The economic growth and economic development

Ekonomia III

Magdalena Cupryjak 91506

In the conditions of modern economic development and economic growth determine the position of a state in the international arena. Moreover, they are responsible for the standard of living and investment attractiveness.

Economic growth and development are often used interchangeably, however, they do not describe the same phenomenon. Economic growth is augmentations ability of a society to produce goods and services. In economic theory this term is used to describe changes in quantitative rather than qualitative. The process of qualitative change is called economic development. Commonly known measure of economic growth is the increase in real gross domestic product. Often it is given as a supplement to GDP per capita¹.

As the main source of economic growth can be considered a common private property, freedom of exchange of domestic and international, competitiveness and innovation, monetary stability, the existence of efficient capital markets and low taxes. In a short time, a key driver of growth is consumer demand and investment - domestic and foreign. In the long term strength is sufficient supply and efficiency factors².

The most important measures of economic growth of society are:

• Gross domestic product - the value of goods and services produced in the country during the year by the society,

• Gross national product - the value of goods and services produced by the country's citizens (even abroad) during the year,

• The rate of growth of national income - is the ratio of the national income in the period to the size of the national income in the base period,

• The size of the Gross Domestic Product per capita³.

Economic development is a long-term process of changes in the economy. It includes changes in the quantitative growth of production, employment, investment, capital size, income, consumption and other economic values that characterize the economy from the quantitative as well as qualitative changes or structural changes. Economic development causes changes in the structure of Gross Domestic Product and changes in the structure of employment⁴.

There are four main factors of economic development;

• Human capital - knowledge resources and capabilities of people. It should be characterized by competition and exclusivity. The knowledge and skills of people are an important factor in the production of goods and services.

• Land and raw materials - earth provides access to minerals and minerals, gives the benefits of space for construction and other uses. It is a basic factor of production. It is characterized by constancy position, the inability to multiply, incorruptibility at the rational use.

• Technical progress - methods of preparation and confirmation process of manufacturing or processing of goods and information. It is characterized by optimizing production and minimizing costs.

• Investments - economic outlay incurred for the maintenance, creation and increase capital. Should be characterized by a specific time of the investment, expenditure incurred for the implementation, the expected benefits of the investment and the possibility of investment risk⁵.

The functioning of the economy and the state creates many obstacles for normal growth and development. There are two main categories of barriers;

• political and economic barriers;

• Systemic and ideological barriers

• Lack of internal stabilization of political relations

• Barriers political division of the world

• institutional and organizational barriers

• Socio-economic barriers:

  • demographic barrier

  • Barrier real wage

  • Barrier social infrastructure

  • Barrier food⁶.

Picture 1. Poland - Economic forecast summary.

Source: http://www.oecd.org/economy/poland-economic-forecast-summary.html

Real GDP should continue to grow around 3½ per cent annually, supported by solid investment and consumption growth. Considerable infrastructure investment supported by EU funds will continue to underpin productivity and GDP growth, despite a temporary slowdown in 2016 at the switchover of budget periods for EU funds. Consumer price inflation is expected to gradually recover as the effect of sharp falls in energy and food prices fades⁷.

The concept of economic growth and development that is linked to fluctuations of slow growth. Such a phenomenon is called the business cycle. It has four phases;

• Phase recovery - growth in investment, consumption and GDP, and a fall in unemployment,

• Phase flowering - an increase in investment, consumption and GDP, reduction of unemployment. In addition, there is the phenomenon of inflation and the trade deficit as a symptom of economic imbalances,

• Phase slowdown - decline in investment, consumption and GDP, rising unemployment, inflation and trade deficits,

• Phase recession - the decline in investment, consumption and GDP, rising unemployment and improving the economic imbalances - the decline in inflation and the trade deficit^{8 9}.

The benefit of economic growth and development is to increase the standard of living, better social situation, increased public safety - which is why every government is fighting to economy rapidly but steadily developed for the good of their society.

Sources:

1. Articles and books:

• “Barriers to economic growth and economic development”, IB Economics, Unit 31, December 2006

• “Sources of economic growth”, Department of International Development

2. Websites:

• www.useconomy.about.com

• www.investopedia.com

• www.business-tes.wikispaces.com

• www.oecd.org

• www.whatiseconomics.org

• www.economicsdiscussion.net

• www.gov.uk

1^ “Economic growth”, Investopedia, website: http://www.investopedia.com/terms/e/economicgrowth.asp

2^ “Sources of economic growth”, Department of International Development, available on website: www.gov.uk\government

3^ “What are the best measurements of economic growth?”, website: http://www.investopedia.com/ask/answers/032515/what-are-best-measurements-economic-growth.asp

4^ “Economic development”, website: http://www.whatiseconomics.org/economic-development

5^ “5 factors that affect the economic growth of a country”, website: http://www.economicsdiscussion.net/economic-growth/5-factors-that-affect-the-economic-growth-of-a-country/4199

6^ “Barriers to economic growth and economic development”, IB Economics, Unit 31, December 2006, p. 329, website: www.business-tes.wikispaces.com

7^ „Poland - Economic forecast summary.”, OECD – better policies for better lives, website: http://www.oecd.org/economy/poland-economic-forecast-summary.html

8^ „Business Cycle”, Investopedia, website: http://www.investopedia.com/terms/b/businesscycle.asp

9^ „What is the business cycle?”, website: http://useconomy.about.com/od/glossary/g/business_cycle.htm

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