Recession and Population Growth - Thesis Example

RECESSION AND POPULATION GROWTH Your Today’s and Period Assignment Introduction From the 90s to the 21st century, the world has seenenormous evolution. There have been advancements in practically everything. Technology has completely changed the face of the earth and the human race has only seen onwards and upwards. However, things have had a negative side to them as well. With the growing advancements in every field, there have been downsides. Two major factors that are slowly becoming a menace to the world and a cause for concern for authorities are recession and the ever increasing population growth. These two factors have had adverse effects on the world. The recession and population Growth have been contributing to Income inequalities and at the same time influencing an increased focused on Environmental pollution. The increase in recession and population growth has had a trickledown effect and things have been getting worse as time has gone by. The primary focus of this thesis will be the effects recession and population growth have on triggering income inequality as well as environmental pollution. Financially, the last decade or so has been a debacle for most countries around the world. The term recession has posed as a pest for most economies and has derailed the massive progress the world was making. Money was being flown out of the economic system that was being injected into it. Supplies were not meeting demands and inflation reached its highest. Recession ate down economies all over the world like a pest and all of that resulted in no liquid money being present in the economy. Credit money increased and economies became dangerously short of liquid cash. The spending power of the common man also went down drastically which means no money was being injected in the economy causing the financial state of the world to go worse. To worsen matters, population of the world saw no regression. The world was experiencing an exponential growth in population and as a result, demands were not being met. The world was not producing enough to be able to accommodate and feed the growing population. The common man started facing affordability issues giving way to income inequalities. Income inequalities had their own set of problems. The common man turned to crime and wrongdoings to fulfill his basic needs and this is where crime multiplied in the world. All of it worked in circles and the world situation starting deteriorating. With all the problems mentioned above, the authorities of the world showed increased concern and focus on environmental pollution. The increasing population led to the world becoming a smaller place geometrically and geographically, hence giving way to environmental pollution which has been eating the earth away. The following parts of this chapter will dwell on details of these subjects. Exponential Population Growth The exponential population growth theory says that the birth rate of the world remains constant showing no decreasing trends whatsoever and is not limited by disease or food. This means that the growth of the population remains constant whereas the goods and supplies to feed that population remains the same. In other words, supplies will not be able to meet the demand in exponential population growth (Hardin, 1233). In exponential population growth, the number of people living the in the world keeps increasing whereas the food supply keeps on decreasing. This would eventually mean that the human race would not be able to survive because the supply of food will begin to cut off. This also applies to the geographical space on earth where the survival of the human life will become impossible if exponential growth continues. The increasing population also gives way to increased pollution in the world as management of resources becomes a hassle as well (Hardin, 1233). Decreased Economic Growth With the increasing population and recession, the direct impact is faced by the economic growth. Recession all over the world means that inflation is high and the spending power of the common man decreases. With larger families, as a result of the increased population, every man now faces affordability issues. The overall income levels have faced a drop too because of the recession. Employers are running out of capital and hence are not being able to afford skilled employees. Unemployment has also increased. All of it, in summation, means that there is absolutely no money being pumped into the economy. The spending is as low as zero and the economies around the world have suffered drastically (Beller & Hout, 19). To make matters worse, the world’s population has seen exponential growth which means the supply is not being able to meet the demand. The trickledown effect of all of this has meant that there has been decreased economic growth. Recession and the growing population of the world have contributed to the failure of the economy. The lack of spending due to recession has meant that there is no circulation of money. With money in the system, economies cannot function and that is why they have faced a backlash and seen negative trends. Income Difference Due to Slow Economic Growth As explained above, the economic growth in the world has been slow and that has had an effect on the overall income levels. The income difference between the different classes of the society has increased. The rich have become richer while the poor have been poorer. This has given rise to the concept of income inequality. The case is however different country by country. There are several countries where the income difference between societies remains negligible because of the overall health of the economy. This happens because the recession is relatively under control and spending power is handsome (Beller & Hout, 19). However, there are countries where due to recession, matters have gotten worse and the difference in income levels has increased. The inequality can be explained by the fact that recession has caused prices to become inflated. Also, it has caused unemployment (CBO, 2). This has meant that spending power has decreased and people have also been on low incomes because of the lack of jobs. On the other hand, the rich have accumulated the money and therefore a massive differential between income levels of the society developed (Li, Squire & Zou, 26). Increased focus on Environmental Pollution The increase in population all around the world has made the environment suffer. The pollution levels over the world have increased causing a direct threat to the safe environment that once prevailed around the world. The question however arises how does the increasing population of the world have an effect on this? The answer is simple. With increased population, there is mismanagement of resources. The usage of fuel increases and that leads to the emission of more harmful gases in the atmosphere (Prizer, 