Inflation can cause a variety of problems for the economy. If our prices are rising more quickly than those of our competitors abroad, then we will quickly become uncompetitive and our exports will fall. Inflation will also cause problems in jobs as wages try to keep up and those on fixed incomes suffer. People's savings will also fall in value. The government would have to do everything possible to keep inflation to a minimum if it wants to keep everyone happy.
There are many reasons for wanting to maximise economic growth and increasing living standards is the reason that all the others are linked with. Increasing the living standards of the countries population will improve the morale of the nation. If people are happy with their lives, in and out of the workplace, they are getting a good interest rate on their savings and there are plenty of jobs to keep them employed, the economic climate will continue to rise. Also, if people are being pleased by what the government is doing with the country, they are going to vote for them in the next election.
Health care is another factor that affects the quality of people’s lives. If there is better health care, people tend to live longer, this increases living standards. As there are more people around, more people will be working in the medical profession, taking care of the shortage of nurses for example, also increasing living standards.
There are however, some reasons for restricting economic growth. There will be an inequality of income. Growth of the economy rarely delivers its benefits evenly to everyone. It often rewards the strong, being the more ‘well off’ people, but gives little to the weak, the not so ‘well off’. This will widen the income distribution in the economy.
The push for increased output tends to put more and more pressure on the environment and the result will often be increased pollution. This may be in the form of water, soil or air pollution, but growth also creates significantly increased noise pollution. Traffic growth and increased congestion are very good examples of this happening.
The more the world (or country) wants to produce, the more resources are needed to do that. The faster we use these resources the less time they will last.
Increased output puts further pressure on the available land. This may gradually erode the available countryside.
The push for growth has in many areas put a great deal of pressure on individuals. This may have costs in terms of family and community life.
It could be suggested that people would be for maximising economy as there are far more good things to come out of it than bad. There are policies (called supply-side policies) that aim to boost the potential for the economy to grow - in other words to supply more. They are policies that should make the economy more productive and more responsive to change. Examples include:
- Cutting tax rates - this gives people the incentive to work harder and be more productive
- Cutting unemployment benefits - this gives the unemployed a bigger incentive to find a job; a harsh policy but a fair one in my opinion.
- Promoting education and training - this should make the workforce more skilled and therefore more productive.
- Promoting research and development - spending on research and development will help find new more efficient ways to produce and should lead to better and more varied products.
- Promoting mobility - if the economy is to be as flexible as possible, people need to retrain where necessary and they need to move to where the jobs are. The government has to help encourage this.
It could be observed from this information, that maximising economic growth undoubtedly seems more of a constructive way forward. However, from an environmentalist’s point of view, restricting would seem the only way to go. The government, around at the moment, or future governments, aren’t going to stop the drive for growth because that isn’t the way they work. They will always be trying to increase the standard of life so that they can be seen to be trying, despite the constant climb of environmental pressure.
Bibliography
Books
Harbury, C. and Lipsey, R. G. 1989. UK Economy.
Craft, N. F. R. and Woodward, N. 1991. The British Economy Since 1945.
Websites
