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What is Economic Growth | Characteristics of Economic Growth

Most of the countries in the world are developing. However, few countries have gone through this stage and the self-sufficient and self-motivated development that is taking place there today is known as ‘Economic Growth’. The developed countries include the United States, Japan, Canada, England, and some Western European countries. In this article we will explain What is Economic Growth and what are the Characteristics of Economic Growth.

What is Economic Growth

What is Economic Growth

Economic growth is the increase in the production of economic goods and services from one period to another. Economic growth is the increase in the production of goods and services in an economy. Increases in capital goods, labor force, technology and human capital can all contribute to economic growth.

Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy over time. Statisticians traditionally measure such growth as a percentage rate of growth in real GDP or real GDP.

Analyzing economic growth, Prof. Simon Kuznet says, “Economic growth is the spontaneous increase in per capita or per capita labor, which is usually accompanied by population growth and tremendous structural changes.”

Further, by defining the form of this definition, it is said that economic growth is the long-term increase in the (economy’s) ability to supply a wide range of goods to the people of a country. This growing capacity is based on evolving technologies and the necessary numerical and technical adjustments.

It is clear from this definition that the main symptom of growth is the spontaneous increase in the supply of goods. To achieve this, technology needs to be developed, something that has already happened in developed countries.

Of course, new technologies can only be used when various numerical and technological changes are possible in the country. So the key to growth is the introduction of new technologies through such changes and the spontaneous increase in the supply of goods based on them.

Characteristics of Economic Growth

1. High growth rate of population and per capita production

During periods of growth, the rate of population growth is much higher. But at the same time (due to progress) the production is increasing so much that their per capita growth rate is also high. In some developed countries, however, the rate of population growth has slowed down while production has been increasing rapidly.

E.g. Russia, England, Sweden, Italy etc. Both rates were higher in the US and Canada. On average, in developed countries, population growth has been at one percent, per capita output at two percent, and gross domestic product at three percent.

The average annual population growth rate in these countries is between 6% and 24%, while the per capita GDP growth rate is between 16% and 44%. Therefore, rapid growth of population and per capita production can be considered as an indicator of growth.

2. Increase in productivity

In most developed countries, productivity seems to be increasing rapidly. This is because the quality of various forecasts improves during the period of progress. Historical experience has shown that the supply of labor also increases as the population of developed countries increases rapidly during periods of growth.

With the exception of a few countries, the proportion of the labor force to the total population seems to be increasing in these countries. Increasing productivity despite low labor costs is not an indicator of improvement and growth in productivity.

3. Creative change

An important sign of growth is that industrialization reduces the importance of agriculture in total production. With the exception of Australia, the share of agriculture in the GDP of all developed countries is declining.

Over the course of a century, the decline seems to have increased from 22% to 5% in England, from 49% to 9% in the United States, and from 63% to 14% in Japan. Of course, the share of the consumption sector increased by the same amount. At the same time, the number of workers engaged in agriculture is declining rapidly, while it is increasing in industry and services.

4. Urbanization

Increasing urbanization is an inevitable consequence of industrialization. During the period of growth, the importance of industry is constantly increasing and agriculture is declining. As a result, the population used to live in rural areas as they depended on agriculture, migrating to cities for employment in industry.

In fact, the labor force for industrialization cannot be available without such migration. One consequence of this is that urbanization accelerates during periods of growth. It has many side effects. But urbanization also brings benefits like reduction in birth rate, importance of small family, conducive environment for growth etc.

5. Increase in area of ​​influence

While this is not an indicator of growth, it is a feature that the influence of developed countries is increasing in other countries. Today, different countries are interdependent for the exchange of technical knowledge and this seems to be increasing the sphere of influence.

6. Migration of labor, goods and capital

Migration of these three components is seen to be accelerating from developed countries to other places. In advanced countries, skilled labor, modern goods and capital go to other less developed countries. During 1956 to 1961, $67 million was going out of America every year.

The above 6 points are seen in developed countries, it is called the characteristics of economic growth.

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