Page 49 - Nuvama | IC Report 2023

INDIA: THE 5D ADVANTAGE

The resultant bouts of surplus population eroded living standards and eventually led to famines or
wars or pestilence. The protagonist Ebenezer Scrooge in Charles Dickens’s Christmas Carol was very
much standing on Malthusian grounds when he rejected the plea for charity, stating, “If they (poor)
would rather die, they had better do it, and decrease the surplus population”.
Much of human history worked on Malthusian logic, but the Industrial Revolution began to change
it right around the time when Malthus was writing. World population has grown exponentially since While it took
then. While it took 700 years for the world population to double to 500 million in 1534 AD, it took just 700 years for
37 years for it to double to 5 billion in 1987. Notably, despite this population explosion, which Malthus world population to
feared, living standards have risen tremendously on the back of sustained expansion in GDP per capita double to 500 million
in 1534 AD, it took
in large parts of the world.
just 37 years for it
In essence, the missing variable in the Malthusian theory – technological improvement – has in to double to 5 billion
fact raised demand for more population. In other words, more workers are needed to realise the full in 1987
potential of the production capabilities that exist today. As British economist Edwin Cannan aptly put
it, “A baby comes to the world not only with a mouth and a stomach, but also with a pair of hands” to
work. But what is true is that, in addition to just a pair of hands, we get one more mind to help tackle
world’s problems (innovation).
Nevertheless, Malthusian fears keep revisiting us. As recent as 1980, economist Julian Simon and
environmentalist Paul Ehrlich made a bet. Ehrlich insisted that commodities such as copper, nickel and
others would become expensive in a decade’s time amid the ongoing population explosion. Simon,
betting on human ingenuity and power of free markets, asserted that prices may fall as more efficient
means of extraction and use are discovered and widely implemented. Apparently, Simon won the bet.
History has repeatedly shown that, given enough time, human ingenuity ultimately turns the tables on
economic limitations. A large population, once thought of as a recipe for doom, is now regarded as a
source of growth and dynamism.

Labour shortages aplenty

The US and Europe are presently facing unprecedented labour shortages. There are almost two
vacancies for every unemployed person in the US. In addition, covid might have structurally altered Labour force
people’s attitudes towards work and life. Labour force participation rate in the US is struggling to get participation
in the US is
back to pre-covid levels despite decadal-high wage growth, high cost of living, and a super-tight struggling to get
labour market.
back to pre-covid
This phenomenon is not just cyclical, it can play out in a structural fashion as well. Major economies levels despite
across the world are now experiencing lower birth rates and higher life expectancies. While the high decadal-high
cost of living, growing intergenerational inequality, and changing societal attitudes have made young wage growth
couples wary of having more kids and has led to decline in fertility rates, improvement in health and
medical sciences has led to the rise in life expectancy.
In China’s case, its government ran an explicit one-child policy for about 40 years till 2015. The upshot
is the rise in old-age population (65 years-plus) and decline in growth of young population, thereby
resulting in a diminishing share of young and working-age population.

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