Most of the readers would say, its a no brainer. More the population more the poverty. and it can be proven based on data. Look at India, China. Look at parts of United states where there is huge population, all these areas tell the same story. If this is so obvious, then why am I writing on this topic?
Let us start with understanding the very basic of the economy. Have you ever asked how much do you pay for your fuel, or for food or any item. Fuel is available in earth, what we (supposedly) pay for is cost of the effort. When you pay $2 for bread, you pay for the effort of the farmer, baker, marketing, sales etc. All this payment is only for the effort of humans. Or at least supposed to be for the effort of the humans. If that is true, in the developed world with currencies and commodity trading (which is fairly regulated across the globe) why does poverty is directly proportional to population?
If a country has more population, it has more manpower which is what you pay for while buying any product or service.... With this logic, all the countries with more population should be able to create more wealth hence more progressed hence standard of living of these countries should actually be much higher...
Let me try to help you find the solution through simple psychology and philosophy theories.
Human is a intelligent social selfish animal. At the core, Human is an animal, then a selfish animal and social only because he is selfish. He may not have been interested in being selfish if he was not given a motivation of either financial or emotional. And these motivations are based on the basic traits of an animal. And he developed intelligence to win over other species or fello humans.
In earlier days there used to be different groups of humans living together invading on other groups for land, food or sex. In todays world it is replaced by boundaries of countries. It is desirable for each of the countries to have their population in a good standard of living. So called developed nations are little ahead of the curve to have higher standard of living. And they have been using people from other part of world to create wealth for them (slavery in US, Invasion of England etc.) But again the argument is that - this happened in last century of even earlier. Today most part of the world has free trade and open policies. then why does it still happen?
the answer lies in the efficiency of conversion (from raw material to finished good), available resources (tangible and intangible), experience and knowledge, etc.
If we as human kind really want to help and support each other, we need to provide all the above things to all those who actually need it. Today, the rich countries provide financial benefits to poor countries. There are a lot of fundraisers who raise funds and help people in poor countries. But this is exactly what is making the not so well developed nations dependant on the developed nations.
This post talks at macro economy point of view and does not talk about how it could be handled at an individual level. I will try to cover individualistic point in my later posts...
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Welcome to the blogging world. Very well articulated first post.
ReplyDeleteYour first post is very interesting,it shows that you are good at it and should write more.
ReplyDeleteThis guy is like the most haraami blogger I've ever known
ReplyDeleteSeems very int interesting since this blog defines the definition of a human being.
ReplyDeleteThough I don’t disagree with some of your analysis- but the relationship between population and standard of living, in your article is simplistic. You mentioned the cost of bread, or for that matter a satellite, is entirely labor – I must draw your attention to Adam Smith’s Wealth of Nation. If my memory servers me right, in his analysis he has reduced the price of any commodity to ‘Rent’, ‘Labour’ and ‘Profit’. Which does not in anyway reduce your argument, however bringing the other two into picture ‘Rent’ and ‘Profit’ makes the dynamics slightly more complicated.
ReplyDeleteAdd to this the role of ‘Capital’(which will command ‘rent’) and the picture does not look very exciting for the ‘Labour’. This is what, I guess, Marx tried to explain in his ‘Communist Manifesto’ i.e. that the capitalist controls the mode of production and it is in his interest to keep making the mode more efficient and reduce his dependence on the ‘Labour’. As per him with industrialization, and control of production by the large industrial complex, the individual, be it artists, farmers, craftsmen are all reduced to wage earners. The profit that is earned (which goes to the owner of the Capital) is the difference between the market value of the product and what gets paid to the labour. So the capitalist keeps investing in better means of production and reduce dependency on the human. The question is how long the wages can keep going down- and the apparent answer is that it will seek the absolute bottom i.e. wages just enough to keep the individual alive.
From what I understood is that the wages will keep going down till they reach a point that the individual resource i.e. labour cannot sustain below that earning. The Communist Manifesto was written around 1848, but surprisingly the mechanics of labour and capital as explained by Marx do seem to make sense even today. To test this theory in modern capitalistic system you need to look at a simple example – Say a T-shirt worn by an American or for that matter anyone else on the planet – A large part of them would be make say in China or Bangladesh. The capitalist has found a way to invest in a more cost efficient mode of production- if you look at the working condition of the Chinese or Bangladeshi worker it will be clear what Marx meant by ‘keeping them alive’.
Of course this is still a simplistic explanation: The number of factors influencing the price of labour being too many! The movement of Labour, Capital and Services in a connected world would greatly influence that. The demand-and-supply factors impact ‘Tradable’ commodities mush more that ‘Non-tradable’ commodities(‘Tradable’ are commodities that can be transported as sold in different markets).
With the rapid change in technology the very list of commodities that are tradable or not, keep changing. Land will never be tradable, so a shortage of real estate in London cannot be made up by abundance of constructed yet unsold apartments in Pune. ‘Wealth’ which was primarily land and cattle was mostly non-tradable, certainly not easily tradable, till a 100 years ago. Even if you could convert it to gold, a person having abundance of wealth in India could not easily be able to invest that in say American. But today capital can flow from Tokyo to New York to London to Bombay to Singapore within hours. Labour has become lot more ‘Non Tradable’ now and it may not be possible for a colonial power to take indentured Indian labours to work on farms in Africa and West Indies- but technology suddenly has made in Indian programmers available to American corporations through the communication link.
The cause-and-effect relationship between population and poverty/prosperity is not obvious to me! Does population lead to more poverty or does poverty lead to more population? Also this needs to be seen within the dynamics of migration rather than a static picture of the population; Does a more prosperous place attract more people i.e. migration from poorer countries to more prosperous ones, or movement of landless labours to mega cities like Bombay!
Though UN has its millennium goal or eradicating poverty- its already several years behind its intermediate milestones. The problem is not that there isn’t enough wheat to feed the poor- the problem is that its too expensive to collect and distribute it to them! Also a situation where there is too much excess production of food grain is not a good situation for farmers, who would start committing suicide(there is a long history of that) if there is abundance of crop resulting in a drop in prices!
My sense is that even the best economist in the world are struggling with this and no one dare say say that they have at least a theoretical answer to the problem of poverty.