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43Scientific Journal Impact Factor
IMPACTS OF ECONOMIC GROWTH ON SOCIAL WELFARE IN
AFGHANISTAN
Ajmal Qayoumi ibn Mohammad Amin Second year economy master student of Termez state university Email: Ajmal_qayoumi@outlook.com
Abstract: Economic growth include changes in material production and during a relative short period of time, usually one year. In economic theory, under the concept of economic growth implies an annual increase of material production expressed in value, the rate of growth of GDP or national income. Growth can be achieved, for it does not achieve the developmental course of the economy. So economic development amounts involves not only an increase in material production, but also all the other socioeconomic processes and changes caused by the influence of economic and beyond economic factors. Economic development is therefore expressed in a longer period of time. Economic development of an economy consists of a series of structural changes. The economic development of the country will be achieved through greater participation of the processing capacity of industrial production (secondary sector), and at higher levels is increasingly dominated by service sector (tertiary sector).
Keywords: Economic Growth, Economic Development, Industrial Production, Investments, Production
Аннотация: Экономический рост включает изменения в материальном производстве и в течение относительно короткого периода времени, обычно одного года. В экономической теории под понятием экономического роста подразумевается ежегодный прирост материального производства, выраженный в стоимости, темпах роста ВВП или национального дохода. Рост может быть достигнут, поскольку он не соответствует курсу развития экономики. Таким образом, объемы экономического развития включают в себя не только увеличение материального производства, но и все другие социально-экономические процессы и изменения, вызванные влиянием экономических и не только экономических факторов. Следовательно, экономическое развитие выражается в более длительном периоде времени. Экономическое развитие экономики состоит из ряда структурных изменений. Экономическое развитие страны будет достигаться за счет большего участия перерабатывающих мощностей промышленного производства
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(вторичный сектор), и на более высоких уровнях все более доминирующим будет сектор услуг (третичный сектор).
Ключевые слова: экономический рост, экономическое развитие, промышленное производство, инвестиции, производство.
For the economic development of any country is also of great importance and changes in production structure and introduction of new products, new products, new techniques and technologies, new processes of production, raw materials, new energy sources. Changes in the distribution of factors of production, ie in their new location, and not only labor, but of the entire technical potential. As for the operating assets, reallocation of technical potential is done through the engagement of cash accumulation, in order to build new generating capacity. Economic development means greater and more effective involvement of the economy of a country in the international economy. The development includes the evergrowing share of accumulation in the national income. Thus, economic development represents a very complex process and phenomenon. Economic growth, measured by the percentage increase in national income per capita, cannot really be realistic indication of the achieved level of economic development (Peru, 1986). Economic development is not just an increase in GDP and national income, but all the long-term socio-economic changes in the economy of a country. It is very important that, above all, political economy, deals with the problems of economic development. First of all, the purpose of creating and managing development and economic policy.
Economic Growth and Economic Development
There are very large differences in income per capita and output per worker across countries today. Countries at the top of the world income distribution are more than thirty times as rich as those at the bottom. For example, in 2000, GDP (or income) per capita in the United States was over $33000. In contrast, income per capita is much lower in many other countries: less than $9000 in Mexico, less than $4000 in China, less than $2500 in India, and only about $700 in Nigeria, and much much lower in some other sub-Saharan African countries such as Chad, Ethiopia, and Mali. These numbers are all at 1996 US dollars and are adjusted for purchasing power party (PPP) to allow for differences in relative prices of different goods across countries. The gap is larger when there is no PPP-adjustment. To better understand capital accumulation and technological changes affecting the economy, it is necessary
INTRODUCTION
LITERATURE REVIEW
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to elaborate neoclassical model of economic growth. This model was developed by Robert Solow, who in 1987 received the Nobel Prize for this model and other contributions to the theory of economic growth. The neoclassical model of economic growth describes an economy in which a single homogeneous output produced two inputs: capital and labor. Here is the growth of labor out of the reach of economics and is not affected by the economic determinants (Ristic et al. 2006). In addition, the assumption is that the economy is total competition and full employment, so that it can analyze the growth of potential output. In the analysis of economic growth, economists emphasize the need to increase capital equipment, which means that the amount of capital per worker is constantly increasing. Examples include the increase in capital equipment multiplication of agricultural machinery and irrigation systems in agricultural production, rapid railways, highways in transportation, computer and communication systems in banking, etc.
