What is economic growth? Sources and Goals of Economic Growth
All states and enterprises strive for economic growth. What are the factors that determine its dynamics? Under what conditions is economic growth possible? By what models can develop the national economic system of the state?
Economic growth is according to the definition of an increase in the macroeconomic indicators of a state, industry or enterprise that is common among Russian experts. In the first case, it is measured, as a rule, in relation to the dynamics of GDP. In the second - with the volume of release of goods or its monetary value. In the third - with turnover, revenue. It can be noted that the term in question is in most cases used in the context of the characteristics of the national economic system. Much less often - in relation to a particular industry or as an economic growth of an enterprise.At the same time, the corresponding terminology in Russian practice is generally well established and used regularly.
Economic growth is, if we speak about it in the context of the national economy, a phenomenon that, as a rule, is also accompanied by an increase in the level of well-being of citizens of the state. Salaries, pensions are rising, social support is improving. In many cases, economic growth also predetermines the modernization of the technological way of life of society and production processes. New technologies are entering the country, infrastructure is improving.
What is economic growth, we have identified. Now we will consider it in key contexts - in relation to the national economy, industry, or to a particular enterprise. Let us begin by examining the factors that determine its intensity at the level of the country's economic system.
Key factors of economic growth
Experts identify the following main factors:
- First, it is the amount of available natural resources, as well as their quality.
- Secondly, it is the personnel potential of the population.
- Thirdly, this is the level of capitalization of the economy.
Some experts believe that the quality of economic growth can also be determined by the level of technology available to enterprises operating within a specific economic system.
A particular factor can be expressed in a variety of indicators. For example, with regard to the volume of natural resources, these could be quantitative indicators (so many billion cubic meters or tons) or criteria that determine the corresponding reserves in relation to time and intensity of consumption (such a resource will last for so many years with such the dynamics of operation).
The personnel potential can be both cumulative, correlated with the total population, and expressed by industry. In the first case, this will be the total number of able-bodied citizens - and this, by the way, is an indicator that, in the methodology of many researchers, is macroeconomic. In turn, it is possible to classify the country's human resources in terms of the number of workers in the industrial, agricultural sectors, or those who are qualified in the field of services.
The capitalization of the economy can be expressed in the volume of the money supply emitted by the Central Bank of the Russian Federation, or, for example, in the value of the assets of enterprises with national registration.In turn, in the second case, both real assets and those that have a speculative origin, that is, arising, for example, can be taken, for example, as a result of placing shares on a stock exchange. Both resources can be expressed in national or foreign currencies.
Intensive and extensive types
Economic growth is a phenomenon that is classified into two main types. There is an intensive and extensive growth of the economy. Key characteristics of the first: GDP growth is carried out with a relatively stable dynamics of the use of natural resources and the country's human resource potential, and therefore with an increase in labor productivity. The extensive course of development implies an increase in GDP due to more intensive use of natural resources and the attraction of new personnel to the development of the national economic system. As a rule, population growth and economic growth with an extensive model are significantly correlated.
Advantages and disadvantages
And he and the other type of development of the national economic system has both advantages and disadvantages. Regarding intensive growth, it can be noted that it is characterized, as a rule,the greater competitiveness of the national economy in the world market, its greater investment attractiveness, the high salaries of those employed in production In conditions of economic growth with an intensive model, however, there may be some risks associated with limited sales markets, unemployment, and economic crises among investors and consumers of manufactured goods.
With extensive growth, as a rule, there are no problems with employment, however, the structure of the national economic system can be characterized by a strong dependence on imports due to the underdevelopment of many industries.
There are experts who consider this classification obsolete. In their opinion, economic growth is a complex process that cannot be unambiguously described as based on intensive or extensive principles, mainly because the boundary between these two criteria is rather arbitrary. In particular, if conditions for extensive growth end in a country, it will in one way or another be forced to revise its economic development policy in favor of intensifying individual industries.
Sources of economic growth
We talked about what the state’s economic growth is and what its main varieties are. Identified key factors affecting its dynamics. At the same time, it will be useful to find out what the main sources of the country's economic growth are. Modern experts identify the following list of them.
First, it is the availability of markets for products manufactured by national enterprises, or for services provided by brands registered in a particular country. They can be both external and internal. At the same time, the nature of profit making due to the development of new markets may be different. Most often it is, of course, the sale of goods through representative offices, networks or dealers or the provision of services by affiliates. This could be franchising - providing a complete business model in exchange for compensation from a portion of the proceeds. At the stage of market development, various intermediary structures and providers of additional services can be connected to the process of distribution of goods, services or the establishment of franchise contracts. Some economists define them as "second-order businesses."
