Growth rate
I am taking a course on economic growth. Surprisingly, I see many students questioning why developed countries are so concerned with economic growth since their standard of living is already high. Like the US, they probably have the highest purchasing power in the world, so why worry so much about economic growth, slows down and not meeting growth rate targets.
The rebuttal I thought was rather simple. Humans have 'unlimited' wants. So of course, humans are never satisfied with where they are. So you could expect people to want to be able to purchase more stuff than they already could. This simple concept which happens to be the basic foundation of economic theory is the reason why economic growth is so important to every countries.
Of course there are other reasons too like political, employment or even poverty. The assumption of developed countries having no poverty is totally wrong. Just look at the poverty rate of the US. (Photo courtesy of The Economist. Should check them out. I'm a loyal subscriber)
3 comments:
Hi,
I believe it's also the mindset that one wants to be "more" than the others to feel superior.It's not about how much one has,but how much one has relative to others.Also,it is essential for US to keep growing so that it can maintain a gap with the rest so as to not have the same fate as UK when US surpassed it economically:)
The problem of slow growth rate is the loss of future prosperity. A growth rate with 2 per cent effects the economy of a country in that way that - in opposite to a growth rate of e.g. 3 per cent - it needs above 10 years or more to reach the same state of prosperity as it would be reached with one point more of percentile.
And secondly, investors like countries with a high growth rate. ;-)
---
Niklas
niklas.p@tzold.de
Thats correct Niklas ! What you meant is that growth rate even by 0.5 percent different means alot of difference in growth in the future. This is due to compouding, right ? Thats very very true !
Thanks for responding :)
Post a Comment