Question for discussion:
Should a government only pursue economic growth as its macroeconomic goal?
Tasks: Each group is to read the link in Webquest:
http://zunal.com/webquest.php?user=37349
and research on the respective countries assigned below as the context to respond to the above question:
Group
(1) Singapore
(2) China
(3) Thailand
(4) India
(5) S. Korea
Subscribe to:
Post Comments (Atom)
(4) India
ReplyDeleteYes. Benefits of growth:
1. Increased levels of consumption
With the government focusing on economic growth, there will be a point whereby it outstrips India's population growth (an estimated 1.548% with around 1.17 billion people estimated for 2009). This will lead to real income per head of more than $1071 (nominal GDP per capita estimated for 2009) thus resulting in higher levels of consumption of goods and services. If human welfare is related to the level of consumption then economic growth provides an obvious gain to India's society.
2. Redistributive benefits.
If incomes rise, the government can redistribute incomes from the rich to the poor without the rich losing in absolute terms. For example, as people's incomes rise, they automatically pay more taxes. These extra revenues for the government can be spent on programs to alleviate poverty, which is extremely important to India as even with its economic growth in the past few decades, it still has the largest concentration of poor people in the world.
On the other hand, the government should not only pursue economic growth as its macro economic goal. Costs of Growth:
1. Current opportunity cost of growth,
To achieve faster growth, firms will probably need to invest more. This will require financing and it can come from higher savings or higher taxes. Either way, there must be a cut in consumption. In the short run, there will be less consumption. This will lead to lower standards of living as less goods will be consumed by the people.
2. Negative effects on employment and the distribution of income,
Growth involves changes in production: both in terms of the goods produced and in terms of the techniques used and the skills required. The more rapid the rate of growth, the more rapid the rate of change. This is likely to result in structural unemployment as the workforce is not equipped with the skills to operate the machineries involved in the production of goods and services due to technological advancements. Hence, there will be unemployment, or lower wage levels as lower skilled workers are compelled to take on lower paying jobs. This will add on to the unemployment rate of India which is 6.80% as of 2009.
Hence, in order to maintain the social fabric, the government should also take into consideration the other 3 macro goals:
1. full employment or low unemployment
2. stable prices or low inflation
3. close to BOP equilibrium.
In conclusion, India should focus its resources largely on economic growth first, then gradually proceed on to focus more on the other 3 goals while tapping on the benefits of economic growth by reforming its public sector. For example, by providing education to the less skilled workers so that they will be equipped with the necessary skills and thus be employed.
(5) South Korea
ReplyDeleteYes, a government should pursue economic growth. Economic growth can bring benefits to a country, such as increased level of consumption, redistributive as well as environmental benefits.
If South Korea's economic growth surpasses its population growth, which was only 0.31% as of 2009, then there will be an increase in real income per head. People will have more money to spend and this will lead to an increased level of consumption of goods and services, which improves human welfare and provides a gain to society.
Also, as economic growth increases and incomes rise as a result, the government will be able to redistribute incomes from the rich and channel them to the poor. This would be especially beneficial for South Korea where there is an increase in income inequality between the rich and the poor. As of 2008, South Korea has the third largest income disparity between the rich and the poor among the Organization for Economic Cooperation and Development (OECD) countries. Thus, with economic growth, a rise in incomes can be used to help alleviate the income inequality problems by getting the rich to pay higher taxes and channelling this money to help the poor.
Furthermore, with people in South Korea becoming richer ( GDP per capita of US$ 16,450 as of 2009), they would be less concerned with their private consumption and be more aware of the need to save the environment. With an increase in revenue from economic growth, the government is able to make use of it and control pollution as well as look for alternative sources of energy. In July 2008,the South Korean government decided to boost investment into renewable energy to reduce its reliance on foreign oil imports. The Ministry of Knowledge and Economy said the country intends to spend 194.4 billion won (US$193 million) on technologies and projects, including solar, wind and biofuels, in 2008. This can help to ensure environmental conservation amidst economic growth.
There are a few factors that have contributed to South Korea's economic growth. One of them is education. South Korea has a high Human Development Index(HDI) measuring particularly high in the Education Index, ranking first in Asia and seventh worldwide. It also has a high literacy rate of 97.9%(as of 2009) and with a population of 49,773,145(as of 2009), this would mean that there are millions of highly educated South Koreans. With an educated population, productivity increases and so does innovation. This will in turn boost the economy and growth. This is proven as South Korea is currently ranked as the most innovative country in the world.
South Korea is also one of the world's leading technology innovators, being home to brands like Samsung and Hyundai. It is export-oriented, shipping many of its domestic products worldwide. This naturally will lead to a rise in economic growth as export revenues increase. It is the eighth largest exporter in the world and is a major trading partner with large economies such as the US, China and Japan. With a large worldwide consumer population, South Korea is able to exploit its export-oriented manufacturing industries and reap economic growth.
(continued)
ReplyDeleteWhile there are benefits to economic growth, there are also costs to it. One of them would be the diminishing of non-renewable resources. Growth undoubtedly will involve using a greater amount of resources and instead of using the same amount of resources more efficiently, certain non-renewable resources will run out more quickly. This is because people are more concerned about economic growth than the sustainable use of resources. If this continues to happen, there would be an insufficient amount of resources for future generations unless viable alternatives can be found. While growth may increase now, the lack of resources in the future would ultimately slow down economic growth.
Furthermore, increasing economic growth may lead to the destruction of the environment, especially if people are more concerned with growth than conserving the environment. With increasing number of factories/manufacturing plants etc being set up, pollution increases as more harmful gases are released into the atmosphere. Although far behind first-place United States, South Korea’s much smaller population is the ninth largest consumer of ozone-depleting chlorofluorocarbons(CFCs). There are a string of environmental issues in South Korea, including water and air pollution, acid rain, drift net fishing, and wasteful packaging of consumer goods.
Thus, while economic growth brings benefits to a country and its population, it can also bring disadvantages. As such, it is necessary that the South Korean government take into account other macroeconomic goals such as employment level, inflation rate as well as Balance of Payment(BOP) instead of solely focusing on economic growth.