Economic Growth

7 Key excerpts on "Economic Growth"

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  eBook - ePub

  International Money and Finance

  • Anthony J. Makin(Author)
  • 2016(Publication Date)
  • Routledge

    (Publisher)

  C H A P T E R 14 Economic Growth An economy’s growth rate determines its standard of living on an income per head basis. Around the world, living standards differ markedly. For instance, average household income in many advanced economies is at least ten times higher than in many developing economies. Meanwhile, economies in East Asia, including China, Japan, Singapore and South Korea, have experienced rates of growth unsurpassed in human history that have lifted hundreds of millions of people out of poverty over the past half century. This chapter focuses on the key factors influencing trends in GDP growth, around which an economy’s business cycle fluctuates. At the most fundamental level, well-defined property rights and a well-functioning legal system that foster market exchange are essential for sustained Economic Growth. Meanwhile, excessive regulation that restricts economic production and exchange stymies Economic Growth by limiting market exchange. Conventional growth theory explains long-term economic performance with reference to the factor inputs to production – the domestic labour force, the capital stock and technological improvement. Before analysing the relationship between factor inputs and Economic Growth in depth, let us first consider some historical features of Economic Growth in advanced economies. Economic Growth and living standards The composition of domestic production in advanced economies changed substantially over recent centuries. The relative share of agriculture in GDP shrank dramatically, while manufacturing industry waxed then waned, and services grew to account for well over half of GDP. From the beginning of the previous century, the agricultural sector in Australia, the United States, United Kingdom, Japan and other advanced Eurpoean economies ceased to be a major source of employment

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  History of the Future of Economic Growth

  Historical Roots of Current Debates on Sustainable Degrowth

  • Iris Borowy, Matthias Schmelzer(Authors)
  • 2017(Publication Date)
  • Routledge

    (Publisher)

  Introduction The end of Economic Growth in long-term perspective Iris Borowy and Matthias Schmelzer The future of Economic Growth is one of the decisive challenges of the twenty-first century. Since approximately 1820, global Economic Growth has profoundly transformed human life and the planet, and current societies, economies, and cultures are fundamentally built on the expectation of continuing future growth. However, given the exceptional and non-reproducible circumstances, which have given rise to the unprecedented economic expansion of recent history, it seems essentially clear that, irrespective of local or regional developments to the contrary, on a global scale future growth rates will be nowhere near what they have been in the recent past. What is unclear, however, is how societies will react to the end of growth and related crises. What is the significance of Economic Growth in current societies? How did humanity come to develop this dependence on a growth-centered economy? And what possible alternatives are there and how have they evolved historically? These, among others, are the questions addressed in History of the Future of Economic Growth. Although a highly ambivalent and elusive term, the semantic core of Economic Growth is statistically fixed. It is generally defined as the annual increase in the Gross National Product (GNP) or Gross Domestic Product (GDP). GNP and GDP measure the monetary value of all the final goods and services produced within a country, including the costs of producing all the services provided by the government. 1 Since production and services are provided and consumed by the inhabitants of a country, GNP/GDP is related to population. Using per capita GNP/GDP allows comparing the economies of countries of different population sizes

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  Development Economics

  • Gérard Roland(Author)
  • 2016(Publication Date)
  • Routledge

    (Publisher)

  In the second half of the 18th century, Great Britain industrialized its economy, followed in the 19th century by the United States and Europe. Japan, which had been isolated from the rest of the world for centuries and deeply mired in its feudal traditions, started growing very rapidly at the end of the 19th century. As a result of its economic strength, it was able to create a powerful military that defeated Russia’s tsarist army in 1905 and went on to invade and occupy China and large parts of Asia in the 1930s and 1940s. After Japan’s defeat in World War II, its economy continued to develop very rapidly, with GDP growing at 9% on average between 1950 and 1970. Other Asian countries (Taiwan, South Korea, Hong Kong, and Singapore) experienced rapid growth in the 1960s and 1970s by following the Japanese model of an export-oriented economy. Since the 1980s, China, the most populous country in the world, has had GDP growth of nearly 10% per year. As the Chinese “miracle” has unfolded over the past decades, income per capita has increased by a factor of 10. India has also started to grow vigorously since the end of the 20th century. Underscoring the power of these two emerging economies, India and China together include more than one-third of the world population.

  It is important to distinguish between economic development and Economic Growth.

