The Effects of Population Growth on Economic Development

shapecharge/E+/GettyImages

As more people move into an area, local residents have mixed reactions. On one hand, you want access to the best shops, restaurants and amenities, but on the other, you don’t like the traffic and crowds that new residents bring. But on a more general scale, population growth can strain economies unless there are enough people and resources to support it.

Effect of Population on Resources

Population growth was a concern as far back as 1798, when English economist Thomas Malthus predicted that it would eventually reduce overall living standards. Looking around, it’s apparent that there’s only so much land to go around, and this also extends to the water we drink and the food we consume. Over time, this growth will eventually lead to starvation and thirst, he said, leading to his advice that mankind limit their procreation.

As insightful as Malthus may have been, though, he couldn’t possibly have foreseen the advancements in technology that now help with manufacturing and production. There’s also an awareness of these dangers that leads consumers to conserve. Malthus didn’t factor in activities like recycling and sustainable manufacturing practices. But at the same time, there are many areas of the world that lack access to basic resources like clean drinking water, yet continue to attract a growing population.

Population and Economic Development

In developing areas of the world, population growth can seem to have a positive effect on local economies. But is this growth always a good thing? Additional people provide a workforce necessary to generate goods and services. However, in some cities, rapid growth leads to skyrocketing housing prices and unmanageable traffic. Instead of focusing on adding to the population, cities like Huntsville, Alabama have made an effort to attract large corporations and improve services to residents. This allows for a more gradual level of growth that doesn’t overwhelm the local infrastructure.

One example of the impact of population on economic growth can be seen in Detroit, where the local infrastructure suffered dramatically as people moved away. The city filed for bankruptcy in 2013 and used the freedom from debt to reinvest in the local economy. But today, government officials still work hard to boost the middle-class population in the area, while also dealing with struggling schools and neglected buildings.

Government officials who focus on growth may find that they suffer the consequences of poor planning. As valuable as an increasing population can be to businesses and local residents, it can also bring problems like heavy traffic and limited resources, driving housing costs up and creating a higher demand for local services than can be supported.

References

Resources

About the Author

Stephanie Faris is a novelist and business writer whose work has appeared on numerous small business blogs, including Zappos, GoDaddy, 99Designs, and the Intuit Small Business Blog. She worked for the State of Tennessee for 19 years, the latter six of which were spent as a supervisor. She has written about business for entrepreneurs and marketing firms since 2011.