1). This has lead to authorities around the world shift their focus to take measures that would help decrease the negative effects of environmental hazards. Authorities have started working on policies and reforms that would help them decrease the pollution level of the world. There have been taxes introduced as well as policies that would help curb the amount of harmful gases that are being emitted in the atmosphere (Viscusi, 687). The idea behind increased emission taxes is that industries as well as the common man would then restrain from wastage and over usage of fuel. Literature Review Population problem is without Solution The problem with population is that the authorities around the world can apply as many strategies as they want to, but there will always be hitch to matters. This is because there cannot actually be a solution to the population problem. As explained by Hardin, for the world to see sustainability, the population growth will have to become zero. This means that there should be no breeding or reproduction of the human race. This is not possible because firstly, according to mathematical theory, population growth can never become zero. Even if the people around the world were educated about family and population control, there would still be a number that would be increasing every year (Hardin, 1233). Therefore, it is not practically possible to ensure that the population growth can ever be zero. Also, the resources around the world are only limited. There will come a time where it will become practically impossible to be able to feed the world’s population adequately and the with the growing trends and increasing rate in population, a solution to the problems looks nowhere to be found. Increased concentration of market income contributes to income inequality Over the past few decades, there has been seen a notable increase in the concentration of market income. This has primarily meant that the upper tier of the market, which is the upper class in terms of income, has seen a great increase in income. This means that the rich became richer. There are several reasons as to why the upper tier of the market income became richer. The technological and educational advancements that the world experienced are major factors. The rich were able to afford quality education and technology because of which they became more skilled and earned more money that the lower classes (CBO, 2). They got the executive positions at companies and hence their income was always high. This also meant that the poor became poorer and were only stuck to a certain income level. The massive difference between the income levels of the upper and lower tiers of the market income lead to increased inequality. Income inequality shows stability within countries The explanation behind this statement is that income inequality has meant that the rich have become richer. The capitalists of the world have become richer and this has lead to more investments being injected in the countries around the world. The higher investments have meant that jobs have been created and more money has been put into the economic system. Eventually, the high income inequality brings about stability within countries. Due to this, the rural population also starts moving to the urban in search of jobs (Li, Squire & Zou, 26). Because there have been good investments they, move to urban areas to find jobs. Once a job is landed, their income becomes stable as well, hence contributing to the overall health of the economy. Income instability shows variance between countries The above mentioned theory, however, varies from country to country. This is because every country has its own growth metrics. The rate of capitalism and the money owned by the rich class of the country would be different from country to country. The income inequality would be different when you compare it with a country that is still developing and one that has already reached realms of development. The amount of money being injected in the economy would be different and hence variance becomes apparent (Li, Squire & Zou, 26). The magnitude of how rich a person is in one economy would be different from that in another. Therefore, the variance due to income inequalities exists across countries. Slow Economic Growth leads to slow social mobility Social mobility can be defined as the movement of an individual from one level of social class to another based on his income levels. This theory implies that when that is slow economic growth in the country, the pace at which a person moves from one social class to another becomes drastically slower. This happens because in a slow moving economy, the income levels are modest. The growth is slow because of the lack of money in the system (Beller & Hout, 19). This also means that people do not experience massive increases in income levels that would eventually lead to the shift in social mobility. That is why slow economic growth leads to slow social mobility. Poverty Reduction depends on Economic Growth When the economy of a country is at its lowest, the poverty is at its highest. There is an indirect relationship between the poverty and the economic growth of the country. When the country experiences growth and the economy is stable, this means that there is enough money in the system to be able to sustain the country. People are investing and jobs are being created. There is lack of unemployment which means that poverty is decreased. Therefore, if the economy of a country experiences growth, the poverty of the country would automatically go down and vice versa (Li, Squire & Zou, 26). Kyoto Protocol in 1997 for reduced carbon emissions In the year 1997, the Kyoto Protocol was signed in a bid to decrease the emission of harmful gases into the atmosphere that caused pollution in the environment. This was done primarily to put a stop to the industrialized emission of harmful gases that were being injected in the atmosphere. Industries were known to use materials that emitted carbon dioxide in the atmosphere. These gases gave way greenhouse effect (Prizer, 1). By signing the protocol, the industries were bound in a commitment where they would ensure that they would make reforms and policies to ensure that the emissions of carbon dioxide would be decreased than the levels that were recorded in 1990. Quantity based controls for GHGs Quantity based controls for GHZs stated that every individual was required to obtain a signed permit for each ton of carbon dioxide that was being emitted by vehicles he or she was using. The number of permits were then limited to a fixed level (Prizer, 1). The emissions could be any that were caused by the burning of resources like natural gas burning coal or petroleum products. Price based controls for GHGs In price based controls for GHGs, an individual is required to pay a fixed cost for every ton of carbon dioxide that he is emitting in the atmosphere. There