  Economic development

  refers to improvements in living standards and in the quality of life, while

  Economic Growth

  measures only growth in economic production. Economic Growth may not accurately reflect all aspects of economic development because growth often results in negative effects on the quality of life such as pollution and urban congestion. Nevertheless, economic development cannot take place without Economic Growth. Growth is thus fundamental to development.

   

  I

  n this chapter, we introduce some important economic concepts to consider when discussing Economic Growth. We then review two very important theories of Economic Growth that explain the capital accumulation process. We will show that these theories, and others, based on capital accumulation explain only a small part of the differences in growth among countries. We then discuss the empirical evidence for the main causes of growth and highlight two important explanations for why some countries are so wealthy and others are so poor: geography and institutions. Currently, economists believe that institutions are central to understanding economic performance and Economic Growth in developing countries. The impact of institutions on growth will continue to inform our discussion of institutions throughout the remainder of the book.

  Growth and Factors of Production

  When we analyze the sources of Economic Growth, the first thing we must consider is the contribution made by the factors of production.

  Factors of Production

  Consider the output of a firm producing T-shirts. The firm generates output by combining labor and capital (machines, buildings, trucks). Labor and capital are critical factors in the creation of value and in the production of output in an economy. In our example, not a single T-shirt could have left the workshop floor without the combination of labor and capital, which are

  factors of production

  .1

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  The Future is Degrowth

  A Guide to a World Beyond Capitalism

  • Matthias Schmelzer, Andrea Vetter, Aaron Vansintjan, Matthias Schmelzer, Aaron Vansintjan(Authors)
  • 2022(Publication Date)
  • Verso

    (Publisher)

  Bear in mind that GDP is far more than a technical tool for measuring economic activity. It generates a whole grammar that not only shapes economics but also structures shared ideas of the world – above all, through its close connection to the growth paradigm. So, while Economic Growth is a highly ambivalent and elusive concept, its semantic core is statistically fixed: it is defined as the annual increase in GDP or per capita GDP and is usually expressed in percentages.

  The growth paradigm

  The international standardization of statistical measurements of the economy was central to making growth a policy objective. Only through this universalized concept of ‘the economy’, commensurable over time and space, did it become conceivable to measure what was to grow: the sum of market transactions within national borders. Only then did the idea that long-term, stable, and unlimited growth was at all possible and desirable become established.

  In fact, in the political discussions of the early post-war period, the idea of Economic Growth was conspicuously absent. Rather, the central themes were full employment, stability, and reconstruction. Before 1950, there was almost no interest at all in Economic Growth as a policy goal in political statements or economic literature.15 In the following years, however, growth was catapulted to the top of the hierarchy of political goals. At the time, movements for decolonization were arising in former colonies around the world, the Cold War was in full swing, and it became imperative to pacify class struggles in both the Global North and South. Something needed to be done to stabilize Western economic dominance and capitalist class relations. There needed to be a way to show conclusively the progress of capitalist economies. First declared the goal of national economic policy by the chairman of the US Council of Economic Advisers in 1949, it became the globally accepted measure of progress from the mid-1950s onwards. The sociological modernization theories developed by North American and European white men were framed as an irreversible and unilinear process of Economic Growth.16 Cold War competition further fuelled the race for growth, through which governments could show their economic dominance. Growth became the yard-stick for comparing the productivity of capitalist and socialist economies. Emblematic of this crucial phase of the development of the growth paradigm is a 1958 statement by Nikita Khrushchev, chairman of the Council of Ministers of the Soviet Union: ‘Growth of industrial and agricultural production is the battering ram with which we will smash the capitalist system.’17

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  Economics For Dummies

  • Peter Antonioni, Sean Masaki Flynn(Authors)
  • 2010(Publication Date)
  • For Dummies

    (Publisher)

  Part II Macroeconomics: The Science of Economic Growth and Stability

  In this part . . .

  T

  he chapters in this part introduce you to macroeconomics, the study of the economy as a whole, which concentrates on economy-wide factors such as interest rates, inflation and the rate of unemployment. We explain what economists believe causes recessions, and we use the famous Keynesian model to illustrate the policies that economists believe can best be used to fight recessions. Finally, we touch upon the factors that economists believe are essential to promoting sustained Economic Growth and rising living standards.

