Advantages of Economic Growth - Essay Example

Advantages of Economic Growth This paper is about the discussion of advantages of economic growth in a country giving examples of countries enjoying the specific advantages. Economic growth is defined as the increase in the productive capability of the nation as computed by GNP for the current year with the GNP of the previous years. Major causes of economic growth include technological advancement, literacy quality improvement and the increase in the capital stock (McCartney, 2015). Measurement of economic growth is through computing changes in GDP, which measures the total economic output of the country per year. It, therefore, includes all the goods and services manufactured in the country for sale (McCartney, 2015). Considering the recent economic growth in UK, the Office for National Statistics (ONS) has shown that the economy of UK grew by 2.6% last year. It is the swift pace since 2007, increasing from 1.7% in 2013. It is also shown that the economy grew by 0.5% in the last three months in 2014. It represented a slow in growth from 0.7% shown in the earlier three months (Office for National Statistics, 2015). Economic growth has shown to have various benefits to a country experiencing it. Countries such as UK, US and other western countries are currently enjoying the benefits ripped from the high rate of economic growth. Various benefits are seen in countries experiencing economic growth. These benefits include: higher incomes, decreased unemployment, decreased borrowing by the government, improved services to the public, environmental protection and investment. Economic growth is a drive towards high rate of employment. Firms and business producing more outputs usually have the need of bringing more people into their premises. They bring in many people to work thus increasing the population of the employed (Belfield, Cribb, Hood & Joyce, 2014). This kind of benefit has been observed in the UK in the recent years. The unemployment rate in the UK has been shown to have fallen again with the wage growth hitting nearly four-year high as shown by the official figures. The population of people that have been reported to be out of work within February and April reduced by 43,000 to 1.81 million (Lea, 2015). The rate of jobless remained steady at 5.5%, the minimum level as from August. Wage rises have shown to have grown at a faster rate as from August 2011, increasing 2.7% both with and without bonuses. The total population in the UK now at work is about 31.05 million people representing 114,000 excess in comparison to the earlier three-month period (Lea, 2015). The women's rate of employment has achieved a record as high as 68.6%. The rate of unemployment for individuals between the age of 16 and 24 has however remained higher than the rate of the aged. The unemployment rate for this group was stated to be at 16.1 % within the month of February and April (Lea, 2015). All these instances of increased rate of employment in the UK are linked to economic growth observed in the UK recently. Furthermore, economic growth has shown to lead to decreased rate of government borrowing. Economic growth leads to the creation of increased tax revenue with less need of spending money on benefits such as unemployment benefits. Economic growth, therefore, assists in the reduction of debt to GDP ratios (Lewis, 2013). This benefit can also be observed in countries like UK. Income tax increase and VAT receipts assisted to cut the borrowing of the government of UK as stated by the official figures. The borrowing by the UK government decreased to £10.13bn in May from £12.35bn in the earlier year (Hardie, 2012). It was the recorded lowest borrowing in May for the eight years. The net debt of the public sector without banks included now reported to be at £1.5 trillion, with about 80.8% of GNP (Office for National Statistics, 2015). Receipts from income tax computed their highest rank in the four years for May, increasing £0.5bn or 5.3% from the previous years to £10.8bn. VAT receipts increased by £0.6bn, or 5.6% to £10.7bn. The total public borrowing in the financial year has also been approximated to be £89.2bn or 4.9% of GDP May 2015 (Office for National Statistics, 2015). The figure has been stated to be slightly higher as compared to the earlier estimates; it was still £9.3bn less than the earlier year's total (Office for National Statistics, 2015). All these are due to decreased rate of borrowing by the government. Also to the above, economic growth has allowed for the improvement in the living standards of the citizens of a country. Economic growth has shown to be crucial in the country in improving the living standards of its people. It assists in the reduction of the rate of poverty for people under low income (Lewis, 2013). It is majorly true for countries that are developing or underdeveloped. A good example of such country is China. China showed a fall in rural poverty down to 28.2 million in 2002 from 250 million in 1978, falling by 88.7% (Chow, 2015). The population of poverty has fallen by about 9.24 million annually. The average growth rate per capita growth rate of GDP for China is 8.1% during 1978-2002. It is a period prolonging with the maximum growth rate of GDP per capita with the largest population benefiting from it. It represents doubling in per capita income GDP for each 8.6 years, 5.4 times of world GDP per capita growth rate in the same time about 1.5% (Chow, 2015). The growth rate yearly in China of the consumption level of rural population is 5.6% with the per capita net income yearly growth rate of farmers being 7.2% (Chow, 2015). All these changes in the level of poverty and increased living standards in China are due to increased rate of economic development observed in China annually. In my conclusion, there is the fact that the economy is growing. However, the growth is also prior to the recession. Many economists have failed to predict the economy's bust, making the growth rate a bad thing to countries like UK and China. It is, therefore, difficult for prediction of sustenance of economic growth for a moderately long period. Statistics has however shown an economic growth to be a continuous change improving over the top time and not abruptly. The rate of change has been shown to vary annually, with the countries experiencing maximum or minimal change depending on the extent of growth. References: Belfield, C., Cribb, J., Hood, A., & Joyce, R. (2014). Living standards, poverty and inequality in the UK: 2014. Institute for Fiscal Studies, London. Top of Form CHOW, G. C. (2015). China's economic transformation. Hardie, I. (2012). Financialization and government borrowing capacity in emerging markets. Palgrave Macmillan. Bottom of Form Lea, R. (2015). The economic outlook in 2015, still fairly bright. Arbuthnot Banking Group, 5. Lewis, W. A. (2013). Theory of economic growth (Vol. 7). Routledge.Page 420 McCartney, M. (2015). Economic Growth and Development: A Comparative Introduction. Palgrave Macmillan. Office for National Statistics. (2015). Economy trend in the UK, 2007-2014. Read More