The main goal of this study is to study and analyze how economic growth affects income inequality, and at the same time to check the empirical validity of other factors. The article discusses the research methodology of theoretical models of advanced economic development. The essence of accelerated development and its objective need for self-reproducing growth is revealed. The forecast uses modern trends in GDP growth and in terms of its rapid development. The neoclassical model of economic growth and the theory of big waves are analyzed in terms of identifying ‘opportunities’, ‘chances’ for a country to break through in economic development. There are huge differences between countries in how economic and political life is organized. Volumetric literature documents a large cross differences in economic institutions and a strong correlation between them institutions and economic indicators.
To achieve further progress, it is necessary to highlight the source of exogenous differences in institutions, so that we approximate a situation in which a number otherwise identical societies end up with different sets of institutions. European colonization of the rest of the world provides a potential laboratory for research these problems. From the end of the fifteenth century, Europeans dominated and colonized most of the rest of the globe. Along with European domination, the imposition of completely different institutions and structures of social power in different parts of the world. The most important factor determining whether Europeans have chosen the mining route establishments were they settled in large numbers.
In the colonies where Europeans settled, institutions developed for their own future advantages. In the colonies where the Europeans did not settle, their goal was to create highly centralized state apparatus and other related institutions indigenous people and facilitate the extraction of resources in the short term. Do we care about economic growth the same way we do? For citizens of all too many countries in the world where poverty is still the norm, the answer is immediate and obvious. But tangible improvements in the basics of life that make economic growth so important when living standards are low – Longer life expectancy, fewer diseases, fewer child mortality and malnutrition – were mainly achieved long before the per capita income of the country reaches levels used in modern industrialized countries.
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For example, Americans are no healthier than Koreans or Portuguese, and we no longer live despite the average income is more than twice that of them. However, whether our living standards will continue to improve and how quickly they will remain a matter of special concern to us. Nonetheless. Perhaps because it is never clear to us why we attach so much importance to economic growth, firstly, we often face different goals, sometimes we seem almost embarrassed – about what we want. We not only recognize other values; in principle, we put them at a higher level than ours material well-being. Even in parts of the world where the need to improve nutrition, literacy and life expectancy is urgent, a reluctant aspect often arises in recognizing that achieving high growth is a priority.
As a result, especially when accelerating growth will require sacrifice from entrenched voters in the presence of established interests, the political process is often not able to gather determination to move forward. Too frequent a result, in both low- and high-income countries, is economic frustration, and in some cases of overt stagnation. We, of course, recognize the advantages of a higher material standard of living and value them. But moral thinking in almost all known cultures encourages us not to pay too much attention material problems. We are also becoming increasingly aware that economic development, in particular industrialization and, more recently, globalization, often leads to undesirable side effects, such as damage to the environment or the homogenization of what used to be distinctive cultures, and we also began to consider these issues in moral terms [6].
Economic growth – meaning an increase in the standard of living of the overwhelming majority of citizens – most often contributes to empowerment, tolerance for diversity, social mobility, a commitment to justice and a commitment to democracy. Ever since the Enlightenment, Western thinking has viewed each of these tendencies positively and in a clearly moral sense. Even societies that have already made significant strides in these same dimensions, for example, most of today’s Western democracies, are more likely to make further progress when their standard of living rises. But when living standards freeze or fall, most societies little progress towards any of these goals, and in many cases they clearly regress.
Economic progress must be broad based if it contributes to social and political progress. This progress requires the positive experience of a sufficiently wide segment of the country’s population to form a national mood and direction. Due to the fact that more and more households with two breadwinners and more people occupy two jobs, the incomes of most families have more than a stable basis [6]. However, almost all of the gains made over the past three decades, occurred only during a period of strong growth in the late 1990s.
Economic Growth Theories
The importance of the link between economic growth and social and political progress and the resulting concern about what happens if living standards do not improve are not limited to the united states and other countries that already have high incomes and established democracies. The main story of the past two decades throughout the developing world including in many countries that were previously either member states of the soviet union or close soviet dependencies has been the parallel promotion of economic growth and political democracy. Back in the 1970s less than fifty countries had freedoms and political institutions which are usually associated with freedom and democracy. However by the end of the twentieth century there were almost ninety of them. Not surprisingly the countries in which this movement towards freedom and democracy was most successful were most often the countries in which average incomes have grown over the years. The specific context of emerging economies provides several reasons for this.
Of course there are very noticeable exceptions china singapore and saudi arabia to name just a few and discrete transitions in the political systems of countries usually also show other difficulties. But in general the experience of developing countries over the past two decades indeed after the second world war is clearly more consistent with a positive connection between economic growth and democratization. It is for this reason that the concern that the sustainable expansion that many developing countries have experienced over the years may weaken is also not an economic issue. Lonely. We know that new democracies are fragile democracies. They have neither the attractiveness of a historical tradition nor a large number of concrete achievements. Give them legitimacy in the eyes of skeptic citizens.