  Passage contains an image

  Chapter 4 Measuring the Macroeconomy: How Economists Keep Track of Everything In This Chapter Measuring GDP: the total value of goods and services

  Deconstructing GDP into C + I + G + NX

  Understanding why free trade is good for you

  M acroeconomics

  studies the economy as a whole. Seen from on high, the production of goods and services is done by businesses or by the government. Businesses produce the bulk of what people consume, but the government provides many goods and services, including public safety, national defence and public goods such as roads and bridges. In addition, the government provides the legal structure within which businesses operate and also intervenes in the economy in order to do things such as regulate pollution, mandate safety equipment and redistribute income from the rich to the poor. (For more on the division of tasks between private businesses and the government, see Chapter 3.)

  In order for economists to study the process of production, distribution and consumption with any real understanding, they need to keep track of exactly how much is being produced, as well as where it all ends up. Consequently, economists have developed a huge accounting apparatus to measure economic activity, called the

  National Accounts (internationally known as National Income and Product Accounts , or NIPA). This system produces numerous useful statistics, including the famous

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  eBook - ePub

  SDG8 - Sustainable Economic Growth and Decent Work for All

  • Madhavi Venkatesan, Giuliano Luongo(Authors)
  • 2019(Publication Date)
  • Emerald Publishing Limited

    (Publisher)

  2

  Economic Growth

  INTRODUCTION

  Targets 8.1, 8.2, 8.4 and 8.9 of SDG 8 all address GDP as a metric to evaluate progress relative to their attainment. Targets 8.1 and 8.2 use direct measures of GDP and per capita GDP while 8.4 focusses on decoupling Economic Growth from environmental degradation. The focus of 8.9 relates to growth in the share of GDP attributable to tourism with the caveat that tourism be modified to be consistent with sustainability.

  GDP, given its market-based valuation and the exclusion of externalities, such as pollution in its calculation, is not inherently a measure of sustainability. In fact, GDP values can increase as a result of environmental remediation and human health care expenses, highlighting that the metric can benefit from detrimental impacts to environmental and human welfare. Additionally, given that GDP relies on market valuation, it fails to capture the social value of unpaid work, in essence through exclusion, undervaluing the social benefit of child-rearing and elder care.

  This chapter provides an overview of the relationship between Economic Growth, as measured by GDP, and sustainability. Discussed in the sections below are the relationship between GDP based Economic Growth and energy production; energy production and climate change; the concept of decoupling; and the role of consumption in Economic Growth and in achieving sustainable Economic Growth. The discussion surfaces informational asymmetries between economic agents and provides a foundation for the discussion of Decent Work in Chapter 3 and the discussion of the goals of SDG 8 in Chapter 4 .

  MEASURING Economic Growth

  GDP is the global indicator of Economic Growth. GDP was a development of the twentieth century and was constructed to provide the US government with an assessment tool to assist with wartime planning and production needs. Since its introduction in the 1930s, GDP has become the standard global metric for measuring economic progress. The widespread use of the metric resulted in GDP being declared ‘One of the Great Inventions of the 20th Century’ by the U.S. Department of Commerce (2000).

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  Turning Point

  End of the Growth Paradigm

  • Robert Ayres(Author)
  • 2014(Publication Date)
  • Routledge

    (Publisher)

  The Economic Growth Paradigm

  Background

  The time has come to focus at last on Economic Growth from an economics perspective. What is it? How does it occur? Will it continue? Why do I speak of a paradigm? To begin with the last question, it is important to distinguish the paradigm of Economic Growth from two other aspects of the broader problem: the physical possibility of environmentally sustainable Economic Growth, and the socio-political necessity of continuing growth. The growth paradigm, strictly speaking, concerns our assumptions about the definition and mechanism of Economic Growth.

  To be as clear as possible, I do not challenge the physical possibility of very long-term economic expansion, especially allowing for eventual conquest of space and colonization of other planets and planetoids of the Solar System. As to the socio-political necessity of continuing Economic Growth (in real terms), at least for many decades, I have no doubts at all. A world with so much inequity, poverty and destitution can afford nothing else. What I challenge is the necessity of continued growth narrowly based on substituting machines, chemicals and fossil fuels for human workers leaving unemployment, social malaise and environmental devastation in their wake. The use of ever-increasing amounts of non-renewable raw materials and energy, generating ever more pollution and waste, in order to put more people out of work is both immoral and unsustainable.

  But the immediate problem is to understand the phenomenon of Economic Growth better, so as to be able to encourage it to continue more effectively and less destructively. It is too often forgotten that Economic Growth has been a relatively episodic phenomenon in human history. Modest periods of real growth occurred at various times in the more distant past, but growth that took a century in the late Middle Ages is now compressed into a decade, or even a single year. What has changed? Is the change irreversible?

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