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Seeking Economic Growth with Long Run Interest

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Pursuit of economic growth

For any country, in order to develop it is essential that it has to produce many goods and services. Economic growth is the main target that every country is aiming for. However, the road for the growth of economics for any country has its gains and problems. This essay will examine the advantages and the disadvantages of pursuing the economic growth in the long run interest.

In order to examine to topic, it is important to how to measure economic growth and why economic growth of a country happens. Economic growth is measured by the annual percentage rate of a country’s Gross Domestic Product (GDP), which is determined by the market value of goods and services which are manufactured by the economy during a certain period of time. It is considered to be “the most fundamental indicator of an economy’s health” (The guardian, 2006)(1). For example, United Kingdom, which is a developed country, has a GDP level of 2.472 trillion dollar by 2012 (Worldbank)(2). The main reason of economic growth is the consistent growth of demand. This can be caused by an massive growth of money expenditure. This is because if the government lowered interest rates to try and make people buy more and spend less. People will go out and borrow money to buy houses and cars, which they would normally not be able to afford because their income cannot help them to pay with normal interest. This results in economic growth. However, this only can help countries to pursuit economic growth in the short run. In order to pursuit in the long run, there are number of requirement that needs to be met. Firstly, natural resources are important, especially land. If a country has many natural resources, this will give it a strong boost in the pursuit. Secondly, in a world nothing is free; it is required capital to pursuit the growth. Thirdly, the greater the level of growth, the more demand from the labour. Government need to spend more government expenditure (taxes) on education in order to help people to have more business skills, which is essential in the long run.

Every issue always has two-side. Economic growth also has benefits and drawbacks. On the one hand, there are a number of advantages for pursuit economic growth. First, economic growth helps the people to increase their income. The more economic growth gets, the higher demand for labour require producing more goods and services, which means more job opportunities. Economic growth will make people want to consume more. If the rate of population growth is smaller than economic growth outstrips population growth, real income per head will be increased. This may result to a higher level of consumption of goods and services which is required to satisfy because people now have more money to spend. Consequently, higher expectations will begin to appear. Organisations will need more investment in order to improve their productivity. Investment is required to make improvements and make the obsolete disappear. The more economy grows the more investment it will attract because country with high GDP rate brings more confidence to investors. Because of the rise in demand, the level of output will be increased. In order to meet the targets, firms will need more labour workforce. Therefore, more people will be employed so people .Consequently, people are able to afford higher quality goods and service to satisfy their needs. Furthermore, the level of unemployment will be reducing due to the higher outcome manufacturer require more labour forces. Secondly, economic growth also improves better standards of living. With the increase of consumption of goods and services, society gets more money to improve standards of living. Economic growth helps government to differentiate income from the rich to the poor without losing. The money gained from taxes can be used to fight against poverty and improve services. Government can spend more money on public services such as National Health Care (NHS), education and the environment… With more money which is spent on health care service, this improves quality of life through treating diseases and life expectancy. With the increase quality of health care, people can live longer. Therefore, it is possible to produce more goods and services. Education is the most crucial determinant element of welfare. The more money is spent on education, the higher goods and services organisations can manufacture due to higher degree of workforce. Furthermore, education makes people understand the importance of preserving the environment. When people became richer, people are able to afford to take care of the environment. People are more concerned about the environment where they are living. Therefore, new regulations have been introduced by the government to ensure that people have a clean environment (for example, the Clean Air Act to prevent the Great Smog in 1952 from happening again). With the increase of real GDP, people can use more resource to limit the use of natural resources and promote renewable resources. The government can promote recycling through education. However, economy growth still has downside despite its advantages.

