Category: Economic Growth

Economic growth should be a positive force for the whole planet. This is why we must make sure that financial progress creates decent and fulfilling jobs while not harming the environment. We must protect labor rights and once and for all put a stop to modern slavery and child labor. If we promote job creation with expanded access to banking and financial services, we can make sure that everybody gets the benefits of entrepreneurship and innovation. Productivity is a measure of the efficiency with which a country combines capital and labor to produce more with the same level of factor inputs. Economic productivity is the value of output obtained with one unit of input.

Economic growth contributes most to poverty reduction when it expands the employment, productivity and wages of poor people and when public resources are channeled to promoting human development. Broadly we divide occupations into three types. Agriculture, animal husbandry, forestry, fishery, etc., are collectively known as ‘primary’ activities or industries. They are primary because their products are essential or vital for human existence. They are carried on with the help of nature. Manufacturing industries, both small and large scale, are known as ‘secondary’ activities. Mining is sometimes included under secondary activities, but properly speaking, it is a primary activity. Transport, communication, banking and finance and services are ‘tertiary’ activities which help the primary and secondary activities in the country.

The occupational structure of a country refers to the distribution or division of its population according to different occupations. Unemployment affects population groups differently, with women and youth (defined as persons aged 15 to 24) having a higher risk of being unemployed at the global level than men and adults (defined as persons aged 25 and over), respectively. The ILO estimates that the global youth unemployment rate is expected to reach 13.1 percent in 2016 and remain at that level through to 2017 (up from 12.9 percent in 2015). This is very close to its historic peak in 2013 (at 13.2 percent). As a result, after falling by some 3 million between 2012 and 2015, the number of unemployed youth globally will rise by half a million in 2016 to reach 71 million and will remain at this level in 2019.

Decent Work and Economic Growth

Over the past 25 years the number of workers living in extreme poverty has declined dramatically, despite the long-lasting impact of the economic crisis of 2008/2009. In developing countries, the middle class now makes up more than 34 percent of total employment – a number that has almost tripled between 1991 and 2015. However, as the global economy continues to recover, we are seeing slower growth, widening inequalities and employment that is not expanding fast enough to keep up with the growing labor force. According to the International Labor Organization, more than 204 million people are unemployed in 2015.

The Sustainable Development Goals (SDGs) aim to encourage sustained economic growth by achieving higher levels of productivity and through technological innovation. Promoting policies that encourage entrepreneurship and job creation are key to this, as are effective measures to eradicate forced labor, slavery and human trafficking. With these targets in mind, the goal is to achieve full and productive employment, and decent work, for all women and men by 2030. Decent work is one of 17 global goals that make up the 2030 Agenda for Sustainable Development. An integrated approach is crucial for progress across the multiple goals. The 2030 Development Agenda:

• Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7 percent gross domestic product growth per annum in the least developed countries.
• Achieve higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus on high-value added and labor-intensive sectors.
• Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services.
• Improve progressively, through 2030, global resource efficiency in consumption and production and endeavor to decouple economic growth from environmental degradation, in accordance with the 10-year framework of programs on sustainable consumption and production, with developed countries taking the lead.
• By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value.
• By 2020, substantially reduce the proportion of youth not in employment, education or training.
• Take immediate and effective measures to eradicate forced labor, end modern slavery and human trafficking and secure the prohibition and elimination of the worst forms of child labor, including recruitment and use of child soldiers, and by 2025 end child labor in all its forms. Protect labor rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment
• By 2030, devise and implement policies to promote sustainable tourism that creates jobs and promotes local culture and products.
• Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance and financial services for all.
• Increase aid for trade support for developing countries, in particular least developed countries, including through the Enhanced Integrated Framework for Trade-Related Technical Assistance to Least Developed Countries.
• By 2020, develop and operationalize a global strategy for youth employment and implement the Global Jobs Pact of the International Labor Organization.

In every progressive economy, there has been a steady shift of employment and investment from the essential ‘primary’ activities. Structural change take place in economies as the process of economic development proceeds further and gathers momentum. These structural changes result in changes in the proportion of national product and of the labor force. The most common pattern of structural change follows a sequence of as shift from agriculture to industry and then to service. These structural changes are observed both in the relative shares of national product and in labor force.

Productivity is a measure of the efficiency with which a country combines capital and labor to produce more with the same level of factor inputs. We commonly focus on labor productivity measured by output per person employed or output per person hour. A better measure of productivity growth is total factor productivity which takes into account changes in the amount of capital to use and also changes in the size of the labor force. If the size of the capital stock grows by 3% and the employed workforce expands by 2% and output (GDP) increases by 8%, then total factor productivity has increased by 3%.

