To what extent is economic growth desirable?

n economics, short term economic growth translates to a rise in real GDP, and in the long term an
increase in the maximum output (aggregate goods and services) an economy can produce. Growth is
caused by an increase in aggregate demand; this may be as a result of higher consumer expenditure,
more investment or as seen recently in BRC, a substantial increase in exports which all form a
component of AD. Economic growth is seen to be extremely desirable by all governments as it solves
many problems of modern life; there are of course many consequences but this is a small price to pay
compared to what could be gained, so economic growth is desirable.

The benefits of economic growth for all economies and especially LEDCs are increased employment,
reduced poverty and a higher standard of living. These events occur because as AD increases, more
factors of production, most notably labour are needed to produce goods and services for the
economy. When this occurs on a large scale unemployed workers shift into employment. This is
beneficial as governments provide less social security for the population, so they can spend money
on public services. As a result of increase government spending, the quality of services such as
education, health and shelter will become better hence improving the standard of living. Previously
unemployed workers will also now be able to afford higher quality essentials. This can be seen in the
case of China's HD which has risen from 0.46 in 1990 to 0.663 in 2010 in correlation to the high level
of economic growth experienced during this period.

Another way in which growth is desirable is the happiness from higher living standards it brings to
people of healthy economies. During a boom, people are generally more tolerant of immigration,
politics and democracy, whereas when negative growth leads to a prolonged recession like Greece,
the population becomes more intolerant of politics leading to surges in violence and mass protests.
So when GDP is rising, confidence amongst the population increases, and the tendency for strikes
and industrial action to occur becomes less likely. This is important because strikes causes by
unhappiness amongst workers is extremely damaging to economic growth. f the market can forecast
satisfaction amongst the working population, then businesses are more inclined to invest in
economies with a reliable working population as opposed to an unstable one. nvestment is a very
component of AD because it ensures sustainable economic growth for the future rather than short
periods of positive then negative growth.

Economic Growth is also desirable because governments and business can invest more in efficient
and green technology with higher revenue from taxes and profits gained from growth. This is
especially important in today's world and almost all governments have budgets devoted to
environmental protection. The EU, whose member's economic growth is collectively very high, has set
a target of achieving 20% of energy needs from renewable sources by 2020. nvestment in
technology and science has meant that energy intensity (energy consumption per unit of GDP) has
decreased dramatically over the last 30 years, even in developing countries.

On the other hand, economic growth puts strains on the environment and the negative externalities
accrued such as pollution can damage the world's health and economy. Pollution emitted from
factories and energy plants in developing countries often drifts causing air pollution and global
warming. These two incidents are very important for the future generations as many coastal regions
and islands will be underwater if the ice caps melt due to global warming. This will cause a strain on
the world's land and scarce resources which is bad for the economy. Also air pollution contributes to
asthma and respiratory problems which will lead to governments needing to spend more on health
services. So the many environmental externalities of economic growth will accumulate more problems
in the future which the world cannot cope or deal with.

Another reason why economic growth is not desirable is the potential for inflation to spur out of
control. Keynesians argue that it could lead to demand-pull inflation pushing the price level up due to
higher aggregate demand which outpaces an economy's potential output. This is undesirable as the
price of goods and services may become so high that householders cannot afford to purchase goods
and services. This raises pressure on monetary policy and interest rates to rise in order to counter-act
inflation, the risk and severity of inflation greatly depends on central banks and governments, if they
do not act then cost-push inflation may occur hitting those on fixed and low incomes the hardest and
increasing income disparity



Finally, growth furthers social injustice within an economy. Firms and bankers (who were originally
wealthy to begin with) stand to gain the most from economic growth as their profits and bonuses
increase. Down the other end of the social ladder, workers only stand to gain employment and maybe
a higher standard of living, but this does not apply to the whole population. n an age of technological
advancement and increased productivity, fewer workers are needed so that even in times of
economic growth, unemployment is still relatively high. t is inevitable therefore that only a certain
group of people benefit from growth, unless governments intervene with strong regulation and taxes
to re-distribute wealth. n Singapore, an almost pure free market model, GDP grew 14.6% in 2010 yet
the GN co-efficient has risen from 0.425 in 1998 to 0.48 in 2008. n the UK, income inequality can be
seen in the North South divide whereby most of the nation's wealth is concentrated in London and the
South, everyone in our economy does not directly benefit from growth, especially in rural areas and
ubiquitous sectors like health and education.

Economic growth therefore, is always desirable provided it is sustainable in the long term and of a
high enough percentage in GDP. n the long term, economic growth seems to provide solutions to
many economic and social problems which would otherwise not be solved by the government.
Economic growth also provides developing countries with the opportunity to improve the lives of their
people and compete with developed nations, there are predictions that China will surpass America in
terms of economic power over the next 30 years. The consequences of economic growth whilst
important can be lightened through regulation and control so it may seem a small price to pay in the
long run. So overall, growth is beneficial to all economies but measures need to be in place to prevent
economies from 'overheating' and slumping due to un-sustainable growth.