Costs and Benefits of Economic Growth
A2 Macroeconomics / International Economy
Costs and Benefits of Economic Growth The advantages and disadvantages of economic growth are fiercely debated by economists, environmentalists and other commentators. In this note we consider some of the economic and social costs and benefits from expanding levels of production and consumption. In particular we focus on the idea of sustainable growth.
The Benefits of Economic Growth
According to the UK government, ‘a healthy economy leads to higher living standards and greater prosperity for individuals. It also helps businesses to be profitable, which generates employment and income’. This quote highlights some of the benefits of growth – developed further below:
Improvements in living standards: Growth is an important avenue through which better living standards and lower rates of poverty can be achieved. This is particularly true for countries who regard growth as a key route for poverty reduction among their population. According to a report published in August 2004 by the Asian Development Bank (ADB), rapid growth in many of the countries in the Asian region has reduced the number of people living on less than $1 a day fell to 22% of the region's population in 2002. That compares with 34% in 1990 and shows "considerable progress in the fight against poverty."
Rising Employment: Growth stimulates higher employment. As we can see from the chart below, the sustained growth in the British economy since 1993 has helped to bring about a large rise in total employment, the number of people in work has risen from 2.53 million at the start of 1993 to nearly 29 million thirteen years later. This is a very impressive employment creation record, much better than most other countries in the European Union.
The accelerator effect of growth on capital investment: Rising AD and output encourages investment in capital machinery – this helps to sustain growth by increasing LRAS.
Greater business confidence: Growth has a
Costs and Benefits of Economic Growth The advantages and disadvantages of economic growth are fiercely debated by economists, environmentalists and other commentators. In this note we consider some of the economic and social costs and benefits from expanding levels of production and consumption. In particular we focus on the idea of sustainable growth.
The Benefits of Economic Growth
According to the UK government, ‘a healthy economy leads to higher living standards and greater prosperity for individuals. It also helps businesses to be profitable, which generates employment and income’. This quote highlights some of the benefits of growth – developed further below:
Improvements in living standards: Growth is an important avenue through which better living standards and lower rates of poverty can be achieved. This is particularly true for countries who regard growth as a key route for poverty reduction among their population. According to a report published in August 2004 by the Asian Development Bank (ADB), rapid growth in many of the countries in the Asian region has reduced the number of people living on less than $1 a day fell to 22% of the region's population in 2002. That compares with 34% in 1990 and shows "considerable progress in the fight against poverty."
Rising Employment: Growth stimulates higher employment. As we can see from the chart below, the sustained growth in the British economy since 1993 has helped to bring about a large rise in total employment, the number of people in work has risen from 2.53 million at the start of 1993 to nearly 29 million thirteen years later. This is a very impressive employment creation record, much better than most other countries in the European Union.
The accelerator effect of growth on capital investment: Rising AD and output encourages investment in capital machinery – this helps to sustain growth by increasing LRAS.
Greater business confidence: Growth has a