Positive and Unfavorable impacts of Economic Growth
Keywords: confident impacts of economical growth, unwanted effects of economic growth
Jump to: Positive Impacts | Negative Impacts | Conclusion | References
The concept of monetary growth is one which has attracted the curiosity and focus of researchers worldwide. Weil (2013, p. 12) identifies economic growth as
a “compelling topic” and a rapidly expanding field, based on the significant upsurge in how much research upon this topic. Bolton and Khaw
(2006, p.1) declare that economic growth is “the just about all fundamental indicator of an economy’s health”. They establish it as the amount of growth
of the national profit of a region, measured by the twelve-monthly percentage rate of modification of country’s gross domestic product. According to Mankiw
(2010), economic growth is one of the explanations why advanced countries have become richer and have improved standards of living. As such, there have been a
number of models targeted at studying economical growth, factors that result in economic growth, and the reason why behind the differing rates of economic growth
among nations. Economic progress in addition has attracted attention due to the positive effects it is wearing society, as it has been associated with benefits such
as increased riches and benchmarks of living amongst others. Barro and Sala-i-Martin (2004) state that aggregate growth is possibly the single most important
factor influencing individual profit levels. However, monetary growth has also had negative impacts on world. This essay shall go over both the positive
and negative impacts economical growth has already established, using practical examples to illustrate these.
Positive impacts of financial growth
Improved living standards
When wealthy countries today are compared to their own history, there exists a great difference in the benchmarks of living (Weil, 2013). As Weil (2013, p. 22)
observes, there’s been an unprecedented increase in living standards generally in most parts of around the world the last 50 percent century. While the life expectancy of
a person born in Japan in 1880 was 35 years, today the life expectancy in Japan has truly gone up to 83 years. Also, the average worker in the United States
would have had to job for 333 hours to buy a refrigerator. Today, a better refrigerator can be bought in 20% of this time by the average worker. While
having a reading light in the night time was once a luxury which only the rich could manage, today about 75% of the environment has access to electricity in
their homes (Weil, 2013, p. 22).
Reduction in poverty
Studies have shown that there is a positive relationship between monetary growth and the amount of poverty decrease in developing countries (Pernia and
Quibria, 1999; Tisdell, 2008). Barro and Sala-i-Martin (2004) report that there’s been a significant increase in the global per capita GDP from 1970 to
2000 with the average indivdual clearly getting richer over time. They note that there’s been a shift in the world distribution of cash flow to the right (See
figures 1 and 2 below) and a positive income evolution generally in most countries worldwide. It has meant that people will be able to afford more and will improve
their standard of living. Weil (2013, p.23) as well notes that countries such as for example South Korea have made the transition “from pauper to an commercial power
within a generation”.
Number 1 The Community Distribution Of Income In 1970
Supply Barro and Sala-i-Martin (2004, p.8)
Body 2 The World Distribution Of Cash flow In 2000
Source Barro and Sala-i-Martin (2004, p. 9)
While there is a lot of literature on the effect of education on financial growth, with considerable facts showing that education has a positive impact
on economical growth, reverse causality, i.e. the effect of higher economic expansion on education may, as The Universe Bank (2007b, p. 4) notes “be at least
as significant as the causal result” education has on expansion. Asteriou and Agiomirgianakis (2001), in a study of the relationship between economic
growth and education in Greece, found that GDP and all educational variables applied will be cointegrated, thus indicating that a positive long-run relationship
exists between economic progress and education. They additional explain that the higher the amount of economic development, the bigger the demand for higher
education. This may be because as the economy grows and GDP per capita increases, the government and/or people will, on average, have more to invest on
education, with regards to increasing the number of people who have access to education at all amounts, and also improving the standard of education by hiring
more teachers, a wider usage of educational materials, books etc.
Improved technology and infrastructure
As economies continue to experience growth, the amount that is spent on infrastructure such as transportation networks, communication, electric power, gas,
water supply along with various technologies has also increased. In a report of infrastructure and long haul economic progress, Canning and Pedroni (1999)
reported that they discovered strong proof the influence GDP has on the infrastructure inventory in a society. It has in turn led to an improvement in
living expectations of the populace in general, and has also led to further increases in economical growth (Barro and Sala-i-Martin, 2004; Canning and Pedroni,
Improvements in living specifications due to economic growth have also resulted in improvements in the health of the population generally, as they have more of
things such as food, shelter and clothing than can permit them to live longer. It is because, as Frenk (2004) notes that poverty, through child
malnourishment and mortality, comes with an adverse effect on life span. Education can also have a positive effect on health aswell (Todaro and Smith,
2011; Weil, 2013). Preston (1976) as cited in Bhargava et al (2001) mentioned that economical development is the most crucial factor determining life
expectancy. This positive romantic relationship between health and monetary growth was as well confirmed in a report by Rivera and Currais (1999) in a report of the
relationship between both of these variables. They pointed out that the association between a growth in income and wellness status goes in both directions.
