Rapid Economic Growth brings few benefits to businesses and causes great problems. To what extent to you agree with this statement? (15 Marks)
Economic growth is the increase in the level of economic activity or real GDP (gross domestic product) within a nation. Economic growth affects businesses in different ways, but it does depend on how quickly the growth occurs as to whether it has a positive effect or not. It is normally measured using GDP, and a rise in GDP usually represents a higher standard of living. Most countries will attempt to improve their economies over a period of time, as this can increase levels of consumer spending, improve profit margins for businesses and therefore make more money for the government.
For businesses, rapid economic growth is likely to be more of a problem than a benefit. While it has the potential to increase sales and generate more profit for the company, it also put a large strain on the workforce. If the company produced luxury goods for example, they would see a large increase in demand from consumers who were now able to afford a higher standard of living. It may be difficult to increase the amount that they can produce if they are already working at a maximum capacity. When consumers do not get the service that they feel is adequate from one company, they will go to a different one with better customer services and quicker delivery time. This could be the moment where customers think less about brand loyalty, and more about instant gratification; this could see them swap to companies who are coping with economic growth well. For companies who previously had a high market share with a sought-after product, they could be looking a loss in sales which could result in some job lay-off’s in order to cut costs. However, by cutting costs they would be losing those employers that are helping them to meet the demands of the economy. This is a vicious cycle in which businesses could find it very hard to break out of. Another factor that businesses would need to consider is the environmental impact that large economic growth could include. Growth cannot be separated from its environmental impact. Fast growth of production and consumption can create negative externalities (for example, increased noise and lower air quality from air pollution and road congestion; the rapid growth of household and industrial waste and the pollution that comes from increased output in the energy sector) These external influences reduce social welfare and can lead to market failure as more and more consumers become more environmentally aware. Growth that leads to environmental damage can have a negative effect on people’s quality of life in the long run and may also impede sustainable growth.
