Peter Bauer

From Subsistence To Exchange And Other Essays

It seems prima facie commonsensical that prosperity depends on natural resources—namely land and mineral resources—and also capital and that population growth reduces the per capita supply of these determinants of income. Indeed, if nothing else changed, an increase in population must reduce income per head: and this must be true in the very short run. However, this simple analysis reveals nothing about developments over a longer period. Then, other influences affecting productivity become significant other influences that can be elicited or reinforced by an increase in population. These influences include the spread of knowledge, division of labour, changes in attitudes and habits, redeployment of resources, and technical change. Economic analysis, in short, cannot demonstrate that an increase in population must entail reduction in income per head over a longer period. There is ample evidence that rapid population growth has certainly not inhibited economic progress in either the West or the contemporary Third World. The population of the Western world has more than quadrupled since the middle of the eighteenth century. Real income per head is estimated to have increased fivefold at least. Much of the increase in incomes took place when population increased as fast as in most of the contemporary less developed world, or even faster.

Similarly, population growth in the Third World has often gone hand in hand with rapid material advance. In the 1890s, Malaya was a sparsely populated area of hamlets and fishing villages. By the 1930s, it had become a country with large cities, extensive commerce, and extensive plantation and mining operations. The total population rose through natural increase and immigration from about one and a half million to about six million, and the number of Malays increased from about one million to about two and half million. The much larger population had much higher material standards and lived longer than the small numbers of the 1890s. Since World War II a number of LDCs have combined rapid population increase with rapid, even spectacular economic growth for decades on end, for example, Taiwan, Hong Kong, Malaysia, Kenya, the Ivory Coast, Mexico. Colombia, and Brazil.

Conventional views on population growth assume that endowments of land and other natural resources are critical for economic performance. This assumption is refuted by experience in both the distant and more recent past. And there is much additional evidence that works in the same direction. Amid abundant land, the American Indians before Columbus were extremely backward at a time when most of Europe, with far less land, was already advanced. Europe in the sixteenth and seventeenth centuries included prosperous Holland, much of it reclaimed from the sea, and Venice, a wealthy world power built on a few mud flats. At present, many millions of poor people in the Third World live amid ample cultivable land. Indeed, in much of Southeast Asia, Central Africa, and interior of Latin America, land is a free good. Conversely, land is now very expensive in both Hong Kong and Singapore, probably the most densely populated countries in the world with originally very poor land. For example, Hong Kong in the 1840s consisted largely of eroded hillsides, and much of Singapore in the nineteenth century was empty marsh land. Both these countries are now highly industrialized and prosperous communities. The experience of other countries in both the East and the West points in the same direction. Poor countries differ in density. For example, India's population density is some 750 people per square mile, while Zaire's density is approximately 40 people per square mile. And prosperous countries differ in density. Japan's density is some 850 people per square mile, while U.S. density is approximately 70 people per square mile. All these instances underline the obvious: the importance of people's economic qualities and of the policies of governments.

It is pertinent also that productivity of the soil in both prosperous and poor countries owes very little to the 'original and indestructible powers of the soil,' that is, to land as a factor in totally inelastic supply. The productivity of land is the result largely of human activity: labour, investment, science, and technology.

The wide differences in economic performance and prosperity between individuals and groups in the same country with access to the same natural resources also make clear that the availability of natural resources cannot be critical to economic achievement. Such differences have been, and still are, conspicuous the world over. Salient examples of group differences in the same country are those among Chinese, Indians, and Malays in Malaysia; Chinese and others elsewhere in Southeast Asia; Parsees, Jains, Marwaris, and others in India; Greeks and Turks in Cyprus; Asians and Africans in East and Central Africa; Ibo and others in Nigeria; and Chinese, Lebanese, and West Indians in the Caribbean. The experience of Huguenots, Jews, and nonconformists in the West also makes clear that natural resources are not critical for economic achievement. For long periods, these prosperous groups were either not allowed to own land or had their access to it severely restricted.