Benefits and Consequences of Growth
1. Externalities
Positive externalities
- Construction of roads/transportation gives people the ability to commute and smoother transporation of goods.
- Spread of new technology enables efficiency.
- Improvement of environment in wealthy countries:
* Note: Although evidence supports this idea in wealthy countries, it is still hazy in developing countries.
Negative Externalities
- Pollution
- Land/water degradation
- Over-use of resources
- Even with constant growth rates, an increasing population will put additional burdens on the environment. Environmental costs include degradation of air, water, land, forests etc.
- Increases poverty in developing countries. There is a poverty cycle that occurs:
2. Income Distribution
- As economies grow and develop, income distribution is likely to widen.
- As economices grow, they tend to reward the economically strong rather than the weak. (The rich get richer while the poor get poorer)
- Developed economies have progressive tax systems and social security systems to help the poor.
- However, many developing economies do not have such systems to help. Instead, income distribution will often worsen during the process growth.
3. Sustainability
- Many economies aim for sustainable economic growth: achieving economic growth without damaging prospects for development for future generations.
- An economic system which does not utilize resources at or below the rate at which these resources regeenerate will ultimately collapse.
- Methods of acheiving sustainability include investing more in… recycling, using alternative methods/resources to generate power, watching our biodiversity, addressing social costs and benefits.
Acheiving sustainable economic growth may mean developing ways of:
- Extending property rights
- Taxing the polluter
- Issuing permits to pollute (tradable permits)
- Introducing congestion charges (road pricing)
- Using direct controls and regulations on certain types of economic activity.
Evaluation : Haiti’s Benefits and Consequences of Growth
One consequences of growth for Haiti is income inequality. As the Haitian economy grows, the growth tends to reward the economically strong rather than the weak. (The rich get richer while the poor get poorer) Furthermore, Haiti is very dependent on aid from foreign countries. Hence, when Haiti receives aid, it tends to be distributed to the higher class. In other words, the people who are really in need do not receive the benefits of aid. Unlike developed countries, Haiti does not have a system which ensures fair distribution of benefits, meaning that income inequality will worsen as the economy grows.
One positive aspect of Haiti’s economic growth is that it could lead to construction of roads/transportations (in other words, improvement of infrastructures). At the moment, the chances of this happening is low but it is possible in the future. Such constructions will give people the ability to commute smoother. It could also increase the efficiency of transportation of goods. Therefore, if the Haitian economy grows, it could lead to improvement of transportation and stimulate economic activity.
http://countrystudies.us/haiti/45.htm