Productivity is an important determinant of living standards – it quantifies how an economy uses the resources it has available, by relating the quantity of inputs to output. As the adage goes, productivity isn’t everything, but in the long run it’s almost everything. Higher productivity can lead to:

1. Lower unit costs: these cost savings might be passed onto consumers in lower prices, encouraging higher demand, more output and an increase in employment.
2. Improved competitiveness and trade performance: productivity growth and lower unit costs are key determinants of the competitiveness of firms in global markets.
3. Higher profits: efficiency gains are a source of larger profits for companies which might be re-invested to support the long-term growth of the business.
4. Higher wages: businesses can afford higher wages when their workers are more efficient.
5. Economic growth: if an economy can raise the rate of growth of productivity, then the trend growth of national output can pick up.

Productivity improvements mean that labor can be released from one industry and be made available for another – for example, rising efficiency in farming will increase production yields and provide more food either to export or to supply a growing urban population. If the size of the economy is bigger, higher wages will boost consumption, generate more tax revenue to pay for public goods and perhaps give freedom for tax cuts on people and businesses. The following are the main determinants of productivity in a country: access to hard technology, skills of labor force, quality of management, training and education standards, competition within markets, and cultural factors such as attitudes and aspirations.

Employment Productivity in the Context of Globalization

Technological changes during the last few decades have induced an increase in demand for services even at even relatively lower levels of per capita income. Moreover, development of communication technologies and reduction of the barriers to commodity flows and movement of people, specially, skilled persons due to impact of globalization, have produced demonstration effects resulting in shifting the pattern of demand in developing countries in favor of those prevailing in developed countries much earlier than the historical experience would justify. As consequences, both the production and consumption of services have shown a quantum jump. Unfortunately, the pattern of production of services which is capital intensive has failed to bring about a significant proportion of the workforce to services even. In an overall view, pattern of GDP growth did not bring about a shift in employment pattern to either industry or services.

Workforce Participation of Various Countries

Labor, being a primary factor of production, the size of labor force is of great importance for the level of economic activity in a country. In the determination of the size of the labor force, it is customary to exclude children below the age of 15 and old people above the age of 60, through in India, poverty forces people belonging to these groups also to work for bare subsistence. The work force participation rate in a country, i.e., proportion of working population to total population, depends upon such factors as age and sex composition, attitude to work, availability of work, etc. all these factors differ in different countries and may differ even within the same country in different periods. In advanced countries like England, Japan and others, work participation rate often ranges between 45 to 50 percent, while in India it has been around 32 percent.

Importance of Human Resource Management

According to Rensis Likert, “All the activities of any enterprise are initiated and determined by persons who make up that institution. Plants, offices, computers, automated equipment and all else that make a modern firm are unproductive except for human effort and directions of all the tasks of management. Managing the human component is central and the most important task because all else depends on how well it’s done”.

It is, thus, through the combined efforts of people that economic and material resources are utilized for the achievement of organizational objectives. Therefore, creating and maintaining a motivated workforce is the central responsibility of management everywhere. The effectiveness with which human resources are coordinated and utilized determines the success in achieving organizational objectives. Human resource management is important to the organization in a number of ways, as following: importance for the organization, employees and society.

Importance for the Organization

Human resource management is important for the organization due to following:

• Good human resources practices help in attracting and retaining the best people in the organization.
• In order to make use of latest technology the appointment of right type of person is essential. The right people can be fitted into new jobs properly only if the management performs its HR function satisfactorily.
• Globalization has increased the size of the organizations that employ thousands of employees in different countries. The performance of the company depends upon the qualities of the people employed. This has further increased the importance of HRM.
• Human resource planning alerts the organization to the types of the people it will need in the short, medium and long run.
• Human resource development is essential for meeting the challenge of future. The importance of HRM has increased because of the shortage of really good managerial talent in the country.

Importance for the Employees

The human aspect of organizations has become very important over the years. HRM stresses on the motivation of employees by providing them various financial and non- financial incentives. Right organizational climate is also stressed upon so that the employees can contribute their maximum to the achievement of the organizational objectives. Effective management of human resources promotes team work and team spirit among employees. It offers excellent growth opportunities to people who have the potential to rise. It also encourages people to work with diligence and commitment.