Todaro and Smith (2011) report that in 1950, 280 out of every 1000 children in the developing community died before the age of five. Nevertheless, by 2008, this
number fell to 118 per 1000 in low income countries, and 57 out of every 1000 children in middle income countries. Thoa et al (2013) also remember that
households which have experienced economical growth spent less on healthcare, but had better quality treatment and were better off with regards to utilisation of
health services, additionally noting that these results were statistically significant.
A number of the reasons for this are that with an increase of incomes brought about by economic growth, governments along with individuals are able to spend more on
health regarding health establishments and infrastructure, improved diet and sanitation, analysis on diseases, improvements in medical technology etc.
According to Frenk (2004, p. 1), “national impact has a direct influence on the development of health and wellbeing systems, through insurance coverage and public
spending”. Frenk further more cites the 1997 WHO Commission on Macroeconomics and Well being for a panel comprising 167 countries, which observed that
although expenditure on wellbeing is set mainly by the national income, it increases faster than cash flow. Thoa et al (2013) also remember that, based on
their studies, when the level of government expenditure on well being is high, then it has a positive influence on the quality of health care, compared with
low profits areas where out-of-pocket (OOP) expenditure on health care has significant negative monetary results on households. This so highlights
the influence of economical growth on health. Nevertheless, Weil (2013) highlights that at another serious, in developed countries, diseases brought on by
too much meals have replaced those due to too little food as a major health issue. Although improvements in technology and heightened research could
also cause improvements in health care in general, these problems along with several others are still associated with financial growth. Other such
problems will subsequently be reviewed within the next section.
Negative impacts of economic growth
Generally, economic growth is wonderful for the welfare of an economy. However, as Acemoglu (2009) notes, it tends to build both winners and losers.
Schumpeter (1942) also coined the term ‘creative destruction’ which highlights the way the progress due to economic growth could result in a
destruction of an old economic structure, along the way of creating a fresh one. Regarding to Cox and Alm (2008), this implies that a society cannot reap
the benefits of innovative destruction without acknowledging that you will have some individuals who will conclude being worse away. Acemoglu (2009, p. 8)
states that “productive associations, firms and sometimes individual livelihoods will come to be destroyed by the process of financial growth, because growth
is brought about by the introduction of different systems and creation of different companies”, and these replace businesses and technologies currently in existence.
Economic growth also leads to a shift in the composition of creation, with a move from agricultural and manufacturing to services. For example, in the
United States, at the start of the nineteenth century, around 90% of the population was engaged in agriculture. However, in the second half of the
nineteenth century, there was a significant decline in the percentage of employment in agriculture, and a rise in both making and services to
over 20% of work. Over the years, both the shares of occupation in agriculture and manufacturing have experienced a decline, while over 70% of the
current U.S. people now work in service industries. Shape 3 below illustrates this pattern.
Figure 3 The Show Of U.S. Career In Agriculture, Making And Services, 1800-2000.
Source Acemoglu (2009, p. 698).
Similar trends are also seen in Britain and all the Organisation for Economic Cooperation and Expansion (OECD) countries (Acemoglu, 2009;
Mokyr, 1993). This shift in the structure of production may subsequently have possible adverse effects on those engaged in agricultural actions. However,
in the long term, this might not exactly necessarily be considered a negative effect on the whole. This is because with a shift in the structure of production to providers, there
has also been an increase in household income in general, as earlier stated. Furthermore, despite a decline in the percentage of individuals employed in
agriculture, improvements in technology have resulted in an increase in agricultural output generally speaking (Sachs, 2009; Todaro and Smith, 2011).
Another aftereffect of this technique of ‘creative destruction’ may be the creation of natural sociable tension. Because widespread structural
transformations quite often accompany the development and creation of an market, some relationships which may have been previously established could be destroyed,
again creating additional winners and losers (Acemoglu, 2009).
As before highlighted, there will be newer wellbeing challenges arising with boosts in monetary growth. Frenk (2004) points out that health systems
currently face complex problems due to new pressures such as for example ageing populations, an increase in
the occurrence of serious illnesses, and a rigorous use
of health technologies which, while important, are also high-priced. Bloom and Canning (2008, p. iv) further note that increases in size which arise because of economic
growth may possibly become outweighed by the influence increased survival rates have on population expansion, “until a fertility changeover occurs”.
On the other hand, Bloom and Canning (2008) also point out that this could be addressed by, among other activities, carrying out low cost health interventions that have
large-scale effects on the fitness of the population and positioning a higher priority on coping with illnesses which are ‘neglected’ but
widespread, i.e. those that while having low mortality costs, have significant effects on productivity. Furthermore, with an increase of access to information,
campaigns on relatively low cost ways to improve the health of the population such as eating the proper types of food in the right portions can minimise the
aftereffect of over-eating, or eating large quantities of food with low vitamins and minerals. Examples of such include the five a day campaign taking place in
various developed countries like the United Kingdom and america, which involves eating recommended portions of vegatables and fruits daily
(Briggs, 2014; NHS Options, 2014). Briggs (2014, p. 1) states that facts from studies implies that an increasing the consumption of fruit and vegetables
“is associated with a lesser threat of all-cause mortality, specifically cardiovascular mortality”.