On the other hand, it cannot be denied that there are a number of disadvantages because of economic growth. Firstly, the risk of high inflation always comes with economic growth. If demand is more than supply, this will make the price set to increase. This happens to most developing countries with high population level. India is a good example to examine. India is one of countries which has high population level and has a booming economy. However, with the high demand which is more than supply the price has been risen. Therefore, manufactures with higher cost have to raise the price of their goods and services too. It is said that “India has been struggling to control what is Asia's highest inflation level, which was running at about 10% last year” (bbc, 2014)(3). This make rupee which is currency of India loses its value by 14%. Two-third of the population of India only has two dollars to spend a day. Due to the lack of income, people in India have to consume less goods and services, which may lead the close down of factories. This make the unemployment level go up significantly. This may leads to an increase in crime However, if the factories are not closed, people will have work more hours to produce more goods to reach the point that supply is equal to demand. Consequently, this will make employees upset. In order to deal with the rise of inflation, the Indian government has to increase the interest rate (ft, 2014).(4) Therefore, the inflation will fall. This will helps the Indian government in order to lower the demand, which will make price go down. Secondly, economic growth might cause unemployment. In order to produce more goods and services, people are always looking for new ways to increase productivity. This makes the economy become more industrial. Therefore, no matter how talent employees are or have many years of experiment, they will always become obsolete. Also, with development of technology machines now can manufacture more than human, which is reduced cost in the long run. Therefore, old obsolete job will be replaced by new job. This may result in high unemployment rate. Thirdly, economic growth may make the gap between the rich and the poor become wider. People who have high level of skills will look for job which pay them most in order to be satisfied. Therefore, people always tend to go to developed country so they have can have the job they want. For example, people who have high level of experiment will not stay at Greece which is in crisis and look for job opportunities. They will go to other developed countries such as United Kingdom, Germany, or Spain in order to get the job which they want. Consequently, developed countries always have more and better staff than developing countries. So, developed countries will always produce more goods and services. This makes the gap between them become wider. Finally, economic growth always results in pollution. With the demand to produce more natural resources will be forced to be run out. The resource of the world is limited. For example, trees will be cut down more in order to build more factories to manufacture, which leads to deforestation. Therefore, the level of CO2 which is released into the atmosphere will increase significantly. It cannot be denied the global warming has become one of the most serious environmental issues that we have to deal with. Because of the rise of temperature, the Arctic ice has melted. Consequently, this threats not only to coral reefs worldwide but also to land resources, which means we will have less land to use. In order to pursuit economic growth, both developed and developing have already damaged the environment. Most of the developing countries used to have problems with air pollution. For example, in 1952, England had suffered air pollution. The smog had killed many people. To prevent this disaster from happening again in the future, the Clean Air Acts of 1956 and 1968. It is said that “these acts banned emissions of black smoke and decreed residents of urban areas and operators of factories must convert to smokeless fuels” (metoffice).(5)For developing countries, water pollution is the main problem. Many factories decided to reduce their cost by pouring industrial waste into the river. For example, in 2008, the authority had discovered that Vedan Vietnam which is a company produce monosodium glutamate (MSG) had been illegally released wastewater in Thi Vai River for 14 years, which killed the river’s system. This results not only in the death of thousands shrimps and fish of farmers but it also ruined farmland along side of the river. Furthermore, it affected the health the farmers who live near river.(abc,2010).(6)

In conclusion, after examine the benefits and drawbacks of pursuit economic growth, continuing growth in the economy would let the countries to gain many potential benefits such as raising the living standards, reducing the level of unemployment and attract more investment into the country. Nether less, it cannot be denied it has many drawbacks. However in saying this, different circumstances and scenarios require different approaches. Every country must pursuit economic growth with the right pace. If the growth goes too rapid, the risk of high inflation rate will become higher. Therefore, the governments play an important role in the pursuit in the long run. They needs to spend more money on public sector such transport, communication and health care. They also need to control the interest rate to prevent the inflation rate from going up too high. And finally, strict regulations need to be introduced in order to preserve the environment and it is crucial to invest more money into research alternative in order that alternative energy will replace natural energy.


  1. Sally Bolton and Stefanie Khaw. (2006).economic growth.Available: http://www.theguardian.com/business/2006/jul/10/ukeconomy.globalrecession. Last accessed 16th feb 2014.
  2. Available at http://data.worldbank.org/country/united-kingdom. Last accessed 16th feb 2014.
  3. India raises interest rates rise to stem inflation.Available: http://www.bbc.co.uk/news/business-25923743. Last accessed 16th feb 2014.
  4. Amy Kazmin. (2014).India raises interest rates to combat inflation.Available: http://www.ft.com/cms/s/0/18dc0d04-87e7-11e3-a926-00144feab7de.html#axzz2tcm66adN. Last accessed 16th feb 2014.
  5. The Great Smog of 1952.Available: http://www.metoffice.gov.uk/education/teens/case-studies/great-smog. .Last accessed 16th feb 2014
  6. bo hill. (2010).Firm pays up after pollution destroyed river.Available: http://www.abc.net.au/news/2010-08-12/firm-pays-up-after-pollution-destroyed-river/942224. Last accessed 16th feb 2014
  7. lipsey & chrystal (2011).economics. 12th ed. oxford: oxford university press. 601-624.

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