Importance for the Society

Society as a whole is the main beneficiary of good human resources practices. Good human resource efforts lead to productivity gains (ratio of output to input) to the society, since it enables the managers to reduce costs, save scarce resources, enhance profits and offer better pay, benefits and working conditions to employees. The importance of human resource is very intelligently explained by Herbert E. Meyer in following words: “The name of the game in business today is HR. You can’t hope to show a good financial or operating report unless your human relations are in order and it is immaterial what kind of company you are running. A chief executive is nothing without his people. You got to have the right ones in the right jobs for them and you got to be sure that employees at every level are being paid fairly and being given opportunities for promotion. You can’t fool them and any chief executive who tries is going to hurt himself and his company”.

Conclusion

The Sustainable Development Goals are a call for action by all countries – poor, rich and middle-income – to promote prosperity while protecting the planet. They recognize that ending poverty must go hand-in-hand with strategies that build economic growth and address a range of social needs including education, health, social protection, and job opportunities, while tackling climate change and environmental protection. SDG 8 promotes “sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all”. It reaffirms the mutually supportive relationship between economic and social policies, full employment and decent work. Among others, inclusive and sustainable economic growth, technology, and structural transformation are critical and must be guided by an overall strategic direction. This may be more crucial than ever, in view of the unprecedented impacts of new technology clusters on all SDG areas and particularly on the future of work and global growth. High levels of inequalities continue as major obstacles to SDG 8 progress. Achieving many of the other SDGs depends on progress under the SDG 8 targets. Mobilizing the policy priorities, instruments, partnerships and resources that SDG 8-related interventions can bring is therefore crucial for ending all forms of poverty and reducing inequalities, while ensuring that no one is left behind. Furthermore, progress towards SDG 8 alone ‘means nothing’, if it allows environmental degradation and social exclusion. There is no substitute for productivity growth or trade-off, heightened productivity growth is needed for job creation. Protection of rights and jobs must happen in tandem with clear creation of employment policies.

In order to explain the balanced growth path using a general Solow economy, I have chosen Ukraine as a developing economy as it is a great example of a country in Europe that struggles economically and fits the Solow’s model of economic growth.

Solow’s model shows that the rate of savings in the economy determines the size of the capital stock, and accordingly the volume of production. The higher the rate of savings, the higher the capital adequacy and higher productivity. The growth of the savings rate determines the period of rapid growth to reach a new stable state. In the long run, the growth rate of savings does not affect the growth rate. Long-term productivity growth depends on technological progress. Economic policy makers often state that the rate of capital accumulation should be increased. Growth in public savings and tax incentives for private savings accelerate capital accumulation. Population growth also affects living standards. The higher the population growth rate, the lower the volume of production per worker. It followed from Solow’s model that the higher the rate of savings, the higher the capital adequacy of the worker in a state of balanced growth, and therefore, the higher the rate of balanced growth. However, growth is not an end in itself. Therefore, the next logical step was to determine the conditions for optimal economic growth for society.

According to economic theory, economic growth in a given country is possible in only three cases. The first is when investment flows: when capital accumulation outstrips the growth of the labor force, so the share of workers is more capital. This growth is named after the American economist Robert Solow – ‘Solovian’ growth. The second – economic growth can occur in connection with the expansion of the exchange of goods and services, it is commonly called Smithian growth, because of economist Adam Smith. The third is the growth caused by the accumulation of knowledge, the actual technical or technological progress of society, named after the Austrian economist Joseph Schumpeter, who defined capitalist expansion as continuous, leaps and bounds, technical change, and innovation.

However, there is another type of growth that is simply associated with population growth. Given that the population of Ukraine has been declining for the past 25 years and the demographic dynamics do not inspire optimism, we will not consider this type of growth as a likely factor in future economic growth in Ukraine.

Thus, there are three remaining types of likely economic growth in Ukraine. We will probably have to exclude Smithian growth for the near future. Since the great Chinese economic slowdown, there is a certain pause in development in developing countries, because many of them flourished precisely on trade with China. Over the past 25 years, China has been growing rapidly and therefore economies of countries that traded in raw materials and low-value products (including Ukraine) have grown with it.

There are remaining two types of growth – Solovian (investment) and Schumpeterian (technology). These are connected. By investments (capital investments) I mean the investments in the capital of enterprises which are long-term in nature. Investments are also possible in non-technological sectors, i.e. in agriculture or infrastructure, which will create a short time illusion of economic growth in Ukraine, but in the long term they cannot be effective, and thus after a while we will see a slowdown in the Ukrainian economy. China has shown the same in recent years that it may attempt to maintain high rates of economic growth by burying millions of tons of concrete in the ground, building countless highways and million-plus cities in many of which now no one lives. Yet it did not help and this component of artificial growth in the overall growth of China (which produces a lot of high-tech products) ended its effect. Thus, there is no need to repeat these mistakes of the planned Chinese economy on the Ukrainian economy as artificial growth is ineffective in this case.