Increase in Income Inequality
An increase in profit inequality is another possible effect of economic growth. Relating to Barro and Sala-i-Martin (2004), there has been an increase
in the dispersion of salary distribution for several countries from the period 1970 to 2000, which as previous noted, was an interval with increased
economic progress. They cite the example of China and some other large countries that have experienced a growth in profits inequality. Weil (2013) as well notes
that over a 188-year period from 1820 to 2008, the gap between your rich and the indegent has widened noticeably. In 1820, Weil notes that thesis synonym the income per
capita of the richest the main world was 3 x that of the poorest portion of the world. However, in 2008, this income per capita ratio risen to
seventeen to one. The experience of South Africa likewise illustrates this on a region level. As Acemoglu (2009) observes, based on data available from the
start of twentieth century till the collapse of apartheid, there is a considerable upsurge in GDP per capita in South Africa. However, dark South
Africans, who comprised nearly all South Africa’s population, truly experienced a fall in serious wages. Experiences such as these could possibly be one
of why some parts of society tend what is an mixture to support institutions and policies which do not necessarily inspire growth.
Salary inequality is a significant issue because it causes several other adverse effects. These include economic inefficiency, undermining of social
stability and solidarity and its unfairness to some parts of the society generally (Todaro and Smith, 2011). As Todaro and Smith observe, as income
inequality boosts, the fraction of a inhabitants that can qualify for some kind of credit reduces. When low profit folks are unable to borrow
money, they may also be unable to afford education for his or her kids, start businesses, and save, thus consequently resulting in less overall rate of
saving in the world. High inequality also encourages hire seeking behaviour, where in fact the rich focus on encouraging outcomes which benefit them and could also
divert resources from successful purposes that could further enhance growth to other less effective purposes. Nevertheless, increased investments in
public wellbeing, education and additional relevant infrastructure could help reduce this adverse effect of income inequality.
Increased pollution in addition has been cited as a drawback of economic growth. The World Lender (2014) states that even though many people have benefited from an
improved quality of life due to monetary growth, these benefits have not been also, and financial growth usually has bad environmental consequences.
According to The World Bank (2014), the rate at which natural resources, i.e. land, normal water and weather, are being degraded in many countries is
‘alarming’. The fitness of many can be threatened by factors such as air pollution, waterborne disease and contact with harmful chemicals. This
is particularly hence in developing countries due to their high levels of reliance on natural resources, a limited capacity for adaptation to the changing
climate, and limited resources to solution the effects of these changes. Furthermore, with alterations in the environment globally, addititionally there is an increased risk
of all natural disasters and other environmental risks (The Universe Bank, 2014).
However, there’s been conflicting evidence about the relationship between economical growth and various environmental indicators. In a report of
economic growth and the surroundings, using various indicators incorporating concentrations of urban air pollution and various contaminants of river basins,
Grossman and Krueger (1994) found no evidence an increase in monetary growth brings about a deterioration of environmental quality. They observed that
while there was an initial period of deterioration, this was subsequently followed by an improvement phase, as a result negating the deterioration effect.
Nevertheless, in a study of the cost of pollution in China, The Universe Bank (2007a) states that although strong financial growth in China during the last
one fourth of the century has had positive impacts on the surroundings due to improved source utilisation, increased energy performance, pollution control
efforts, technologies which will be cleaner and more energy conserving, and implementation of guidelines for environmental pollution control, new challenges have
also been created. For example, energy consumption raised by 70% from 2000 to 2005, coal consumption increased by 75%, polluting of the environment emissions have
either risen or remained the same, and surface water top quality deteriorated from 2000 to 2005. This has led to not only increased pollution, but also a
depletion of resources in general.
In a study of the relationship between energy usage and economic growth using period series data from Asian developing countries, Asafu-Adjaye
(2000) reported that large levels of economic growth bring about higher energy demand levels. Even so, he notes that to ensure that an increase in the demand for
energy never to have a negative effect on economic growth, then energy conservation policies which are focused on reducing energy usage need to discover
methods of reducing customer demand. Asafu-Adjaye (2000) points out that this can be achieved through a suitable mixture of taxes on strength, subsidies, together with
making efforts to inspire industries to adopt systems which minimise pollution.
Economic growth is a significant field of study, due to the significant impact it has on the society generally, plus the various units that make up the
society. This essay has got examined both the positive and negative ramifications of economic growth on society. Some of the positive impacts include an increase in
wealth/decrease in poverty, improved standards of living, overall health, education and infrastructure and technology. It had been also noted that in a number of
cases, the causality ran both ways. For instance, while monetary growth can have results on overall health, education and infrastructure, these subsequently
also have results on economic growth. The negative effects discussed however include creative destruction, natural social stress,
health challenges, upsurge in income inequality, raised pollution and a depletion of natural resources. Examples from numerous countries have already been used
to illustrate these results. Furthermore, various suggestions and advice were highlighted on how to counter some of the negative effects economic
growth can own. While these might not exactly totally get rid of these negative impacts, they can nevertheless go quite a distance in minimising the unwanted effects and
enhancing the positive effect monetary growth can have.
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