Discuss The View That Economic Growth Is always Desirable
by
itrader (student)
Discuss The View That Economic Growth Is always Desirable
Firstly, Economic growth (EG) is positive change in the actual output of Goods and Services produced by the factors of production in an economy over a period of time, it is expressed as a percentage change on previous year. Sustainable Economic Growth is growth that follows the trend rate and over time doesn’t endanger future generations ability to expand productive capacity.
The last line of the definition concerning sustainability is relevant to the question heading as there is a strong link between sustainability and desirability. When evaluating Economic Growth you have to think of the impacts it will have and that catalysts have upon: the environment, society and future EG.
As an example I’ll use two recent events, the “Credit Crunch” and Hurricane Katrina, these two events affected economic growth negatively in different ways. First, the recent economic boom was based on the back of mortgages, however this boom was pushed more with subprime mortgages, however these sub prime mortgages defaulted in large numbers damaging the Collaterised Debt Obligation market as more and more mortgages defaulted. This demonstrates how in the short term these risky investments may be beneficial with high yields, however they quickly defaulted and became toxic. This affected society negatively in several ways, firstly it meant that housing prices crashed as lenders wanted to decrease their exposure to risk, therefore mortgages granted decreased, this in turn really damaged the building sector. Also due to the banks holding high levels of toxic assets and to spur forward lending from banks, Governments from all over the world injected trillions of capital into the financial sector. This demonstrates how short term EG can lead to huge undesirable effects upon society and the Tax Payer.