Technological Change and Economic Growth
Based on the historical genesis of the development is easy to see that the technological changes caused economic improvement of manufacturing capabilities in Europe, North America and Japan. Technological changes include changes in production processes or the introduction of new products in order to increase output or increasing output from the same amount of inputs. The most significant technological developments in the modern world took place in electronics, computers, telecommunications, and aviation industry and so on. Technological change is a continuous process of small and large improvements as evidenced by the fact that most developed countries achieve millions of patents. Certainly the most significant changes made in the military industrial complex, which was later applied in the civilian sector of production. Civil technological advances are less dramatic, but no less impressive increase its contribution to the living standards of market economies. From the standpoint of the neoclassical model of technological change means that more output can be produced with the same inputs of capital and labor, which will say that technological change is pushing the boundaries of arbitrary features. Inventions and achievements not only ensure stable development, but with a constant ratio of inputs, wages and interest rates increase the amount of output that each unit of output may (Dimitrijevic / Fabris, 2007). Thus continuous growth: capital per worker and output per worker wages (wages) per worker, while it does not cause a decline in real interest rates. So real investment increases the productivity of capital and neutralize the law of falling profit rates. It should be noted that some
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favorable investment income, and other work. Agricultural machinery reduce the need for labor and increase capital requirements, and therefore, called "investment-saving work", and they increase profits relative to wages (wages). New inventions that reduce capital needs over the needs of the work (for example, the introduction of multishift operation) are "saving investment capital," and they increase wages (wages) compared to a profit.
Sources of Economic Growth
Economists are not satisfied with just trends and theories, but portray the sources of economic growth. They attach special importance to the calculation of growth, so that the ingredients are thoroughly calculated that caused growth trends. Japan and previously the Soviet Union in the period 1930-1960. Years have had enormous economic growth. With the help of calculating economic growth economics experts have discovered that the GDP of Japan grew at a rate of 10% per year (astonishing but true) due to the growth of inputs with rapid technological change (much faster than in other countries). When analyzing the growth of the Soviet Union in the mentioned period resulted primarily from an increase in forced inputs of capital and labor(Abramowitz, 1957: 88).
Labor productivity is the most important factor of economic growth. It represents the ratio of total output divided by the number of worker-hours in a particular sector, or at the level of the economy. If it slowed down the search are the reasons, and as a justification cited the following reasons:
1. Investment Enterprises in nature conservation, improving health and safety in the workplace. This was particularly true of mining, construction and services.
2. Increases in energy prices, especially after 1970 and 1990, when the company began replacing other energy inputs, capital and labor. The result is a reduction in the productivity of labor and capital in relation to previous growth rates.
3. After the 70s, there was a change of generations of workers who are inexperienced and inadequately trained to work with low wages, which is particularly applicable to the non-industrial sectors, such as areas in the preparation of fast food and the like. In addition to these basic factors that caused lower productivity, it should be noted smaller size allocations for civilian research and development, to reduce investment in plant and equipment, increased the rate of inflation and the like. These are just some of the factors that have slowed productivity. In that sense, there is a need to explore the possibility of increasing labor productivity. In order to
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achieve this it is necessary to increase national savings and investment, which is the most difficult to achieve (Acemoglu, 1998: 127).
Investments and Economic Development
Economic investment categories can be defined in various ways. Yet it is the most domesticated definition of the term in which the investment in the broadest sense of the word mean investment in fixed and revolving funds.
Therefore we can say that the investments represent that part of the social product (in the expression of the social product or national income) that are in the process of its final allocation and use has not spent (in terms of individual, general and collective consumption), but it is used for replacement of worn and shabby and to build new capacity (Equal, 2005). If the term investments understands not only the investment for replacement of worn and disposed and to build new capacity but also an investment for the maintenance of the existing potential, this means that the concept of investment involved and the activity of the so called. Investment maintenance. In this case, the concept of depreciation must adjust this setting, which means that the total depreciation fund parts of the part that goes to capital maintenance and part of that is spent for the replacement of worn-out and disposed of fixed assets.
Such a definition of the term investments was accepted and implemented in practice our applied economic analysis and planning until 1957. In the middle of this year, our official statistics abandoned that concept on investments and accepted the concept that they recommend economists methodologists from the United Nations and accepted by most of the member countries (Arrow, 1962: 320). Why growth should be at the heart of development policy? Growth transforms society
The positive link between growth and poverty reduction is clear. The impact of the distribution of income on this relationship - in particular, whether higher inequality lessens the reduction in poverty generated by growth - is less clear.
Initial levels of income inequality are important in determining how powerful an effect growth has in reducing poverty. For example, it has been estimated that a one per cent increase in income levels could result in a 4.3 per cent decline in poverty in countries with very low inequality or as little as a 0.6 per cent decline in poverty in highly unequal countries.
Such calculations need to be interpreted with care given the multitude of variables involved. Even if inequality increases alongside growth, it is not necessarily
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the case that poor people will fail to benefit - only that they will benefit less from growth than other households.
