Continuous growth concept, characteristics and examples

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Jonah Lester

The continuous growth o economic growth reflects the increase in income, values ​​or goods of both a country and a region in a specific period. It occurs in times when the economy is doing well, with decrease when there are economic crises..

Continuous growth will also be understood as a favorable trade balance, which will lead as a direct consequence to the inhabitants of that country having a better quality of life.

To measure this type of growth, the percentage of increase in real gross domestic product (GDP) associated with productivity will be taken into account. According to experts, said productivity will depend on GDP per capital; that is, the income per inhabitants of the region or country.

Main characteristics of continuous growth

Continuous growth is a term that begins to appear around 1800; Until that date the GDP per person was very low and therefore it was not considered an aspect to study.

When we began to analyze continuous growth, we started from two categories: the first, when the increase was due to the increase in income; and the second, when it was generated by productivity increases.

The theoretical models that began to explain economic growth were the neoclassical models of traditional growth or Solow growth, and the Washington consensus..

Solow growth

The traditional growth or the growth of Solow arose to be able to explain what happened with the continuous growth starting from the analysis.

Then it was possible to differentiate the per capita income using exogenous parameters when different factors were at stake..

According to the Solow model, all per capita growth arises from the technological process. It is also stated that growth is exogenous, starting from a principle with a specific value.

The flaw in this method was that it was not possible to define exactly how or why economies grow.

Washington Consensus

For its part, the Washington consensus came from the publication that appears in the 1990s signed by John Williamson.

There it was established that the growth of the countries was linked to macroeconomic stability, the distribution of resources through the market and the international opening of markets..

With this method it was determined that growth was linked to trade, which worked from incentives such as the reduction of import duties, competitive exchange rates and the promotion of so-called free zones..

Controversial aspects of continued growth

Continuous growth affects multiple aspects of the correct development of a country, such as the economy, politics and the social sphere..  

Almost all current systems associate growth with factors such as well-being and progress, but the detractors of capitalism differ since they consider that economic growth in many cases does not generate social cohesion.

The second controversial aspect of continuous growth lies in the impossibility of being able to maintain stability without harming the environment, since many activities necessary for economic growth use non-renewable energy resources..

Examples of continuous growth

Baja California

This state of Mexico, with Tijuana as its capital, is being an example of continuous economic growth in recent decades. Its main economic activities are those related to manufacturing, agriculture, livestock and fishing, and tourism..

The origin of this continuous growth was caused by the North American Free Trade Agreement, signed in 1994 by Mexico, Canada and the United States, and in which many restrictions on the exchange of goods were put to an end.

Baja California, thanks to its geopolitical position and its industry, benefited greatly, generating a great work environment. 

Indonesia

Between 1997 and 1998, Asian countries such as South Korea, Thailand and Indonesia were affected by the Asian financial crisis, which condemned millions of people to the poverty line.

In the case of Indonesia, the crisis went further, promoting the resignation of military leader Suharto and his government team, which had been in power since the 1970s..

Indonesia, like other nations, was exposed to severe restrictions by the IMF and the World Bank. These institutions approved a series of measures based on the Washington consensus.

However, the Southeast Asian country little by little detached itself from this macroeconomic project. To do this, they carried out an investment of GDP in infrastructure of 9%, much higher than the 2.4% of the western ones, resulting in a pragmatic and successful development since then. That is to say, a continuous growth born from an unfavorable situation due to the crisis and the pressures.

References

  1. Ochoa, G. (2009). Financial administration. Retrieved on December 13, 2017 from: usbscz.edu.bo
  2. Continuous growth. Retrieved on December 13, 2017 from: es.wikipedia.org
  3. Taylor, A. (1994). Three phases of economic growth. Retrieved on December 5, 2017 from: books.google.es
  4. Drury, C. (2013). Managment and cost accounting. Hong Kong: ELBS. Retrieved on December 5, 2017 from: books.google.es
  5. Weil, R. (2012). Financial Accounting: An Introduction to Concepts, Methods, and Uses. Retrieved on December 5, 2017 from: usbscz.edu.bo

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