDP. C stands for consumption at both the individual and business level, I represents investment by private businesses, G

stands for government spending and NX is the difference between exports and imports. The total is the value of the total output of a

country.”

...

“When we buy air tickets we spend money. That is an airline’s income. The airline pays its employees and meets other expenditure from the

money we spend. The employees in turn can spend that money or save it in a bank, which can lend that money to someone, who in turn can spend

that money. And so the cycle continues and all this spending gets captured in the GDP at some level.”
“So when economies go into a recession, the C part — consumption — falls, as there is a lot of uncertainty around. And does this in turn pull

down the overall GDP?” she asked confidently.
“Yes. When economies go into a recession, governments boost spending to balance for the fall in consumption. And that is what has happened

across many countries in the last two years. And once demand rises, governments can slow their spending spree.”

...

“Why is that happening?”
“Sustained GDP growth happens in two ways. Either the productivity has to rise or the population has to go up.”
“And what does that mean?” she asked.
“Let me simplify. Let us say before the recession struck, a country was producing ten million cars every year. Now it is producing nine

million cars. Or lower productivity because of lower demand. Now, flip this argument around. Why are governments spending so much money? So

that consumer demand picks up, people start buying things again and GDP growth picks up. But it is not as simple as that. Primarily because

the money spent by the government is always less productive and creates lesser jobs than when it is spent by the private sector.

...

“So where does that lead us?”
“Well, the answer is that maximum jobs are created by start-ups and not big behemoths. As Mauldin writes, “Without start-ups, there would be

no net job growth in the US. From 1977 to 2005, existing companies were net job destroyers, losing 1 million net jobs per year. In contrast,

new businesses in their first year added an average of 3 million jobs.”

...

“The major point is population growth. William Gross, who manages money for Pimco, the biggest mutual fund in the world, wrote ina recent

column, “Demographics — or population growth is so long-term in its influence that economists and observers are inclined to explain the

functioning of economic society without factoring in the essential part that it plays in growth. Production depends upon people, not only in

the actual process, but because of the final demand that justifies its existence. The more the consumers, the more the need for things to be

produced.”

“Simplify,” she said.

“Well, let me continue with Gross to explain my point. “Our modern era of capitalism over the past several centuries has never known a period

of time in which population declined or grew less than 1% a year. Currently, the world is adding over 77 million people a year at a pace of

1.15% annually, but slowing. Still, that’s 77 million more mouths to feed.” All this consumption adds to the GDP. Things are good when the

population is going up at a significant rate as that adds to the GDP. In Japan, however, the population has been falling. In 2010, it

estimatedly fell by 0.22%. Same is the case with bigger countries in the West where population growth rate is low and if it is positive, it

is because of poor immigrants coming in, who do not have the ability to spend like residents do.”
“So what are you hinting at?”
“Population growth has been slowing from the 1970s. But countries made up for it by running easy money policies, letting their citizens

borrow and hence consume more and increasing consumption per capita. Now that has ended. Over and above that, several western economies are

rapidly ageing, and older people spend less than younger ones.”
“Can governments do anything about it?”
“Well, nothing that I can think of. Unless of course they force citizens to produce more children,” I said.

This article was published in the Daily News And Analysis on Thursday, September 09, 2010. Please read the original article here.
Tags- Find more articles on - population

Post your Comments on this Article

Name  
Email    
Comment  
Comments will be moderated

More Related Articles
Population - the ultimate resource
More Articles


 
An Initiative of
LIBERTY INSTITUTE, INDIA
All rights reserved.