Positive and harmful impacts of economic growth

Keywords: confident impacts of economic growth, negative effects of economic growth

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The concept of financial growth is one which includes attracted the fascination and focus of researchers worldwide. Weil (2013, p. 12) refers to economic growth as

a "compelling topic" and a rapidly expanding field, predicated on the significant increase in the volume of research on this topic. Bolton and Khaw

(2006, p.1) state that monetary growth is "the many fundamental indicator of an economy’s health". They define it as the amount of growth

of the national cash flow of a country, measured by the twelve-monthly percentage rate of transformation of country’s gross domestic product. According to Mankiw

(2010), economic growth is one of the reasons why advanced countries have grown to be richer and also have improved specifications of living. As such, there have been a

number of models aimed at studying financial growth, factors that cause economic growth, and the reason why behind the differing prices of economic growth

among nations. Economic progress has also attracted attention because of the positive influence it is wearing society, as it has been connected with benefits such

as increased prosperity and benchmarks of living amongst others. Barro and Sala-i-Martin (2004) declare that aggregate growth is most likely the single most important

factor influencing individual cash flow levels. However, economical growth in addition has had harmful impacts on contemporary society. This essay shall discuss both the positive

and negative impacts financial growth has already established, using practical illustrations to illustrate these.

Positive impacts of economical growth

Improved living standards

When wealthy countries today are in comparison to their own history, there is a vast difference in the criteria of living (Weil, 2013). As Weil (2013, p. 22)

observes, there’s been an unprecedented increase in living standards in most parts of around the world the last half century. As the life expectancy of

a person born in Japan in 1880 was 35 years, today the life span expectancy in Japan has gone up to 83 years. Also, the common worker in the usa

would have had to operate for 333 hours to buy a refrigerator. Today, a better refrigerator can be purchased in 20% of that time by the average worker. While

having a reading light in the night time was once a luxury which only the rich could manage, today about 75% of the universe has usage of electricity in

their homes (Weil, 2013, p. 22).

Reduction in poverty

Studies have shown that there surely is a positive marriage between economic growth and the amount of poverty reduction in developing countries (Pernia and

Quibria, 1999; Tisdell, 2008). Barro and Sala-i-Martin (2004) report that there has been a significant increase in the global per capita GDP from 1970 to

2000 with the average indivdual clearly getting richer over time. They note that there’s been a shift in the world distribution of income to the proper (See

figures 1 and 2 below) and a confident income evolution generally in most countries worldwide. This has meant that people are able to afford more and may improve

their quality of life. Weil (2013, p.23) also notes that countries such as South Korea have produced the changeover "from pauper to an commercial power

within a generation".

Shape 1 The Universe Distribution Of Cash flow In 1970

Supply Barro and Sala-i-Martin (2004, p.8)

Body 2 The World Distribution Of Salary In 2000

Origin Barro and Sala-i-Martin (2004, p. 9)


While there is a lot of literature on the effect of education on monetary growth, with considerable data showing that education has a positive impact

on financial growth, reverse causality, i actually.e. the result of higher economic expansion on education may, as The Environment Bank (2007b, p. 4) notes "be at least

as essential as the causal result" education has on expansion. Asteriou and Agiomirgianakis (2001), in a report of the partnership between economic

growth and education in Greece, found that GDP and all educational variables utilized are cointegrated, thus indicating that a positive long-run relationship

exists between economic expansion and education. They further explain that the higher the level of economic development, the bigger the demand for higher

education. This may be because as the economy grows and GDP per capita boosts, the government and/or people will, on average, have more to invest on

education, regarding increasing the number of individuals who have usage of education at all levels, together with improving the quality of education by hiring

even more teachers, a wider usage of educational materials, literature etc.

Improved technology and infrastructure

As economies continue to experience growth, the amount that is allocated to infrastructure such as for example transportation networks, communication, energy, gas,

water supply along with various technologies in addition has increased. In a study of infrastructure and long run economic growth, Canning and Pedroni (1999)

reported that they discovered strong proof the influence GDP has on the infrastructure stock in a society. This has in turn led to an improvement in

living requirements of the populace generally, and has also led to further increases in economical growth (Barro and Sala-i-Martin, 2004; Canning and Pedroni,



Improvements in living criteria because of economic growth have also led to improvements in the fitness of the population generally, as they have significantly more of

things such as for example food, shelter and apparel than can permit them to live much longer. It is because, as Frenk (2004) notes that poverty, through child

malnourishment and mortality, has an adverse effect on life span. Education can also have a positive effect on health aswell (Todaro and Smith,

2011; Weil, 2013). Preston (1976) as cited in Bhargava et al (2001) mentioned that economical development is the main factor determining life

expectancy. This positive romantic relationship between health and economic growth was also confirmed in a study by Rivera and Currais (1999) in a report of the

relationship between these two variables. They pointed out that the association between a growth in income and overall health status goes in both directions.

Todaro and Smith (2011) report that in 1950, 280 from every 1000 kids in the developing community died prior to the age of five. Even so, by 2008, this

number fell to 118 per 1000 in low income countries, and 57 from every 1000 children in middle class countries. Thoa et al (2013) also note that

households which have experienced financial growth spent fewer on healthcare, but had better quality attention and were better off regarding utilisation of

health services, even more noting that these results were statistically significant.

