I'm not saying Earth is literally Hell. I'm saying if you assume it is, everything makes perfect sense.
Humans are damned souls. Hell is hellish because all the neighbours are sinful. Demons is a term to refer to damned souls.
Q: Why can't humans make a functioning government?
A: Literally demons.
Ah. Well then.
Q: Why is humanism such a fucked up religion?
A: Literally demon-worship.
Hey. That makes sense.
Q: Why are humans so prone to Pride, in particular?
A: Literally Satan-spawn.
Q: WTF is up with insects?
A: Don't mess with me, you already know.
Can go on like this all day.
More precisely, a demon is a form of dissonant energy. They don't fit in anywhere. However, there's going to be a place where they stand out the least, which will naturally collect this kind of energy. The stagnant pool will likely manifest as a particular specie.
Population growth in Hell is a result of the rest of the universe becoming more degenerate, sinning more often or more flagrantly.
The peasantry is what demons are supposed to be like. Aristocracy is the result of Darwinian selection accidentally (and unstably) creating something worthwhile from the inherently-corrupt gene stock. There's a limit to how bad a situation can get before everything just dies, self-terminating the situation and defeating the spiritual purpose, forcing it to arise again...
Q: Why do the good die young?
A: Those who don't deserve Hell are evacuated from the "Vale of Tears" early. They don't fit in with the misfits and are spiritually repulsed.
S: Life is suffering.
R: For some very restricted definition of "life," yes.