We see that all types of growth are interconnected. Investment and technological growth are interconnected. The model of economic growth in Ukraine surrounds around investments in high-tech sectors that will provide production of high-margin products that are in demand on world markets. Only when in all these stages there will be a long-term growth, the Ukrainian economy will grow, selling more goods and services on world markets (Smithian growth). It will be possible to sell them because Ukraine will trade high-margin high-tech products that are in demand on world markets (Schumpeterian growth) and thus will be able to create these products due to previously accepting investments (both external and internal) in these high-tech sectors of the economy (Solowian growth), national science, and technical education.

All other models of attracting investments as factors of economic growth offered to Ukraine will only provide a short-term effect and will very quickly end their action.

We can further this by seeing whether growth-beneficial investments can be channeled into technology geological sectors. Modern capitalist development is characterized by an extreme degree of uncertainty therefore it is impossible to know for certain where the next technological breakthrough will take place.

In the United States, a four-tier system of attracting investment in the technology sector was created – a venture financial model (first, investments in a technology company come in the form of money from family and friends; then money from ‘business angels’ comes; then money from venture funds; then followed by an IPO). It is this model that helps to overcome the risks of uncertain technological development, but even there the number of successful investments is quite small. However, it was on this system that companies such as Apple, Microsoft, Google, Amazon, and Facebook were created.

The high level of openness of Ukraine’s economy determines the significance of the impact on national economic development by global economic trends.

Leading internationals think tanks are wary of optimism about the dynamics of the world economy in 2017, expecting a moderate acceleration growth in 2017 of 3.2% compared to 2.9% in 2016 to 3.4%. Expected multidirectional dynamics of developed economies. If for the US OECD experts forecast to accelerate GDP growth in 2017 by 0.7 % up to 2.1% in the Eurozone, on the contrary, growth is expected to slow down by 0.1 % up to 1.4%. In the UK – a decrease in the dynamics immediately by 0.8% up to 1%. So, there are reasons to be careful of optimism about the prospects for the development of export-oriented sectors in Ukraine. Maintaining and strengthening economic growth trends in 2017 critically depends on increase in fixed capital investment. There should be a return from investments made in 2016. Reconstruction of destroyed housing and infrastructure, restoration of business activity in the ‘front’ zone. Growth of construction activity and positive dynamics in clusters, related to the production of building materials, budget support programs housing construction; road construction, stimulated by the state budget and budgets of local communities. Development of mechanical engineering which is projected to cover agriculture mechanical engineering, production of machines for the food industry, for metallurgy, energy equipment related to investing in energy saving, production of railway rolling stock (taking into account the intention of Ukrzaliznytsia to mass purchase of freight cars), the defense industry. investment activity.

Economic growth is a key problem in macroeconomic politics in the world, yet alone- Ukraine. Developed countries and regions that managed to achieve a stable level of growth and revenue are focused on the social problems of development. When it comes to Ukraine, its economy is always described as the one that tries to catch up with the rest of the world, thus showing convergence. It suffers from a problem of keeping the stable development and growth on a consistent basis. Thus, the present model is unable to solve the problems of economic growth and thus in need of dramatic changes. Ukraine has not got a formed system of factors that could guarantee dynamic growth combined with structural transformation of the national economy.

Formulation an own model of economic growth is a very strategic prospect for Ukraine which shall secure macroeconomic stability, strong and positive influence of the economic surrounding onto restoring the quality of life and increasing the competition within the home businesses. It shall account all of the factors of growth inside of the economic system (demand, propositions and institutions) with a specialization of modern economic growth linked with processes of globalization, socializing, dynamics and ecology. The best suited model for economic growth in Ukraine is the Solow model which is furthered on the basis of the Ukrainian experience.

Positive indicators of economic growth in 2016 shows some success of achievement of the macroeconomic stability. It should be the foundation for the development and implementation of the concept of a new quality economic growth which should be based on intensification processes of economic development due to a system factors that will guarantee dynamic growth rates and taking into account structural priorities of economic transformation that will not only provide quantitative growth but also qualitative changes in the structure of consumption, accumulation and changes of in social parameters of development. New qualities of economic growth are not just aimed at development of production and welfare industry under consideration as a complex of branches of economy and economic activity but are directed on ensuring a high standard of living. The model offers and innovation and investment growth.