Economic growth or lack thereof often plays an important role in spawning progress from dictatorship to democracy but also the overthrow of democracies by new dictatorships. It is too early to judge whether the financial crisis which hit some of the most successful developing countries in asia and latin america at the end of the 1990s marked a new era of slower growth for example due to global excess capacity in the world. Many of the industries in which these economies competed. Or was it just a warning to avoid risky financial institutions and eliminate wasteful corruption in any case it should be clear that these countries are at risk. Individuals if their previous growth was disappointing are as political and social as economic. Violent violence that suddenly occurred in indonesia the chinese minority when the economy of this country stumbled was just one demonstration of the dangers associated with falling incomes. For the same reason the frequently expressed fears about what economic collapse will mean for a still weak and extremely imperfect democracy in russia also deserve acceptance.
Seriously. Problems of a more serious nature surround those developing countries in which actual economic development is practically absent. In most of africa but elsewhere standard of living at the same level or declining. In many such countries the habitual assertion is that the proper institutions of the rule of law transparency and a stable government that do not corruption must be in place before economic progress becomes possible. But if economic growth is required to make these institutions viable they are consistent with society although they are not identical to it an attempt to artificially introduce them into a stagnant economy is likely to prove futile. Greater prosperity means among other things better food larger homes more travel and better health care.
That means more people can afford better education. It can also mean as it was in most western countries during the twentieth century a shorter work week which gives more time for family and friends. In addition not only individuals and their families but also communities and even entire countries receive these material benefits from income growth. More abundance can also mean better schools more parks and museums and larger concert halls and sports arenas not to mention more leisure activities to enjoy these public services. The growth of average income allows the country to project its national interest abroad or send a person to the moon [5]. All these advantages however lie mainly in the material world and we have always been reluctant to push material concerns to the highest level in our system of values.
Praise of ascetic life and admiration for those who practice self-denial were constant themes of the religions of both the west and the east. Same to warn of dangers to the spiritual well-being of a person that arise from devotion to money and luxury or in some cases simply from wealth itself. Even aristocratic and romantic traditions that are based on the explicit presumption of wealth however neglect the efforts to achieve it. Moreover even when people directly admit that more is more less is and more is better economic growth rarely means just more. A dynamic process that improves living standards also leads to other changes. More is more but more is different. Qualitative changes accompanying economic growth including changes in the organization of labor in the structures of power in our relations with the environment almost always caused resistance.
Anti-globalist protests on the streets of seattle genoa and washington dc and even on the outskirts of davos reflect a long line of thinking [4]. More than two centuries ago when europe began the industrial revolution and adam smith and his contemporaries analyzed and praised the forces that create the wealth of peoples jean-jacques rousseau instead admired the noble savage claiming that the golden age of mankind not only happened before industrialization but before the advent of settled agriculture. Seventy-five years later when prominent victorians hailed the age of cultivation karl marx observed the gross difficulties that the promotion of industrialization had imposed on workers and them families and developed an economic theory about how things can and in his opinion could become better together with a political program to create this supposedly better world.
Although communism is now for the most part a relict where it exists at all romantic socialism combining the acts of marx and rousseau continues to attract supporters as well as fundamentalist movements that glorify the purity of pre-industrial society. What all of these forms of resistance to the unwanted have noted the side effects of economic expansion or globalization of economic growth are that as with the earlier lines of religious thinking in each case accompanied by a distinctly moral subtext. Increasingly wider sections of our society recognize that it is not only economically stupid but it is also morally wrong for one generation to use a disproportionate share of the worlds forests or coal or oil reserves or to deplete ozone or change the earths climate filling the atmosphere with greenhouse gases.
While requests on behalf of biological diversity sometimes appeal to practical concepts such as the potential use of undetected plants for for medical purposes we are also increasingly questioning our moral right to destroy other species. Opposition to the global spread of markets is often expressed in the same degree from the point of view of the moral emptiness of consumerism as in the tangible difficulties that world competition and unstable financial systems sometimes impose. But if raising the standard of living makes society more open tolerant and democratic and also perhaps more prudent with regard to future generations then it is simply not true that moral considerations are completely contrary to economic growth.
Growth is valuable not only for our material improvement but also for how it affects our social attitude and our political institutions in other words the moral character of our society in a term approved by the thinkers of the enlightenment of which there are so many of our views on openness tolerance. And democracy arose. The attitude of people towards themselves towards their fellow citizens and towards their society as a whole is different when their standard of living rises compared to when it stands still or a fall. It is also different when they look at their prospects and the prospects of their children with confidence and not look forward with anxiety or even fear [6]. When the attitude of the vast majority of citizens is determined by rising living standards over time this difference usually leads to a positive development. Use the language of the enlightenment again the moral character of society.
Consequently economic growth issues are not a matter of material or moral values. Yes economic growth often has undesirable effects such as destruction of traditional cultures and damage to the environment and yes some of them are our own moral considerations which we have the right to take into account. But economic growth has social and political consequences which are also morally beneficial. Especially in order to assess various directions of public policy it is important to consider not only familiar moral negatives but also these moral positives. It is equally important to understand the correct relationship between public policy and private initiatives regarding economic growth. There is also a positive moral the consequences of improving living standards change history significantly.
The generally accepted view is that government policy should try to avoid interference with private economic initiative as much as possible: expecting more profit is a sufficient incentive for a company to expand production or build a new plant while the prospect of higher salaries are also sufficient to encourage workers to seek training or invest in their education. The same applies to private decisions about saving opening a new business or introducing new technology. The best thing the government can do as the story goes is to minimize the extent to which taxes or security rules or restrictions imposed for national security dull these market incentives.