But contrary to widespread belief, growth does not necessarily lead to increased inequality. While some theoretical research suggests a causal relationship between growth and inequality (and vice versa), the consensus of the latest empirical research is that there is no consistent relationship between inequality and changes in income.
The experiences of developing countries in the 1980s and 1990s suggest that there is a roughly equal chance of growth being accompanied by increasing or decreasing inequality.7 In many developing countries, rates of inequality are similar to or lower than in developed countries. A series of studies using cross-country data all suggest that growth has neither a positive nor a negative effect on inequality.
This is not to say that increased growth has not led to increasing inequality in some countries. Both China and India have seen widening inequality as their growth rates picked up over the 1990s. And both Bangladesh and Uganda would have seen higher rates of poverty reduction had growth not widened the distribution of income between 1992 and 2002. For example, one study suggests that the proportion of people living in poverty in Uganda at the end of this period would have been 30% instead of 38% had the poor benefited proportionally from growth.
Due to the complex, two-way relationship between growth and inequality, it is impossible to say whether such proportional growth was possible. Even if it was, it may have come at the cost of higher growth. If the growth rate was curtailed sufficiently, the reduction in poverty may have been less than the high but relatively unequal growth experiences of each country.
Controlling for initial inequality of assets such as land and education, income inequality no longer seems to play a role in expanding or reducing the opportunities for growth. But asset inequality itself may be important because owning an asset that can be used as collateral can expand access to financial markets. Such access is likely to be growth-enhancing when it allows more households the opportunity to invest -which is especially important in economies where the average firm size is small.
Reducing asset inequality is a challenge, as it concerns the stock of wealth rather than the flow of income. Redistribution of assets may have an adverse effect on the incentives to save and invest, which may more than counteract the positive effects of more equitable asset ownership. Moreover, it is often politically contentious, and may be destabilizing (Atkinson, 1963: 140).
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Growth creates jobs
Economic growth generates job opportunities and hence stronger demand for labour, the main and often the sole asset of the poor. In turn, increasing employment has been crucial in delivering higher growth. Strong growth in the global economy over the past 10 years means that the majority of the world's working-age population is now in employment.
At the same time, in every region of the world and particularly in Africa, youth unemployment is a major issue. This is reflected in higher than average unemployment rates: young people make up 25 per cent of the working population worldwide but 47 per cent of the unemployed.
Nevertheless, since the early 1990s, global employment has risen by over 400 million. While China and India account for most of this increase, almost all of the new jobs have been created in developing countries.
Real wages for low-skilled jobs have increased with GDP growth worldwide, which indicates that the poorest workers have benefited from the increase in global trade and growth. Fears that greater global integration and ever more 'footloose' international investors would push down wages have proved to be unfounded. Indeed, evidence on foreign direct investment suggests that firms are attracted to countries with higher, not lower, labour standards.
Macroeconomic factors, such as low inflation, export orientation and low labour taxes, help to determine how much employment is created by growth. Structural factors, such as the balance of the economy between agriculture, manufacturing and services, are also important.
While the relationship between growth and employment remains robustly positive, the strength of the link has weakened slightly since the turn of the millennium. This has raised concerns about 'jobless growth' in some countries(Banerjee, 1993: 311).
Between 1999 and 2003, for every one percentage point of additional GDP growth, total global employment grew by 0.30 percentage points - a drop from 0.38 for 1995-99. This may prove a problem for some countries in the Middle East, South Asia and subSaharan Africa, where the number of jobs being created may not be high enough to absorb their growing workforces.
But even if the relationship between growth and employment is weakening, this may suggest a stronger rationale for a higher growth strategy in the future.
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Furthermore, the trend may mask improvements in productivity that could provide the basis for the creation of even more job opportunities in the longer term.
Growth helps people move out of poverty
Research that compares the experiences of a wide range of developing countries finds consistently strong evidence that rapid and sustained growth is the single most important way to reduce poverty. A typical estimate from these cross-country studies is that a 10 per cent increase in a country's average income will reduce the poverty rate by between 20 and 30 per cent.
The central role of growth in driving the speed at which poverty declines is confirmed by research on individual countries and groups of countries. For example, a flagship study of 14 countries in the 1990s found that over the course of the decade, poverty fell in the 11 countries that experienced significant growth and rose in the three countries with low or stagnant growth. On average, a one per cent increase in per capita income reduced poverty by 1.7 per cent
Among these 14 countries, the reduction in poverty was particularly spectacular in Vietnam, where poverty fell by 7.8 per cent a year between 1993 and 2002, halving the poverty rate from 58 per cent to 29 per cent. Other countries with impressive reductions over this period include El Salvador, Ghana, India, Tunisia and Uganda, each with declines in the poverty rate of between three and six per cent a year.
