CH33 The impact of economic growth Flashcards
what are the 5 benefits of economic growth
-life expectancy tends to be associated with income. SO life expectancy in the UK in 1900 was approximately 49 years. Today it is 82 years.
-people have enough to eat and drink, which was not true in the UK in 1900. In fact, UK consumers are now so rich that overeating is a major problem.
-housing standards today in the UK are very high. There is some inadequate housing but this is only a very small percentage of the housing stock.
-nearly everyone can read and write in the UK. Standards of education are much higher on average than 100 years ago when most children left school at 12.
-health tends to be better. Not only are people living longer on average, but the quality of their life in old age has increased because of better health
what is the most serious anti-growth argument?
the most serious anti-growth argument is that growth is unsustainable.
-each extra % increase in national income is likely to use up non-renewable resources such as oil, coal and copper. It is argued that the world will soon run out of these resources and there will then be economic collapse. Increases in national income are also argued to be associated with greater pollution.
what do some economists argue that economic growth increases?
-some economists argue that economic growth increases inequalities in income and wealth.
-Karl Marx argued that workers would live on subsistence wages whilst all the benefits of economic growth would go to the owners of capital. However, the history of the 20th century in rich countries like the UK and the USA seemed to disprove this Marxist view. Inequalities broadly narrowed and both manual workers and the rich enjoyed rising incomes. However, certainly in the UK and the USA, inequalities have been growing in recent decades. In the case of the USA, the average worker has seen almost no growth in income over the past 25 years at a time when the US economy has been growing on average by 2.5 per cent per year. One explanation is that the average worker today is competing for jobs not within an economy, but globally.
what have surveys shown about the relationship between income and happiness?
they have found that happiness and income are positively related at low levels of income but higher levels of income are not associated with increases in happiness.
what is the Easterlin Paradox?
it is the idea that increases in GDP do not lead to increases in happiness.
-the argument is that an increase in consumption of material goods will improve well-being when basic needs are not met, such as adequate food and shelter. But once these needs are met then increasing the quantity of goods consumed makes no difference to well-being.
what is one important thing to note about the anti-growth lobby?
-the supporters of the anti-growth lobby tend to be people who are relatively well off.
-cutting their consumption by 25%, or producing environmentally friendly alternative technologies, might not create too much hardship for them.
-however, leaving the mass of people in the developing world today at their present living standards would lead to great inequality. A small minority would continue to live below the absolute poverty line, facing the continual threat of malnutrition
what is the impact of economic growth on consumers?
-economic growth should allow households to see rising incomes over time. They can then afford to buy more goods and services.
-however, if the economic benefits of economic growth are appropriated by only the most well off in society, then average households will see no gain. This has been the experience of US households for the past 30 years.
-also there is debate about whether buying more goods and services leads to rising standards and rising levels of happiness. If the Eastern Paradox is correct, economic growth will bring no benefits to consumers in terms of happiness in rich industrialised countries.
what is the impact of economic growth on firms?
-economic growth may provide opportunities for existing firms to increase sales as buyers have rising incomes.
-however, economic growth is accompanied by changes in the structure of the economy. Changing technologies mean that some firms will find their markets disappearing.
-economic growth also provides opportunities for new firms to establish themsleves.
what is the impact of economic growth on the government?
-rising incomes means that gov tax revenues should rise.
-rising private sector spending also tends to lead to demands for similar rises in public sector spending.
-however, the response to rising tax revenues depends upon parties in power. Right-wing govs are more likely to reduce rates of tax and reduce gov services than left-wing govs
what is the impact of economic growth on the environment?
-in rich developed countries, economic growth is likely to lead to less pollution and a cleaner environment. Economic actors are likely to spend on technologies and projects to improve the environment.
-in developing countries, growth in primary and secondary industries is likely to increase pollution and degrade the environment. China for example has a serious pollution problem because of the growth of its heavy industries in recent decades. However, further growth should lead to a cleaning up of the environment in these countries.
what is the impact of economic growth on the economy?
-growth in GDP results in a larger economy. In terms of jobs, growth may result in more jobs being created or there may be fewer if existing workers become more productive
what are the impacts of economic growth on current and future living standards?
-the impact of economic growth on current living standards depends on who receives the benefit of that economic growth. If it is only the richest in society, then it will have no impact on the majority of households,
-However, in developing countries, everyone in society is more likely to benefit from economic growth. The debate about the link between rising GDP and living standards must also be taken into account. The weaker the link, the less economic growth will benefit households and individuals.
what is meant by sustainable growth?
growth in the productive potential of the economy today which does not lead to a fall in the productive potential of the economy for future generations.
