Economic Growth

Insistent demands for higher standards of living have put great pressures on governments to achieve faster rates of economic growth. In the more affluent societies there has been some reaction against the pressures for more rapid growth. Opponents of growth maintain that the costs of growth in terms of damage to the environment and the 'quality of life' are disproportionately high. Nevertheless, the demands for more consumption and more leisure are strong enough to make growth a major objective of eco­nomic policy.

The meaning of economic growth

In general usage, economic growth is taken to mean any increase in the Gross National Product, but for several reasons this is a rather misleading use of the term. First of all, GNP is measured in terms of money values so that inflation will increase the figure from one year to another. If we are to use the concept of growth to indicate changes in real income, the annual GNP figures must be corrected for price changes before any valid comparisons can be made. Secondly, changes in real GNP do not necessarily indicate corresponding changes in economic welfare. These are more accurately indicated by changes in real income per head so that changes in GNP should be related to changes in population. We should also take account of the composition of total output when relating growth to living standards. A massive increase in defense spending would show up as a large increase in GNP, but it would be misleading to use this as an indication of an improvement in material living standards.

There is one further distinction to be made. When an economy is functioning with excess capacity, GNP may be increased by putting the unemployed resources to work. Economists do not usually describe an increase in GNP which arises from a fall in unemployment as economic growth because the extra output is a one-and-for-all gain. The problem of economic growth is how to increase output when all resources are fully employed; it refers, therefore, to an increase in the country's productive potential. This means that economic growth can only be measured between periods when the utilization of resources, or rates of unem­ployment, were very similar.

The desirability of economic growth

Growth is an important objective of economic policy because it is the key to higher standards of living. It is eco­nomical growth which has made it possible for millions of people to escape from the miseries of long hours of a back-breaking toil, deplorable living conditions, a low expectan­cy of life and other features of low income societies. Furthermore, people have come to expect economic growth — we expect our children to have a better life (in the mate­rial sense) than we have had.

From the government's point of view, economic growth is desirable because it brings in increasing revenues from a given structure of tax rates. It means that more and better schools, hospitals, and other social services can be provided without resorting to the politically unpopular measure of raising the rates of taxation. Economic growth also makes it easier (politically) to carry out policies of income distribu­tion which favor the less well off. If real income per head is increasing, a more than proportionate share of the incre­ment can be allocated to lower income groups and a less than proportionate share to the higher income groups. No one need be worse off.

Of great importance is the cumulative nature of eco­nomic growth. We must use compound interest calcula­tions to work out the longer term effects of particular growth rates. For example, a country which maintains a growth rate of 3 percent per annum will achieve a doubling of real income in 24 years. It is this aspect of growth which explains why relatively small differences in national growth rates can, in a matter of 10 or 15 years, lead to large absolute differences in living standards. It also explains why the differences in real income between a rich country and a poor country can widen even when they are both experi­encing the same rate of growth... A 3 percent increase on pound m. is a much greater increase in absolute terms than 3 percent on 1000 pounds.

The causes of growth

Economists have identified several factors which determine the rate of growth, but there is a lot of dis­agreement on the relative importance of these factors. It is obvious that, on the supply side, economic growth will depend upon the increase in the quantity and quality of the factors of production and the efficiency with which they are combined. But the demand side is also important. The incentives to increase capacity and output will clear­ly depend upon the level of aggregate demand. The object of demand management is not merely to bring planned spending up to a certain level and hold it there, it must be steadily raised to take account of the desired or attainable rate of growth.

1. Try to understand text A.

2. Renew the sentences:

incentives, output, objective, usage, values, increase, rates, resources, revenues

1. In general... economic growth is taken to mean any ... in the Gross National Product.

2. GNP is measured in terms of money ....

3. The problem of economic growth is how to increase ... when all... are fully employed.

4. Growth is an important... of economic policy.

5. Economic growth brings in increasing... from a given structure of tax....

6. The ... to increase capacity and output will clearly depend upon the level of aggregate demand.

3. Find the synonyms:

attain, desire, revenue, widen, merely, steadily, obvious, fast, affluent, damage, relate, deplorable, furthermore, rapid harm, connect, poor, rich, besides, wish, income, increase, only, constantly, achieve, evident.

4. Find the antonyms:

opponent, growth, better, easy, less, wide, supporter, decline, worse, difficult, more, narrow.

