Using real world examples, Evaluate the view that the benefits of economic growth will always
outweigh the costs. [15]
Economic growth can be defined as the increases in total real output produced by an economy
(real GDP) over time; may also refer to increases in real output (real GDP) per capita (or per
person).
In particular, economic growth include both short-term economic growth and long-term
economic growth. In macroeconomics, short run refers to the period of time during which prices
of resources, particularly the prices of labor do not change. And long run refers to a time period
when prices of resources change along with changes in price level.
As the graph shows above, when the aggregate demand increases, AD curve shifts right, from
AD1 to AD2, there will be an increase in real GDP, from Y1 to Y2, which leads to the short-term
economic growth. AD can increase as a result of an increase in any one or more of the
components of AD, which are consumption, investment, government spending and net exports.
As the graph above shows, when long run aggregate supply increase, LRAS curve shifts right
from LRAS1 to LRAS2, leading to real GDP increase from Y1 to Y2. For example, in Nigeria,
its real GDP increase from $375.77 billion to $448.12 billion between 2015 and 2019.Since these
usually need an extended period of time to take effect, their effects on the economy are referred
to as long-term growth. There are several ways to achieve long-term growth: increase in
quantities of the factors of production, improvement in the quality of factors of production,
imporvenment in technology, increases in efficiency, institutional changes and reductions in the
natural rate of unemployment.
There are several consequences could be brought by economic growth such as impact on living
standard, income distribution and environment.
In some case, economic growth brings positive effect to countries.
South Korea is a one of the examples. Since the 1960s, South Korea has transformed from a wartorn, impoverished nation to one of the world's most dynamic and prosperous economies.
According to the World Bank, South Korea's gross domestic product (GDP) per capita increased
from $87 in 1961 to $31,846 in 2019.
This growth has been accompanied by improvements in living standards, such as increased life
expectancy, better education, and improved access to healthcare. Since the 1960s, South Korea
has made significant investments in healthcare infrastructure and technology, which has led to a
significant increase in the number of hospitals and healthcare facilities across the country.
According to the National Health Insurance Service, the number of hospitals in South Korea
increased from 1,094 in 2000 to 2,164 in 2020, which is a 97.8% increase. Additionally, the
number of hospital beds per 1,000 people increased from 7.3 in 1990 to 12.3 in 2019. Along with
the increase in hospitals and healthcare facilities, South Korea has also made significant progress
in improving the quality of its healthcare services. In 2020, South Korea's healthcare system was
ranked as the best in the world by the Bloomberg Healthiest Country Index, which takes into
account factors such as life expectancy, healthcare spending, and healthcare efficiency.
Additionally, South Korea has made significant progress in reducing poverty and income
inequality. In 1963, the poverty rate was over 50%, while in 2018 it was only 7.6%. According to
the Organization for Economic Co-operation and Development (OECD), South Korea's Gini
coefficient, a measure of income inequality, decreased from 0.43 in the mid-1990s to 0.31 in
2019, indicating a more equal distribution of income.
Furthermore, South Korea has made significant strides in improving its environment. The
country and has invested heavily in renewable energy sources. In 2020, renewable energy
accounted for 9.4% of the country's total energy consumption, up from just 2.5% in 2010.
Besides, South Korea has one of the most advanced waste management systems in the world.
According to the Ministry of Environment, the recycling rate of household waste increased from
15% in 1995 to 59.4% in 2020. The government has implemented a system of mandatory
recycling, where households are required to sort their waste into different categories, such as
food waste, recyclables, and non-recyclables.
However, economic growth is not always beneficial.
One such example is Nigeria. According to the World Bank, Nigeria has experienced economic
growth over the past few decades. In 2019, Nigeria's gross domestic product (GDP) was $448.12
billion, an increase from $375.77 billion in 2015. The country's GDP per capita also increased
from $2,174 in 2015 to $2,229 in 2019.
However, this growth has come at a cost. Nigeria is facing a number of environmental
challenges, including deforestation, soil erosion, and water pollution. According to a report by
the United Nations Environment Programmed (UNEP), Nigeria loses around 1.5 million hectares
of forest every year due to deforestation. This has serious implications for the country's
biodiversity and ecosystem services. Rapid urbanization and industrialization also have led to
increased levels of air pollution, particularly in cities such as Lagos. According to the World
Health Organization (WHO), in 2016, Nigeria had an average annual PM2.5 concentration of 26
micrograms per cubic meter, which is above the WHO's guideline of 10 micrograms per cubic
meter.
Besides, Nigeria has experienced a decrease in living standards in certain aspects due to its
economic growth. One area where this is evident is in access to basic services such as electricity.
According to the World Bank, in 2018, only 57.3% of Nigeria's population had access to
electricity, a decrease from 58.4% in 2014. This lack of access to electricity has serious
implications for quality of life, as it can limit access to education, healthcare, and economic
opportunities.
Lastly, there is an increase in income distribution inequality in Nigeria due to economic growth.
The Gini coefficient has increased in Nigeria over the past few decades.in 1992, the Gini
coefficient for household income in Nigeria was 0.425. By 2010, it had risen to 0.489. This
represents a significant increase in income inequality over the period.
In conclusion, based on the real-world examples mentioned above, the statement that benefits of
economic growth will always outweigh the costs is not accurate. In many cases, the cost of
economic growth is outweighing the cost.