Strategic and innovative marketing approaches

Strategic and Innovative Marketing

The Pursuit of Economic Growth is not in People's Long-Term Interest

Nothing defines the contemporary society as well as consumerism does. And we consume everything there is to be consumed, not just basic subsidies such as food, but also services and luxurious products. The major reason forwarded to explain this fact is the economic growth registered by the civilized countries, which earn more and more money and afford to spend it. "The population of the world is now growing at a speed which is without precedent, and this growth appears to be almost without constraints. The growth of the output of goods and services by human kind is speeding up even more, in particular since the most populated parts of the world, East and South Asia, are now also participating successfully in the process of economic growth" (Van Zanden).

Economic growth is an extremely wide concept and it can be looked at from numerous perspectives. For once, it can be analyzed from a generalist stand point, meaning the economic growth of the world. This basically affects the population in the meaning that it will increase their living standards, but it will also generate an increased consumption of the globe's natural resources. Then, it can be divided into geographical regions and understood as the growth of a country in comparison to another country. This represents the gap between developed and less developed countries, which is generally deepened by further economic growth. Finally, it can be seen as the growth and development of a company within a national or international context.

It is often being said that economic growth is not in the best interest of the population, at least not on the long-term. To establish a clear opinion in regard to this statement, one must first analyze several particularities of growth, such as its causes and its negative as well as positive effects.

2. Economic Growth

Along the years, the concept of economic growth has been defined in numerous ways, all basically stating the same things, but in different ways and sometimes from different angles. Here are some of the most relevant definitions of economic growth:

Economic growth means in fact that man as a species is increasingly successful in manipulating biological, chemical and physical forces in such a way that (s)he can satisfy his/her needs" (Van Zanden).

Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable" (Romer and Henderson, 2007)

Economic growth refers to the expansion of the national income -- the total production of goods and services of a country over a given period. Economic growth is usually measured by the pace of change of gross domestic product (GDP) after adjustment for inflation also known as real GDP" (Canadian Economy, 2007)

Whichever definition chosen as most relevant, fact remains that much will still be said about economic growth. Specialized economists often disagree on the effects of economic growth upon the general population. But to best understand these effects, one must first truly comprehend the vital components of growth, including the causes which generate it.

Causes of Economic Growth

The causes of economic growth are multiple and much can be said about them. However, this is not the purpose of the present paper, which will simply and concisely present some of the most relevant causes, as found in the specialized literature. In this order of ideas, a highly important generator of economic growth is given by the migration of the population. To better explain, the market liberalization and globalization have made it easier for countries and corporations to import and export all sorts of resources, including personnel. Then, this opened a new window of opportunities for the employees in less developed countries, who sought work in better paying regions. The national companies soon hired this specialized workforce (Brenner, 1998), moreover when they worked for less money than the local labour force. Economic growth was as such achieved. But the costs of outsourcing were extremely severe upon the local population, who was laid off in favour of foreign workers. As such, the economic growth based on demographical factors materialized in an increased unemployment rate.

Another significant cause of economic growth has a more financial nature and is once again generated by the liberalization of international markets. Globalization eased companies' access to international investments and funding opportunities. Therefore, the increased circulation of capital supported the growth and development of corporations, which consequently generated economic growth.

The increased attention on the human resource and the numerous policies of human resource management also fostered economic growth in the meaning that the working force became more specialized through training programs, which then led to an increase in productivity and also generated a superior quality of the final product - all leading to economic growth.

A last major component of economic growth is given by the most recent technological advancements. These support countries and organizations in increasing the quality of their products and services through an improvement of the manufacturing, management, marketing, administrative and human resource processes. Then, the technological advancements also support an increased extraction and processing of the natural resources. But then this implies that the natural resources would be exploited to a maximum, negatively impacting the population on the long run.

All in all, "economic growth is caused by improvements in the quantity and quality of the factors of production that a country has available i.e. land, labour, capital and enterprise" (Biz/ed, 2008). And this was generally possible due to the liberalization and globalization of international markets.

3. Positive Effects of Economic Growth upon the People

Economic growth has been presented for years as a source of future benefits for the population in order to motivate them and have them contribute to its achievement. And the beneficial effects have also been seen, and include features such as a wider palette of products and services, from which the population can choose, or reduced poverty.

A first positive effect of economic growth is that it increases the population's living standards in the meaning that it presents them with more choices of goods and services, from where they can choose the ones that best meet their needs. This is generally possible through the increase of competition in a developed economy and a free and growing market. But the process then fosters excessive consumption, which is not by far a positive aspect of economic growth; but this will be discussed further on.