5. Make up the opposite meaning of the words:

lead, agreement, proportionately, increase, compose, desirable, popular, efficient, attainable.

6. Translate:

більш високий рівень життя, більш швидкі темпи економічного зростання, основна мета економічної політики, в грошовому еквіваленті, мотивоване порівняння, відповідні зміни, показник підвищення рівня життя, використання ресурсів, подвоєння реальний доходів, відносно невелика різниця, рівень сукупного попиту.

7. Give 3 forms of the verbs

put, cost, take, mean, mislead, do, spend, show, arise, come, bring, give, raise, rise, grow

8.Put the words in correct order

1. personal, is, held, in, wealth, forms, many.

2. distributed, reasons, for, is, wealth, unequally, many.

3. people, generally, older, hold, younger, than, wealth, people, more, people.

4. now, part-time, make up, workers, a, quarter, almost, the, total, of, labour, employed, force.

5. investment, is, education, often, as, described, people, in.

6. growth, demands, expenditures, research, on, eco­nomic, large.

7. are, an, exports, injection, circular, the, into, flow.

8. imports, leakage, are, circular, the, flow, a, from.

10. Ask as many as you can

1. Comprehensive details of the distribution of income and wealth in the UK become available for the first time in 1975.

2. Marketable wealth consists of those assets which can be bought and sold.

3. The income of a household depends to a large extent on the number of economically active people k contains.

11. Reconstruct the sentences

1. The possession of wealth ... (to confer) certain social advantages.

2. In order... (to get) people... (to work) harder, it... (to be) usually necessary ... (to offer) higher rewards.

3. Unemployment which... (to arise) from immobilities in the labour force rather than a lack of demand for labour... (to know) as frictional unemployment.

4. Private spending may... (to stimulate) by a relaxation of any existing hire purchase restrictions.

5. The natural rate of unemployment ... (to associate) with an equilibrium situation in the labour market.

6. The Enterprise Allowance Scheme ... (to help) unemployed people ... (to set up) in business for themselves.

12. Put 10 different questions to the text.

13. Retell text "Economic Growth".

14. Read and entitle text B.

Text В

There are a variety of ways in which the benefits of economic growth may be enjoyed. By maintaining the same labour force working the same number of hours, the community may enjoy the gains from its increasing ability to produce in the form of higher levels of con­sumption. Alternatively, since any given output can now be produced with a small labour input, workers may decide to take part of their improved living standards in terms of increased leisure. It would also be possible to maintain consumption levels and reduce the proportion of the population at work by extending the provisions for full-time further education and/or reducing the age of retirement. Economic growth, as pointed out earlier, also makes it possible to devote more resources to the social services without having to cut private consump­tion.

Nevertheless, in whatever form society chooses to take the further benefits, economic growth imposes a sac­rifice in terms of current living standards. In a fully employed economy a higher rate of investment can only be carried out by allocating more resources to the produc­tion of capital goods, therefore, will be less than it might otherwise be. It is true that a much greater annual output of consumer goods will be forthcoming in the future, but it may be many years before there is any net gain. Is it worth it?

Economic growth also gives rise to a variety of social costs. Rising incomes make it possible for more people to own cars, but this could lead to problems of pollution and traffic congestion. Huge modern steel plants, chemical works, oil refineries, and generating stations may be very efficient on the basis of purely commercial assessments, but they could impose costs on society by destroying nat­ural beauty and other amenities. Modern methods of agriculture may greatly increase yields per acre, but they could have damaging effect on wild life. On the other hand we must remember that it is economic growth which makes it possible to devote more resources to the search for safer and cleaner methods of production.

Perhaps the most disturbing social costs are those associated with a rapid pace of economic change. The technical progress which makes machines and produc­tion methods obsolete also makes people redundant. Labour will have to learn new skills, adopt new methods of working and accept more frequent changes of occupa­tion. While programmers of retraining with adequate financial 'grants can deal with the problem to extent, there still remains the social cost in terms of the disrup­tion of a career and the unpleasant breaks in the partners of a person's working life. The benefits of economic growth may not be evenly spread; instead of everyone reducing his working week by a small fraction, it is more likely that some individuals may find themselves com­pletely redundant.

15.Read and refer the text .

Text С