Consequences of Economic Growth on Environment

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Economic growth is the increase in the capacity to provide people with goods and services, and increase in Gross Domestic Product, or the increase of a nations capacity to provide goods and services to its people(Miller G.T. & Spoolman S.E. 2009), they further go on to describe environmental degradation as a depletion or destruction of a potentially renewable resource such as soil, grasslands, forest or wildlife that is used faster than it is replenished, if such use continues, the resources become non-renewable or extinct (Miller G.T. & Spoolman S.E. 2009).

Consequences of Economic Growth

Economic growth eventually leads to economic development, as Miller G.T. & Spoolman S.E. (2009) observes that it is the improvement of human living standards by economic growth. It is clear however that economic growth is every country’s dream and priority. The path to economic growth can be looked at as both destructive or constructive to the environment, the purpose of this discussion will be to look at both the negative and positive consequences.

Gore (1992) shows his clear stand on the negative consequences of economic growth when he states that ‘The hard truth is that our economic system is partially blind, it “sees” some things and not others. It carefully measures and keeps track of the value of those things most important to buyers and sellers, such as food, clothing, manufactured goods, work and indeed money itself. But its intricate calculations often completely ignore the value of other things that are harder to buy and sell: fresh water, clean air the beauty of the mountains, the rich diversity of life in the forest…In fact, the partial blindness of our current economic system is the single most powerful force behind what is irrational decisions about the global environment’ (p.10-11) Adams, (2001) on the other hand is of a different view as to him ‘In practice, development and the environment have a ‘two-way relationship’ (World Bank 1992, p. 1), with economic growth having both good and bad effects on the environment.

There is a vast literature analysing empirical evidence of the environmental consequences of economic growth. Some environmental indicators do tend to show improvement as incomes rise (access to clear water and sanitation) (p.119) This shows that nature is key economic growth and is key in economic growth which is aimed at green economies. From the two schools of thoughts it shows that, economic growth’s impact on the environment should be frowned upon and simultaneously be celebrated. With my focus being on China and Germany.

Bao, Chen and Song (2008) argue that, since 1990, China has been the most significant recipient of Foreign Direct Investment (F.D.I.) and it resulted in its rapid economic growth by meting capital shortage gaps, pushing technology split over towards local firms and improving the degree of China’s openness (Cheung and Lin 2004, Yao 2006). F.D.I. in China has had negative impacts on its economy, these negative impacts included environmental consequences which was caused by foreign firms, therefore it could be said that F.D.I. could be a contributing factor to the serious environmental damage, (which was mostly pollution) that befell China on its rapid economic growth. Even though it seems FDI had negative consequences to the environment (Jiang and Hu 2008), argue that due to China’s rapid economic growth, its energy consumption grew and that its energy development strategy gives priority to conservation and improvements in energy efficiency. By so doing China is doing what (Booth 1998) explained as the ‘Kuznets Curve’ hypothesis, which means that developing countries worsen their environmental conditions and later improve them after growth per capita (p.19)

A recent research investigated environmental regulation and win-win opportunities by concluding that Germany has environmental and economic efficiency. In Germany, environmental protection and economic efficiency appear more balanced in firms’ choices…Such findings partially confirms that community pressure plays an important role in affecting green performance of firms, as recently reported by Feres and Reynaud (2012). In this sense, policy instruments able to increase the sensibility of the public opinion on environmental topics can be a valid strategy to increase the informal pressure on firms, stimulating them to become more focused on eco-efficiency themes during the investment phase (Manello 2017).

This argument though not having enough on Germany, shows that from the onset of development, Germany controlled their firms’ emissions as compared to China, even though both ended up giving priority to environmental conservation strategies. Germany seems to have had control and regulation towards their economic growth. (Tietenberg and Lewis 2012)


  1. Adams, W.M. (2009) Green Development, Environment and Sustainability in a Developing World, 3rd ed. New York, Routledge.
  2. Bao, Q., Chen, Y., & Song. L. (2008) The Environmental Consequences of Foreign Direct Investment in China: Song, L. & Woo, W.T., China’s Dilemma: Economic Growth, the Environment and Climate Change. Canberra, ANU Press (pp 243-264)
  3. Gore, A. (1992) Earth in the balance, Ecology and The Human Spirit, New York, Rodale Inc.
  4. Jiang, K. & Xiulian, H. (2008) Energy and Environment in China, Song, L. & Woo, W.T., China’s Dilemma: Economic Growth, the Environment and Climate Change. Canberra, ANU Press (pp 310-333)
  5. Miller,G.T. & Spoolman S. (2009) Living in the Environment, 16th ed. Belmont, C.A., Brooks/ Cole.
  6. Manello, E. 2017, Productivity growth, environmental regulation and win–win opportunities: The case of chemical industry in Italy and Germany, European Journal of Operational Research Volume 262, Issue 2, available from URL https://doi.org/10.1016/j.ejor.2017.03.058
  7. Tietenburg, T & Lewis, L. (2012) Environment and Natural Resource Economics, 9th ed. New Jersey, Pearson.

Cite this paper

Consequences of Economic Growth on Environment. (2021, Jul 29). Retrieved from https://samploon.com/consequences-of-economic-growth-on-environment/



What are the consequences of development to the environment?
Development can have a number of consequences on the environment, both positive and negative. On the positive side, development can lead to the creation of new infrastructures and homes that can help improve the quality of life for people in the area. On the negative side, development can lead to the destruction of natural habitats, the pollution of air and water resources, and the displacement of local wildlife.
What are the economic issues of environment?
The economic issues of environment include the cost of pollution and the cost of environmental damage.
What are the effects of economic growth?
The effects of economic growth are an increase in the standard of living and an increase in employment opportunities.
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