Economic growth and its long-term effects on human society

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.

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).

The population is negatively affected by economic growth in the meaning that they are placed under increased pressure and stress. To better explain, in order to keep up with the advancements made, the population has to readjust and this generally means they will have to put in extra hours. "In the beginning of the industrial revolution, higher growth led to people working lower hours. However, in the past couple of decades higher incomes have actually led to people working longer hours. It seems people are unable to enjoy their higher incomes. Feeling the necessity or preferring to work longer hours. This suggests people are valuing earning money more than leisure. However, this trend may also be due to companies wanting people to work longer hours" (Pettinger, 2007).

Other significant implications of economic growth upon the population revolve around the diseases generated by superior life standards, such as obesity. Then, unlike other sources, Pettinger states that the crime rates have actually increased, simply because there are more things to steal (Pettinger, 2007).

5. Conclusions

The matter of economic growth is far from being exhaustive and making a clear decision on whether to agree or disagree with the statement that economic growth will damage the long-term interest of the population becomes even harder to make. Therefore, I will say that while I do not totally agree with the statement, I neither entirely disagree with it. In other words, I partially agree with the statement due to the negative long-term effects of economic growth, such as the income inequality and the relative poverty, but more importantly because of the negative effects it has upon the natural environment.

On the other hand, I partially disagree with the statement for I consider economic growth to have numerous advantages for the population. Our lives have significantly changed for the better as compared to the lives of our ancestors. And proof of the advantages offered by economic growth stands the fact that all technological, legal, education and political advancement occur during times of economic prosperity, rather than stagnation or recession (Friedman, 2005).

All in all, I believe the matter to be a personal one and the decision to depend on the unique characteristics of each responded. For instance, it is only natural for an environmentalist to speak against economic growth in the detriment of environment protection. Then again, it is only natural for a manager or shareholder to desire growth as to ensure future financial resources.