Driving these overall reductions in poverty was the rebound in growth that began for most of the countries in the mid-1990s. The median GDP growth rate for the 14 countries was 2.4 per cent a year between 1996 and 2003. (Barro, 2011: 311).
Growth drives human development
Economic growth is not just associated with reducing poverty. There is also clear evidence for a positive link between economic growth and broader measures of human development.
Economic growth is not fundamentally about materialism. Nobel laureate Amartya Sen has described economic growth as a crucial means for expanding the substantive freedoms that people value. These freedoms are strongly associated with improvements in general living standards, such as greater opportunities for people to become healthier, eat better and live longer.
Growth generates virtuous circles of prosperity and opportunity (see Figure 2). Strong growth and employment opportunities improve incentives for families to invest in education by sending their children to school. This may lead to the
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emergence of a strong and growing group of entrepreneurs, which will generate pressure for improved governance. Strong economic growth therefore advances human development, which, in turn, promotes economic growth.
Equally, weak economic growth implies vicious circles in which poor human development contributes to economic decline, leading to further deterioration in human development. For many countries, achieving the Millennium Development Goals will require breaking out of vicious circles to enter virtuous circles.
The link between economic growth and human development operates through two channels. First, there is the 'macro' link whereby growth increases a country's tax base and therefore makes it possible for the government to spend more on the key public services of health and education(Robert, 1992: 113).
Growth is essential if governments are going to be able to continue to provide public services, which directly benefit the poor. Although aid may provide initial support, increasing public expenditure in developing countries must ultimately be financed by collecting greater tax revenues. Given the generally low levels of tax revenue collection (often still below 20 per cent of GDP in African countries), this can only be achieved in the long-run by strong and sustained growth.
Botswana and Kenya provide contrasting examples of this macro link. In 1960, the two countries had similar levels of per capita income and spent approximately nine per cent of their GDP on health and education over the next three decades. But by 1990, because Botswana had grown by 6.5 per cent a year while Kenya had only grown by 1.6 per cent a year, Botswana was spending five times as much as Kenya on these sectors.
A review of nine countries shows that higher growth during the 1990s was indeed accompanied by bigger increases in government budgets. A DFID study shows that on average for low-income countries, a 10 per cent increase in per capita income is associated with an 11 per cent increase in education expenditure, an 11.4 per cent increase in health expenditure and a 12.7 per cent increase in tax revenue. A sustained two per cent increase in per capita growth would bring forward the date at which a typical low-income country could domestically finance recommended health expenditure rate ($40 per capita) by 33 years.
The second channel between growth and human development is a 'micro' link, whereby growth raises the incomes of poor people and thereby increases their ability to pay for activities and goods that improve their health and education.
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Vietnam's experience between 1993 and 1998 is an example of this. The country's high rate of growth during that period (six per cent a year) led to significant increases in household incomes (seven per cent a year). This resulted in increased demand for education: the average length of time that children attended school rose from 7.5 to 8.1 years, and enrolment rates in secondary schools increased by approximately eight percentage points (Baumol, 1986: 311).
Economic growth is an increase in the production of goods and services over a specific period. To be most accurate, the measurement must remove the effects of inflation. Economic growth creates more profit for businesses. As a result, stock prices rise. That gives company's capital to invest and hire more employees. In simplest terms, economic growth refers to an increase in aggregate production in an economy. Often, but not necessarily, aggregate gains in production correlate with increased average marginal productivity. That leads to an increase in incomes, inspiring consumers to open up their wallets and buy more, which means a higher material quality of life or standard of living. In economics, growth is commonly modeled as a function of physical capital, human capital, labor force, and technology. Simply put, increasing the quantity or quality of the working age population, the tools that they have to work with, and the recipes that they have available to combine labor, capital, and raw materials, will lead to increased economic output(Orley, 2003: 190). Economic growth include changes in material production and during a relative short period of time, usually one year. In economic theory, under the concept of economic growth implies an annual increase of material production expressed in value, the rate of growth of GDP or national income. Growth can be achieved, for it does not achieve the developmental course of the economy. So economic development amounts involves not only an increase in material production, but also all the other socioeconomic processes and changes caused by the influence of economic and beyond economic factors.
1. Hansen, Gary D. and Edward C. Prescott (2002) "Malthus to Solow. "American Economic Review, 92, pp. 1205-1217.
2. Hanushek, Eric and Dennis Kimko (2000) "Schooling, Labor-Force Quality, and the Growth of Nations. " American Economic Review, 90(5), pp. 1184-1208.
3. Harrison, Lawrence E. and Samuel P. Huntington (2000) eds. Culture Matters:
CONCLUSION
REFERENCES
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