is also a fixed monetary incentive for individuals who make an effort to ensure that they are trying to reduce the amount of harmful gas emission in the atmosphere (Prizer, 1). Coase Theorem for Externalities The Coase theorem said that if there are no costs involved and if conducting trade in an externality is possible, bargaining will produce an outcome that is efficient. This will be regardless of the initial allocation of the property ownership and rights (Viscusi, 688). Findings Between 1979 and 2007, there has been a 62% growth rate of average household income (CBO, 2) According to Ryan, in the year 2007, there was a 53% growth rate of average household income (Ryan, 2) The household income of top 1% doubled from 8% to 17% in the year 2007. The huge increase can be indicated clearly in the figure below (Ryan, 2): During the 1970’s, the United States of American saw increased Social mobility as a result of increased economic growth. This states that as the country progressed in terms of the economy’s health, the number of people moving up from one social class to another increased. (Beller & Hout, 19). Because of increasing differential in the income inequality, 1990’s saw social mobility decline past levels in the US. The gap between the income level of the upper, middle and lower class was highest during the 90s and that is why social mobility decreased. People remained in their income brackets and social classes for longer. (Beller & Hout, 19). Income difference showing 0.4% elasticity between two generations shows that the difference in the income in the son’s generation was massive as compared to the fathers in the past years. (Beller & Hout, 19). One standard deviation increase in financial depth leads to reduction in 5.05% reduction in income inequality (Li, Squire & Zou, 37). Reduction in income inequality increases long-term growth rate by 1.3%/year. This shows that when income inequality decreases, long term growth of a country sees an improved trend. (Clark cited in Li, Squire & Zou, 42). Conclusion Following are the conclusions that were derived as a result of the findings and literature review of this thesis: Reducing Inequality increases growth Authorities should try and churn out policies and reforms that would enable them to eradicate the gap in the income levels of the different tiers in society. This would mean that all tiers of the social classes will be able to spend and therefore contribute to the overall health of the economy. When there will be money in the economy, the spending powers will rise and will lead to growth of the country (Li, Squire & Zou, 42). Therefore, reforms need to be put in place in order to eliminate the differential between the incomes of the different classes in the society. Focus on closing the income inequality gap Economic leaderships of countries around the world have been stressing on how they can work in order to improve the economy of their respective countries. This can be done if they try and focus their concentration and work in closing the gap in the income inequality in the world. The rich should not be becoming richer and similarly (Ryan, 14); the poor should not be getting further poorer. If that can be achieved successfully, there is no reason why the world will not experience economic growth in the future. Creating opportunities for income growth and job opportunities Part of making reforms and policies is also creating realistic and practical opportunities for income growth. One of the best ways to do so is to create job opportunities for people. The starting point of this is investment in businesses that would open up jobs. People would then gain employment and start earning a stable income. When an income starts coming into a household, their spending power increases. This in turn means that more money will be injected in the economy leading to its growth and betterment (Ryan, 14). There should also be reforms made to attract investments from capitalists who wish to invest their money in profitable endeavors. With investment coming in, business enterprises would be set up, again leading to the opening of more employment opportunities for people. Environmental pollution must be controlled by taxation and law There is no argument about the fact that environmental pollution is a big hazard that could have detrimental effects on the world in future. Concerned authorities should be looking to make reforms and policies that would stop the population of the world from polluting this world. They should be educated about the harmful effects. There should be a realization that all the polluting is only going to become problematic for them in the end (Hardin, 1245). For this purpose, once they are educated about the problem, there should also be laws and taxation policies be in place that would help stop pollution. Penalties and strict regulations should be implemented that will help curb the emission of harmful gases from both individuals as well as industries. These should be done keeping in mind that it would eventually help a human race achieve a world that is healthier to live (Viscusi, 698). Price control for Carbon emissions are incentive to reduction of emission The price control strategy for reducing carbon emission can be used smartly in a bid to decrease the pollution in the atmosphere. It is human tendency to be inclined towards things that offer them incentives. It gets even better and attractive when there is a monetary benefit attached to it. If people are given monetary incentives or financial penalties for reducing or emitting harmful gases respectively, they will make a conscious effort of contributing to the overall efforts of the concerned authorities to help the world get free of harmful gases. If these reforms are put in place, we could have a cleaner and healthier earth in the future (Prizer, 5). References Beller, Emily and Hout, Michael. Intergenerational Social Mobility: The United States in Comparative Perspective. The Future of Children, Vol. 16, No. 2, Opportunity in America (Autumn, 2006), pp.19-36 Congress of The United States Congressional Budget Office [CBO]. 2007, Page 1-59 Hardin, Garrett. The Tragedy of the Commons. Science, New Series, Vol. 162, No. 3859. (Dec. 13, 1968), pp. 1201-1248. Li, Hongyi, Squire, Lyn and Heng-fu Zou. Explaining International and Intertemporal Variations in Income Inequality. The Economic Journal, Vol. 108, No. 446 (Jan., 1998), pp. 26-43. Published by: Blackwell Publishing for the Royal Economic Society Pizer, William. Choosing Price Or Quantity Controls For Greenhouse Gases. Climate Issues Brief No. 17. July 1999 Ryan, Paul. A Deeper Look At Income Inequality An Analysis Of The Cbo’s Latest Study On Household Income Distribution And Recommendations For Policymakers. November 17, 2011 Page 1-330 Viscusi, W. Kip. Regulation of Health, Safety, and Environmental Risks. NBER Working Paper No. 11934. Issued in January 2006 Read More