Impact of economic growth 2.5.4

What are the main benefits of economic growth?

• Increased standard of living

• Job creation

• Reduced poverty

• Increased government revenue

• Investment opportunities

What are the main costs of economic growth?

• Inflation

• Resource depletion

• Income inequality

• Financial instability

What are the positive impact of economic growth on current living standards?

• Increased income and employment

• Improved infrastructure and services

• Technological advancements

• Reduced poverty

Why can growth threaten living standards?

• Environmental concerns

• Income inequality

• Inflation

• Resource depletion

•  Climate change

• Biodiversity loss

• Water scarcity

What is the Environmental Kuznets Curve?

A theoretical framework that suggests a non-linear relationship between environmental degradation and economic development.

What is the Low-income stage of the Environmental Kuznets Curve?

Where country’s tend to focus on growth and industrialisation. It often involves increased pollution and degradation of natural ecosystems.

What is the Middle-income stage of the Environmental Kuznets Curve?

Where the negative impacts on the environment tend to peak

What is the High-income stage of the Environmental Kuznets Curve?

Where beyond a certain level of income, the theory suggests that societies become more concerned about environmental issues. They start investing in cleaner technologies, adopting stricter regulations and prompting sustainable practices. Environmental quality begins to improve despite ongoing economic growth.

What can explain a movement up the Kuznets curve?

• Rapid industrialisation- heavy industries are often energy intensive

• Increasing emissions from urbanisation

• Relatively weak environmental laws and pollution regulations

• Many low-income countries have limited technology/ infrastructure

• Heavy reliance in ‘dirtier fuels’ such as coal

What can explain moving down the Kuznets curve?

• Innovation leads to scaled application of cleaner techniques

• Tougher environmental laws

• Government policy interventions (carbon taxes/ trading)

• Change in structure of GDP away from heavy industry towards services

• Emergence of policies/ capabilities to promote smart urbanisation

What is sustainable growth?

Sustainable economic growth seeks to achieve long-term prosperity while also considering the well-being of current and future generations, as well as the health of the environment.

What are the ways that economic growth can help sustainable growth?

• Slower population growth as per capital incomes rise

• Proceeds of growth invested in clean energy

• Increased awareness of need for sustainability

• Decline in heavy energy-intensive industries

What are some policies to promote sustainable growth?

• Carbon tax

• Carbon trading schemes

• Tougher environmental regulations

• Spending to protect bio-diversity

• Subsidies for scaling up clean energy generation

• Investment in sustainable technologies

• Tax relief on research and development initiatives

What is likely to occur if economic growth is unsustainable and is higher that the long-run trend rate?

Inflation