Secondly, it is access to capital.In practice, these may be loans or the attraction of direct or portfolio investments. In the expert community, there is a widespread theory that a lower interest on a loan causes a greater intensity of economic growth, in many cases increases the competitiveness of production. However, there is another opinion, according to which expensive to maintain or so-called long loans stimulate business much less to develop more efficiently.
Thirdly, it is access to the technologies in demand on the market, solutions that can help the company to acquire the necessary competitive resources. Or, as an option - the willingness to offer the world market its own development, which will be more competitive current.
Optimum growth environment
The main sources of economic growth that we have discussed above tend to become available only if the national economic system is characterized by a number of specific features. The development of the country's economy is possible within the framework of the relevant environment. Consider its key features.
First, the openness of the state in the aspect of foreign trade is generally accepted among modern economists as a condition for the growth of the national economic system.The fact is that there are very few countries that are able to provide themselves at the same time with natural resources, industrial products, investments, human resources. If a state closes its economy, then a significant growth of the national economy will not occur.
Secondly, an important parameter of the optimal environment for economic growth is the political stability of the state. Any investor will prefer to invest in the economic system of the country where the safety of assets will be guaranteed, the key criterion of which is political stability.
Thirdly, the policy of economic growth of the government of the country should be accompanied by a well-developed budget component. On the one hand, the sphere of private business, as a rule, is significantly isolated from the point of view of priorities in making decisions on the development of those areas for which the state is responsible. On the other hand, the country's budget exists mainly due to tax deductions and other fees paid by businessmen. The corresponding burden on business, determined by the state through legislative initiatives, should be acceptable.
Let us now consider the specifics of economic growth in relation to any industry. It can be noted that the basic classification of the term we are studying is also relevant in relation to the industry level. That is, in this or that segment of the economy, both extensive and intensive concepts can be implemented. As for the key growth factors, they, as in the case of the national economic system, are basically the same: capital, natural resources, human potential.
Sources of growth, in principle, have the same nature - the availability of credit and investment, the availability of markets, as well as access to technology. In turn, one or another sector of the economy will successfully develop if the state possesses political stability, provides opportunities for communication with foreign markets and pursues an adequate tax policy.
Consider the specifics of economic growth of a single enterprise. One can immediately note the fact that the key factors, conditions and sources of growth characteristic of the economic system of the country as a whole or for any of the sectors are applicable to the activities of a single subject of entrepreneurial activity.However, in relation to enterprises, experts identify a number of specific criteria. Consider them.
First of all, experts identify a number of internal and external factors that form the conditions for growth in the enterprise. Among the first are the sectoral specifics of the company, the particularities of the goods produced, the size of the authorized capital, the profitability of the business model, the condition of fixed assets, and labor productivity. To external factors, in turn, experts attribute the specifics of the legislative regulation of the industry where the company operates, the level of competition in the segment, and the prices of suppliers.
Is development possible without economic growth?
Some researchers put forward an interesting thesis: a country or a separate enterprise may well develop without economic growth. The main thing is to reach a certain level acceptable from the point of view of social objectives and political stability, if we talk about the government, or have sufficient revenue and optimal profitability for an enterprise, and simply reproduce a successful model. There can be no practical increase in GDP and revenues for the state and the company in real terms, respectively.That is, within the framework of this concept, economic growth is not so much a need, as one of the tools of change in the current development model. In this regard, the actual question may arise: "What are the goals of economic growth?" Why do governments and businesses strive for it in conditions when the model of their development is generally established?
Many experts believe that the goals of economic growth are the preparation of the economic systems of countries and local business models of enterprises for possible changes in the reproduction environments of key processes. If we talk about the state, the external economic situation may change, and the export products of the current group may turn out to be uncompetitive, or their sales volumes may decrease, as a result of which taxes will fall. Therefore, the national economic system should be developed primarily in order to find promising industries. The new economic growth will be possible on the fact of supplying the world markets with a product that has no competitors or is more attractive in terms of price.
Economy and business: general laws
Approximately by the same laws business is conducted.Any product at first brings great profit to the owners of the enterprise. Later, the market is saturated, resulting in the profitability of production falls. Further, two scenarios are possible - either it will be completely unprofitable to release a particular product, or competitors will offer something more technologically new. Both options suggest that the company should implement economic growth: intensive - by offering new solutions to the market with available resources, or extensive - by hiring new specialists to the staff, buying additional equipment to develop new segments or, alternatively, reorienting production, which can lead to That the reasons for economic growth will appear - a new product, service or technology.