Then, economic growth sustains the development of the population in the meaning that it creates more jobs. And an increased workforce occupation reduces poverty and even crime, moreover when most crimes are being committed by poor and unemployed individuals. "Economic growth helps to reduce unemployment by creating jobs. This is significant because unemployment is a major source of social problems such as crime and alienation. However, despite rapid increases in economic growth since the Second World War, areas of high unemployment in the EU remain. For example, in France and Spain there are currently high levels of structural unemployment. This kind of unemployment may not be reduced by economic growth" (Pettinger, 2007).

Economic growth also sustains the development of the country in numerous industry sectors, such as medicine or education, by creating more studying opportunities and better access to medical care. "Infant mortality has declined from 180 per 1000 births in 1950 to 60 per 1000 births. Literacy rates have risen from an average of 40 per cent in the 1950s to over 70 per cent today. World poverty has declined, despite still-high population growth in the developing world. Since 1980, the number of poor people, defined as those living on less than a dollar a day, has fallen by about 200 million, much of it due to the rapid growth of China and India" (Ben-Ami, 2006).

Another social aspect of economic growth is the fact that continuous development has supported numerous countries in improving the treatment of women and children. The condition of women has changed drastically within the countries focused on economic growth and significant steps are being made to ensure the gender equality. In this sense, women have been given long overdue rights, such the right to get a job, vote or get a divorce. Furthermore, the approach of women giving birth has also changed within these countries and the conditions in hospitals have improved (Ward, 1993).

4. Negative Effects of Economic Growth upon the People

But aside from the beneficial effects forwarded by the advocates of economic growth, one must also look at the multitude of negative impacts, such as the destruction of the environment or the widening of income inequality. These, and others, are succinctly presented next.

Economic growth has been shown to increase the income gap between different social classes by making the rich even richer and the poor even poorer. This can basically be explained by the fact that a developing country offers more perspectives to its educated community, in the detriment of the uneducated ones, which remain poor, generating as such a relative poverty and an income inequality (Pettinger, 2007). Several studies have backed this statement with evidence that countries which present a more equal land distribution are more likely to support economic growth and register less negative effects, like in the picture below:

Source: Deininger K., Squire, L., 1997, Economic Growth and Income Inequality, Finance and Management

But these statements on income inequality have been counter-argued with evidence that inequality was only widened for a short period as it "tended to increase in a first stage and then to decrease at a later stage of development" (Kuznets, 1955).

Economic growth is possible through the exploitation of natural resources, but on the long-term, this diminishes the resources, harms the environment and consequently negatively impacts the population. "At its simplest it can hold that there are physical limits as the Earth risks running out of natural resources. Alternatively the limits can be projected further into the future - for example, economic development threatens to raise global temperatures and destabilise the climate" (Ben-Ami, 2006). A most relevant example in this sense is given by the continually decreasing resources of natural petroleum, already found only in certain regions of the globe. Not only has the reduction of these resources affected the population, but has affected the international economy as a whole and has increased the political power of the exporting countries and the dependency of the importing countries. For the population, these changes have materialized in higher prices not only for gas, but also in chain price increases for all products and commodities.

Then, another side effect of economic growth is once again linked to the preservation of the natural environment. From this perspective, economic growth uses more technologies and more machinery, which eliminates more waste and increases the levels of pollution. "Economic growth results in an immediate increase in emissions" (Bruyn, 2000), which consequently damage the health of the surrounding environment. But the advocates of economic growth might argue that the specialized engineers are increasing their efforts to come up with newer and better technologies, which are more environment friendly. A positive example in this sense is given by the Japanese car manufacturers, which are currently producing small size vehicles, with fuel-efficient engines incorporated. But the overall focus on environment protection has decreased significantly and it was replaced with an increased emphasis on economic growth, as revealed by the chart below:

Source: Carlson, D.K., 2008, Public Priorities: Environment vs. Economic Growth, Gallup

But economic growth affects the population from yet another perspective - that of social structures. To better explain, economic growth and development is generally achieved through intense industrialization, which occurs within large cities. This widens the gap between the wealth of the citizens and the peasants and generates a migration form the rural to the urban areas, decreasing as such the interest and capabilities in the agricultural sector. "Economic growth favours urban workers over rural workers that the latter tend to migrate to the cities and the size of the agricultural population declines" (Bourguignon, 2003).