Essay Plans

What is Economic Growth and how may it be achieved?

POINTS:

  1. Define terms: increase in real output of an economy over a period of time.

  2. An annual growth rate of 3% (in terms of GDP) would mean a doubling of living standards every 25 years. Current UK has achieved this in the six year period up to 1987 (the best performance for 15 years).

  3. GNP (GDP plus net property income from abroad) has to have several corrections to enable us to use it for comparative purposes:-

    • Using a price index, inflation is accounted for

    • Divide by population

    • Somehow account for the costs of growth to arrive at an increase in real output per capital after having been deflated by damage to the environment. Only then may it be meaningfully used to compare living standards.

  4. Thus growth does not measure well-being, but productivity.

  5. Care must be taken with comparing growth rates over a period of time. In point (2) above our current growth rate was praised BUT from 1970-82 the UK growth rate was 19% but the average for OECD countries was 43% (Turkey - 80%, Japan - 72%). If percentages are used, however, this favours developing countries as they start from a lower economic base:

    Country A - 10 12 - 20%
    B - 100 103 - 3% (although in absolute terms B has grown more)

  6. Over time, percentage difference in growth rates - though small - lead to large differences in GNP.

  7. Using a diagram showing a shift in the production possibility curve, the main method of growth may be discussed:-

    • Agriculture - productivity gains owing to investment (also previously the agricultural revolution)

    • Natural resources - and their conversion into usable forms.

    • Investment (machines etc) - this would involve the sacrifice of consumption ie an increase in savings, leading in the short term, to deflation.

    • Technological progress - funding for research (eg in universities).

    • Expectations - people want higher incomes, realise they are attainable, so invest time in education, training.

    • Increase labour supply - quality and quantity - migration policies, school leaving age etc.

    • Improve efficiency to reach boundaries of the production possibility curve. This could mean allowing market forces to work or, as the Cambridge School maintain, import controls and devaluation to get export led growth.

    • Government policies to affect the above - policies to overcome inflation, increase employment opportunities, investment, industrial relations policy ('smash the unions').

  8. In conclusion, some mention should be made of Mishan's article in the National Westminster Bank Quarterly Review (November 1984) in which he argued that the costs of growth included a decline in services provided by women at home (as they are now in employment) growth of public sector has lead to growth in over estimations, is military expenditure a sign of growth? Growth uses finite resources and pollutes the environment.

  9. Readers are further referred to the Economic Progress Report June 1988 which deals specifically with UK Growth.
©2005 Oxford School of Learning Ltd. 66 Sunderland Ave, Oxford OX2 8DU. Tel: 01865 512428
Company Registered in England No. 02031252
email us | Our Privacy Policy | Accessibility Policy |
Approved by the ATW
Web Design by Bat Design