Why Growth is Good - Essay Example

? Critical review Contents Contents 2 Introduction 3 Review 3 Conclusion 5 Reference 6 Introduction In the article Why Growth is Good, Robert Reich has put forward some of his arguments on why steady growth should be the aim of the time. This review will have a closer look into the arguments provided by the author and will try to launch a conclusion on the relative basis of the text. This provides the space of further researches on the conclusions reached by the author. Review The author asserts that U.S. economy is slowing down but this is not the case of the current times as the nation’s total output of goods and services grew at an annual rate of 2.5 percent from July to September and this rate of growth is double the rate of growth from the last quarter. The economy is not following a brisk pace but showing the signs of take off (Dewan, 2011. p.1). (Office of the Management and Budget, 2010, p.8). But the economic growth of Germany is on the slower side and the government of the concerned country has nearly halved its growth forecasts to one percent. The reason being shocks in exports and the powerhouse of Europe is on the slower side (Carlin, n.d. p. 23). Government intervention is necessary in cases to push up demand but to a certain extent. Free market is necessary to achieve the equilibrium. Economic growth is the amount of goods and services produced over time. With economic growth, development is creating a healthy environment will come under its purview. Per Capita Income can be taken as a measure to capture economic growth. Let the population of country A and B be 20 and 5 respectively and the average income be $ 200 and $100 respectively. It will appear country A as the economically developed country but it is not the case as PCI of country A is 10 and that of country B is 20. Poor countries are often exploited by the richer ones as industries that cause environmental degradation are shifted in those countries. This tends to pollute the natural resources which have negative effects on the life of the people residing in the poor countries. The open up of new industries has created growth or employment opportunities but the darker side of the coin is the extraction of irreversible natural resources. (Office of the Management and Budget, 2010, p.153). The above pie chart proves that U.S. allocates a large proportion of its capacity in social security. The budget of 2001 allocates $ 17.5 billion to support small business access and 25 billion dollars on microloans which will create employment opportunities. A path that leads to most optimal growth path is the toughest to get recognized. Earlier a school of economists believed in trickle down hypothesis where the benefits of growth will trickle down to the people who form the base of the society. But soon another school of economists began to contradict by arguing that those who are in the higher levels of the society will reap all the benefits and the poor will be confined in a vicious circle. This theory was proved right in the later stages. So growth may not create equal opportunities for all (Basu and Mallik, 2007). The statement of the rich gets richer while the poor gets poorer is well known. The statement that middle class is happy to pay taxes and contribute in the welfare is controversial as all are involved in finding out ways to evade taxes and keep their money in their own pockets. Consider the case of China. China announced to lower the GDP target to 7.5 percent which gave rise to mixed feelings around the globe. This created tremors in the market but some were of the opinion that this strategy will revive China in taking the path of sustainable development. They argue that this would help China to achieve a higher quality and higher level development over a longer time span and all are certain about the amount of welfare sustainable development can bring about (Prasad and Rajan, n.d., p. 1). A recession is followed by recovery. In this phase growth is bound to be slow but this situation is welcomed from every levels of society. The argument provided by the author is true in this regard as the wealthy are in an advantageous position. Governments tend to overburden the community with tax structures that are unfavorable to them which creates chaos in the society giving rise fights within the community (Environmental Scan, 2003, p.1). Slower growth has diverse effects (Ravallion, 201, p. 1805). One of the characteristics is reduction of 100 basis points annually affecting the expected growth rate. As a result substantial effects on employment and income or in the other way the standard of living is expected. Growth in the production of food is useful. The recent growth in financial services in U.K. could have accounted for at least a difference of 100 basis points between the expected and observed growth rates but it did not create as much value as it was thought would be. Growth is recognized as modest increase in productivity and employment. Macroeconomic growth brings opportunities to top line organizations. It is one of the important components to manage the capital accounts for the government which will have the implications in the credit market. The ability to borrow of the treasury is likely to get affected (Heskett, 2009). Slow economic growth brings hardships for companies to grow and makes it difficult for governments to repair finance (Zarroli, 2012). Conclusion So the article of the author is close to reality and only a few modifications will make the article more compact. The author is correct from his point of view and the contradictions in some arguments arise only when the other viewpoints is taken into consideration. The final statement of the author supporting the reasons for not celebrating slow growth is correct when the recent U.K. status is studied but an economy recovering from recession will experience slower growth (Economics help,2012). No growth is better than slower growth and sustainable growth is better than slow growth and yet again a situation of boom is better than stagnant growth. Reference Dewan, S. 2011. U.S. Economy Picks Up Pace, Advertising a Stall.[online]. Available at: http://www.nytimes.com/2011/10/28/business/economy/us-economy-shows-modest-growth.html?pa. [Accessed: 16th March, 2012]. Carlin, W. n.d., West German Growth and Institutions, 1945-90. [pdf]. Available at: http://www.ucl.ac.uk/~uctpa36/west%20germany%20in%20crafts%20toniolo.pdf. [Accessed: 16th March, 2012]. Budget of the U.S. Government, 2011. Rescuing the Economy. [pdf]. Available at: http://www.gpoaccess.gov/usbudget/fy11/pdf/budget.pdf. [Accessed: 16th March, 2012]. Basu, S. and Mallik, S., 2007. When Does Growth Trickle Down to the Poor? The Indian Case. [online]. Available at: http://cje.oxfordjournals.org/content/32/3/461.abstract. [Accessed: 16th March, 2012]. Prasad, E. and Rajan, R. China’s Key to Sustainable Growth. [pdf]. Available at: http://faculty.chicagobooth.edu/raghuram.rajan/research/papers/china%20growth.pdf. [Accessed: 16th March, 2012]. Environmental Scan, 2003. Slow economic growth worldwide. [online]. Available at: http://www.oclc.org/reports/escan/economic/slowgrowth.htm. [Accessed: 16th March, 2012]. Ravallion, M., 2011. Growth, Inequality and Poverty: Looking beyond Averages. [pdf]. Available at: http://ejournal.narotama.ac.id/files/poverty.pdf. [Accessed: 16thy March, 2012]. Heskett, J. 2009. What does Economic Growth Really Mean?. [online]. Available at: http://hbswk.hbs.edu/item/6189.html. [Accessed: 16th March, 2012]. Zarroli, J. 2012. The Problem With A Slow-Growth Economy. [online]. Available at: http://www.npr.org/2011/07/12/137770847/the-problem-with-a-slow-growth-economy. [Accessed: 16th March, 2012]. Economics help, 2012. Problems facing an economy recovering from Recession. [online]. Available at: http://www.economicshelp.org/macroeconomics/unemployment/recovering_recession.html. [Accessed: 16th March, 2012]. Read More