Some of the reasons for this are that with an increase of incomes as a result of economic growth, governments as well as individuals are in a position to spend more on

health when it comes to health establishments and infrastructure, improved nutrition and sanitation, exploration on diseases, improvements in medical systems etc.

According to Frenk (2004, p. 1), "national influence has a direct influence on the development of wellness systems, through insurance plan and public

spending". Frenk further cites the 1997 WHO Commission on Macroeconomics and Well being for a panel comprising 167 countries, which mentioned that

although expenditure on wellness is determined mainly by the national income, it does increase faster than income. Thoa et al (2013) also note that, based on

their studies, when the level of government expenditure on health is high, then it has a positive impact on the grade of health care, compared with

low income areas where out-of-pocket (OOP) expenditure on healthcare has significant negative monetary effects on households. This as a result highlights

the influence of economical growth on health. However, Weil (2013) points out that at another severe, in developed countries, diseases brought on by

too much foodstuff have replaced those due to too little food as a significant health issue. Although improvements in technology and raised research could

also cause improvements in health care generally, these problems and also several others are still associated with financial growth. Other such

problems will subsequently be reviewed within the next section.

Negative impacts of financial growth

Creative Destruction

Generally, economic growth is wonderful for the welfare of an overall economy. However, as Acemoglu (2009) notes, it tends to build both winners and losers.

Schumpeter (1942) as well coined the word ‘creative destruction’ which highlights the way the progress due to economic growth could lead to a

destruction of an old economic structure, in the process of creating a new one. Regarding to Cox and Alm (2008), therefore a society cannot reap

the benefits of imaginative destruction without acknowledging that you will see some people who will end up being worse away. Acemoglu (2009, p. 8)

states that "productive associations, firms and sometimes specific https://testmyprep.com/lesson/useful-advice-on-how-to-write-an-evaluation-essay livelihoods will come to be destroyed by the process of monetary growth, because growth

is brought about by the introduction of brand-new systems and creation of different companies", and these replace businesses and technologies currently around.

Economic growth also contributes to a change in the structure of creation, with a approach from agricultural and making to services. For instance, in the

United States, at the start of the nineteenth century, around 90% of the populace was engaged in agriculture. However, in the next half of the

nineteenth century, there is a significant decline in the percentage of occupation in agriculture, and a rise in both production and services to

over 20% of occupation. Over the years, both the shares of job in agriculture and production have observed a decline, while over 70% of the

current U.S. populace now work operating industries. Number 3 below illustrates this pattern.

Amount 3 The Talk about Of U.S. Career In Agriculture, Making And Services, 1800-2000.

Source Acemoglu (2009, p. 698).

Similar trends have also been seen in Britain and all other Organisation for Economic Cooperation and Advancement (OECD) countries (Acemoglu, 2009;

Mokyr, 1993). This change in the composition of production may as a result have possible adverse effects www.testmyprep.com on those engaged in agricultural activities. However,

over time, this may not necessarily be a negative effect on the whole. The reason being with a shift in the structure of production to solutions, there

has also been an increase in household income generally, as earlier explained. Furthermore, despite a decline in the percentage of folks employed in

agriculture, advancements in technology have led to an increase in agricultural output on the whole (Sachs, 2009; Todaro and Smith, 2011).

Another effect of this technique of ‘creative destruction’ is the creation of natural social tension. Because widespread structural

transformations often accompany the progress and advancement of an economy, some relationships which might have been previously established could be destroyed,

again creating even more winners and losers (Acemoglu, 2009).

Health Challenges

As previously highlighted, there will be newer wellness challenges arising with boosts in economic growth. Frenk (2004) points out that health systems

currently face complex difficulties due to new pressures such as for example ageing populations, an increase in

the occurrence of persistent illnesses, and an intensive use

of health technologies which, while vital, are also high-priced. Bloom and Canning (2008, p. iv) further note that increases in size which arise due to economic

growth may possibly come to be outweighed by the affect increased survival rates have on population expansion, "until a fertility changeover occurs".

Nevertheless, Bloom and Canning (2008) also point out that this can be addressed by, among other things, carrying out low cost health interventions which have

large-scale effects on the fitness of the population and positioning an increased priority on dealing with ailments which are ‘neglected’ but

widespread, i.e. those that while having low mortality rates, have significant effects on productivity. Furthermore, with an increase of access to information,

campaigns on relatively low cost ways to enhance the health of the population such as eating the proper sorts of food in the proper portions can minimise the

aftereffect of over-eating, or eating large levels of food with low vitamins and minerals. Examples of such include the five a day marketing campaign taking place in

various developed countries including the United Kingdom and america, which involves eating advised portions of vegatables and fruits daily

(Briggs, 2014; NHS Choices, 2014). Briggs (2014, p. 1) states that proof from studies demonstrates an increasing the intake of fruit and vegetables

"is associated with less threat of all-cause mortality, especially cardiovascular mortality".

