How does economic growth affects the society?

How does economic growth affects the society?

Economic growth is a long-term expansion of a country’s productive potential.

China and India are examples of very fast-growing countries. Their annual growth has far exceeded that for most advanced economies; China has out-paced India although both have experienced a slowdown in growth over the last couple of years.

There have been numerous research studies in what determines long term GDP growth. Every country is different, each factor will vary in importance for a country at a given point in time. The advantages of economic growth are higher living standards where there will be an increase in real income per head of population and also employment effects where growth stimulates more jobs to help new people as they enter the labour market. Growth can also help protect the environment such as low-carbon investment, innovation and research and development, resulting in more efficient production processes to reduce costs.

There are also disadvantages of an economic growth. Firstly, it is the Inflation risk. If demand races ahead of aggregate supply the scene is set for rising prices. Many fast growing developing countries have seen high rates of inflation in recent years, a good example is India. Secondly, the working hours of adults will be increased. A fast-growing economy places increasing demands on the hours that people work and can upset work-life balance. Lastly, there will be a structural change. Although a growing economy will be creating more jobs, it also leads to structural changes in the pattern of jobs. Some industries will be in decline whilst others will be expanding. Structural unemployment can rise even though it appears that a country is growing – the labour force needs to be occupationally mobile. There are also environmental concerns such as fast growth can create negative externalities for example higher levels of noise pollution and lower air quality arising from air pollution and road congestion, increased consumption of de-merit goods which damages social welfare. It can leads to a huge increase in household and industrial waste which again creates external costs for society.Growth that leads to environmental damage may lower the sustainable rate of growth.  Examples include the destruction of rain forests through deforestation, the over-exploitation of fish stocks and loss of natural habitat and bio-diversity created through the construction of new roads, hotels, retail malls and industrial estates.Deforestation releases more CO2 into the atmosphere each year than all of the world's planes, trains and automobiles put together. Globally, an area almost the size of England and Wales is cut down every year releasing billions of tons of CO2 into the atmosphere.

Not all of the benefits of growth are evenly distributed. A rise in real GDP can lift millions of people out of absolute poverty but it can often be accompanied by widening income and wealth inequality in society that is reflected in an increase in relative povertyIf inequality grows as a country becomes richer, this raises important questions about a potential trade-off between equity and efficiency. 

Fast growth often lead to a widening of inequalities in both developed and developing countries. Examples are very high increases in the pay of people in the top-paying jobs – market-based economies offer the highest rewards to households with the most valuable skills, education and access to capital , increasing wealth including rising property prices – fast-growing economies will often seen a rapid increase in property prices, growing gaps between urban and rural areas with rural poverty on the increase, high fertility in the poorest households and linked effects of inequality in health and education.

-Teo Lian Wei Vesy (20) 2E