Economic Growth
Economic growth is a positive circumstance for
any nation. It raises the standard of living, cuts down on
government responsibilities, and alleviates many of the ills of
society.
One of the most important aspects of economic
growth is the standard of living. Standard of living is the quality
of life based on the possession of necessities and luxuries that make
life easier. In a market economy, one of the features of the
standard of living is its ability to increase real per capita output.
Another feature would be the ability of the
standard of living to increase people’s free time because of their
economic sufficiency. Government spending is another feature of
economic growth. Because a large amount of the government’s income
comes from the taxpayers, an improvement in the economy can lead to
the creation of a larger tax base. In the end, this money that the
government collects, can add to improving the quality of public
services.
The third aspect of economic growth is domestic
problems. As with any nation, the United States faces a multitude of
levels of poverty, medical care, inequality of opportunity, and
economic instability. Most of these problems are the result of
economic need. With a growing economy, many of these societal ills
are reduced because of the creation jobs and income for many of the
underprivileged.
Helping other nations is the fourth aspect of
economic growth. As our economy grows, so does American demand for
foreign made products. With the United States purchasing foreign
goods, we are helping to create jobs and improve the economy of that
nation. In return, an increased income for citizens of other nations
enables them to purchase American goods. An increase in foreign
trade also assists other countries in their allocation of resources.
When the U.S. purchases foreign goods, productive resources in those
nations are attracted to the growing export industries. Thus in the
long run, world economic growth is stimulated.
The fifth and final aspect of economic growth
is the global role model. In a time where many nations are
establishing a foothold in the world, they are copying the economic
and political ideologies of other established and industrial nations.
During the Cold War, countries of the free world and the communist
world tried to influence the economic development of developing
nations. But with the fall of the USSR nearly 10 years ago, the U.S.
has increased its global influence.
Factors That Influence Economic
Growth
The factors that influence economic growth are
the same as the factors of production. Land, the first factor, is
one of the greatest resources in the United States. Though we must
import certain elements, the U.S. is reasonably self-sufficient in
many other natural resources. But in order to sustain this level of
self-sufficiency, the United States must conserve its natural
resources because they are rapidly decreasing.
Capital is the second factor influencing
economic growth. Economists frequently use the capital-to-labor
ratio, which is obtained by dividing total capital stock by the
number of workers in the labor force. The ratio therefore stands for
the average amount of capital stock each worker uses in his or her
job. Capital goods are the result of production, making it possible
to influence their creation. The key to the creation is saving, and
the saving is left up to the consumer. When people cut back on
consumption to save and invest, they liberate factors of production
to generate new capital. Yet this tactic is not always possible. In
some countries, people are so impoverished that they cannot bear to
save their money because it would compromise their survival. In
these countries there is low investment in capital goods.
Labor is the third factor that influences
economic growth. A skilled and growing labor force within a nation
allows its economy to grow. In general, the rule is, is that the
size of a labor force is related to the size of the population. It
the rate of population growth declines, so does the labor force
growth rate. This is where foreign workers step in. New additions to
the labor force help offset a labor shortage. Worker desire and
motivation are other factors that affect the quality of the labor
force.
The fourth and final factor of economic growth
is entrepreneurs. Just because a nation has many workers and other
growth potentials, it doesn’t ensure the success of the economy. A
very important factor is the presence of entrepreneurs who add a
twist to the economy by bringing to it innovation. All entrepreneurs
need is a business climate to permit them to succeed. Such a climate
would include minimum government involvement, and an economic system,
which allows them to keep most of their profits.
Productivity
Productivity is the level to which productive
resources are used efficiently. Basically this means the amount of
goods that are produced at the lowest price. When this is present, a
nation is saving money, and increasing its revenue. As a result, the
government takes in more money, and is able to spend more on public
works, and on the underprivileged of society. By having a high level
of productivity, a nation’s economy, provided other factors permit,
is strong and vibrant.