Increase in Income Inequality

An increase in profits inequality is another conceivable effect of economic development. According to Barro and Sala-i-Martin (2004), there’s been an increase

in the dispersion of cash flow distribution for several countries from the period 1970 to 2000, which as earlier noted, was a period with increased

economic development. They cite the example of China plus some other large countries that have experienced a rise in profit inequality. Weil (2013) also notes

that over a 188-year period from 1820 to 2008, the gap between the rich and the indegent has widened substantially. In 1820, Weil notes that the income per

capita of the richest area of the world was 3 x that of the poorest area of the world. However, in 2008, this money per capita ratio risen to

seventeen to one. The experience of South Africa as well illustrates this on a region level. As Acemoglu (2009) observes, predicated on data available from the

start of the twentieth century till the collapse of apartheid, there is a considerable increase in GDP per capita in South Africa. However, black South

Africans, who comprised nearly all South Africa’s population, truly experienced a fall in true wages. Experiences such as these could be one

of why some parts of society have a tendency to support institutions and plans which usually do not necessarily encourage growth.

Profits inequality is a major issue because it contributes to several other adverse effects. Included in these are economic inefficiency, undermining of social

stability and solidarity and its own unfairness to some parts of the society generally speaking (Todaro and Smith, 2011). As Todaro and Smith observe, as income

inequality boosts, the fraction of a inhabitants that can qualify for some type of credit rating reduces. When low cash flow folks are unable to borrow

money, they could also be unable to afford education for his or her kids, start businesses, and conserve, thus consequently resulting in a lesser overall rate of

saving in the culture. High inequality as well encourages hire seeking behaviour, where in fact the rich focus on encouraging outcomes which profit them and may also

divert resources from effective purposes which could further enhance development to other less productive purposes. On the other hand, increased investments in

public well being, education and other relevant infrastructure may help reduce this adverse aftereffect of income inequality.

Increased Pollution

Increased pollution has also been cited as a drawback of monetary growth. The World Lender (2014) states that while many persons have benefited from an

improved quality of life due to economic growth, these benefits have not been also, and economical growth usually has bad environmental consequences.

Based on the World Lender (2014), the rate at which natural assets, i.e. land, water and weather, are being degraded in lots of countries is

‘alarming’. The fitness of many can be threatened by factors such as for example polluting of the environment, waterborne disease and exposure to harmful chemicals. This

is particularly hence in developing countries because of their high levels of dependence on natural resources, a limited convenience of adaptation to the changing

climate, and limited information to treatment the effects of the changes. Furthermore, with improvements in the environment globally, addititionally there is an increased risk

of natural disasters and other environmental risks (The Community Bank, 2014).

However, there has been conflicting evidence about the relationship between economic growth and different environmental indicators. In a report of

economic growth and the surroundings, using various indicators incorporating concentrations of urban polluting of the environment and various contaminants of river basins,

Grossman and Krueger (1994) found no evidence that an increase in financial growth contributes to a deterioration of environmental top quality. They observed that

while there was a short period of deterioration, this is subsequently followed by an improvement phase, thus negating the deterioration effect.

Nevertheless, in a study of the expense of pollution in China, The World Bank (2007a) states that although strong financial growth in China during the last

quarter of the century has had positive impacts on the environment due to improved resource utilisation, increased energy performance, pollution control

efforts, technologies which will be cleaner and more energy conserving, and implementation of guidelines for environmental pollution control, new challenges have

also been created. For example, energy consumption heightened by 70% from 2000 to 2005, coal consumption increased by 75%, polluting of the environment emissions have

either risen or remained the same, and surface water top quality deteriorated from 2000 to 2005. This has led to not simply increased pollution, but also a

depletion of resources in general.

In a report of the relationship between energy intake and economic growth using time series data from Asian developing countries, Asafu-Adjaye

(2000) reported that high levels of economic growth result in higher energy demand levels. On the other hand, he notes that in order for a rise in the demand for

energy never to have a negative influence on economic growth, then energy conservation policies which are focused on reducing energy usage have to discover

methods of reducing client demand. Asafu-Adjaye (2000) points out that this can be carried out through a suitable mixture of taxes on energy, subsidies, and

making efforts to encourage industries to adopt technologies which minimise pollution.


Economic growth is a significant field of study, due to the significant impact it has on the society generally, in addition to the various units that define the

society. This essay possesses examined both the positive and negative effects of economic growth on society. A few of the positive impacts include an increase in

wealth/lowering in poverty, improved requirements of living, health, education and infrastructure and technology. It was also noted that in several

cases, the causality ran both ways. For example, while economical growth can have results on health, education and infrastructure, these subsequently

also have results on monetary growth. The unwanted effects discussed alternatively include creative destruction, natural social tension,

health challenges, upsurge in income inequality, increased pollution and a depletion of natural resources. Examples from various countries have been used

to illustrate these results. In addition, various suggestions and recommendations were highlighted how to counter some of the negative effects economic

growth can possess. While these may not totally eradicate these negative impacts, they are able to nevertheless go quite a distance in minimising the unwanted effects and

enhancing the positive influence economical growth can have.


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