2.3.5 Costs of economic growth

Costs of economic growth

• Opportunity cost

• Environmental costs

• Balance of trade deficits

• Increased inequality (national + global)

• Inflation

• Easterlin paradox (maybe)

Why are some people against economic growth

• Unsustainable, reduce productive potential of future

• Deplete non-renewable resources = pollution + global warming

Anti-growth belief + who usually is anti-growth

Cutting consumption and adopting more environmentally friendly technology

• Sustainability should prioritize growth

• Usually from developed economies (less-developed want economic growth to increase standard of living)

How does economic growth encourage banks becoming more powerful

Globalized through increasing technology to allow trading to become computerized

Globalization & economic growth

• Buying and selling of securities increased connections + made more unstable finances as prices were volatile

Costs of economic growth on consumers/households (Short and long run)

Short run:

• Higher unemployment if firms use profits to automate production

• Higher prices of domestic products if export focused economy

• Inflation

Long run:

• Increased risk of inequality

• May not increase happiness

Costs of economic growth on firms (short and long run)

Short run:

• Challenges from overseas competitors

• Struggle to access factors of production (may be moved abroad to use in different country)

Long run:

• Decline if in sector that is undercut by overseas production

• Firms may close due to improving technology

Costs of economic growth on government (short and long run)

Short run:

• Higher inflation

Long run:

• Deficit in balance of payments current account (overreliance on imports)

• Difficult to manage inequality

• Difficult to manage environmental degradation

Costs of economic growth on environment (short and long run)

Short run:

• Damaged from increased emissions

• Pollution + depletion of natural habitats

Long run:

• Climate change

• Soil erosion

• Desertification