References

1. https://www.worldbank.orgencountryukraineoverview
2. https://www.case-research.eu/en/macroeconomic-model-for-ukraine
3. https://www.focus-economics.comcountriesukraine
4. https://www.imf.orgenCountriesUKR

From the 1870s to the 1890s, the United States entered a period of dramatic change and rapid industrialization. The economy was gradually shifting from agrarian to industrial and urbanization was happening at an exponential rate. Mark Twain named this period the Gilded Age and described it as a time during which greed and political corruption ruled. While there were millions of industrial workers, farmers, and clerks, the wealthy entrepreneurs who owned the factories controlled most of the wealth in the United States during this time.

Laissez-faire ideology had a massive influence on many aspects of society, politics, and economics during this time. This ideology incorporated corruption in government, which flourished during the Gilded Age. Politicians diverged from their duty to serve the people; instead, they were busy distributing government jobs to the party loyalists, giving favors to wealthy entrepreneurs, and enriching themselves rather than dealing with important policy issues; it was this lack of political will to introduce change to this situation that hit the workers and the farmers the hardest.

At the city level, what were then called “political machines” skimmed off money from the business, some kept it for themselves, and some distributed it to the poor. To finance their activities and election campaigns, bosses exchanged favors for votes and money. Having to influence the local government, machines were able to control the awarding of public contracts, the granting of streetcar franchises, and the distribution of city jobs. The recipients were expected to repay with a fraction of their salary and votes. It is worth noting that the political machines were really important to the immigrants as they improved their conditions by providing them with many necessities like food and clothing in exchange for their votes. The immigrants’ major concerns did not revolve around corruption at this time and they, in fact, welcomed it as they saw it as something of great benefit to them. However, machines were awarding more contracts than the budget could afford. Consequently, they raised taxes, which eventually dissatisfied the working class.

• When President James A. Garfield was assassinated, people were stunned to discover that the assassin was a resentful office seeker who had been trying to get a position in Garfield’s administration but failed to do so. Besides, as society grew more complex, the ability of government employees to perform routine became increasingly complex and challenging. It was apparent for these reasons that a professional civil service reform was required, with employees that would be no longer subject to the ever-changing political winds. The result was the passage of the Pendleton Civil Service Reform Act in 1883. This act dealt a major blow to the spoils system and saw the establishment of the United States Civil Service Commission which would construct a system under which people would be hired on merit rather than based on political favoritism.
• Additionally, during the Progressive Era, we have the introduction of the direct primary, the initiative, the referendum, and the recall. In a direct primary voters elect delegates who choose the party’s candidates at a nominating convention. The initiative is a power reserved to the voters to propose legislation, by a petition that would enact, amend or repeal a piece of government legislation. The referendum is a power reserved to the voters that allow the voters, by petition, to demand the reconsideration of any legislative action. The recall is a power reserved to the voters that allow the voters, by petition, to demand the removal of an elected official. On top of that, we also have the Seventeenth Amendment (1911) to the United States Constitution which established the popular election of United States senators by the people of the states.

At the national level, only a handful of extremely rich individuals exercised a powerful influence over Congress. All the presidents from Abraham Lincoln’s death until Teddy Roosevelt were remarkably weak. Presidents and cabinet members were put under tremendous amounts of pressure by job seekers and political machines seeking to capitalize on campaign promises. As a consequence of this relationship, the rare pieces of legislation passed were clearly responses to satisfy the interests of businessmen whose support helped put the politicians reach success.

The main source of corruption at the national level involved Railroads. The only way to recover from the War was to incentivize economic growth. To do this, the country needed Railroads and for this reason, the government started lowering taxes and giving aid to the Railroads. These Railroads turned out to be corrupt. To get the right to build the Railroads, they started bribing the legislators. On top of that, as rail networks spread, so did the competition. On noncompetitive routes, railroads made pricing disproportionate to distance as they increased charges as high as possible to compensate for unprofitably low rates on competitive routes. On top of that, railroads had a monopoly on the transportation of goods from producer to market. Shipping rates were uneven and often unfair, especially on non-competitive lines. Additionally, large corporations such as Carnegie Steel or Standard Oil were able to pressure rail companies to give them favorable rates and low charges. Farmers, in particular, suffered the most from these unfair practices as they could exercise no pressure on the railroads.

• In order to answer those questionable practices, Congress passed the Interstate Commerce Act in 1877. The law created the Interstate Commerce Commission (ICC) which was designated to investigate railroad rate-making. The commission faced a lot of resilience from the railroads as corrupt courts usually ruled in favor of the companies when cases were prosecuted.

However, the most influential factor in politics during these tense times was monopolies. During the last half of the 19th century, it became apparent that large businesses needed to be regulated and it was apparent that the tradition of laissez-faire was not only impractical but hazardous.

• The concept of laissez-faire was first challenged by the 1890 Sherman Antitrust Act. Businesses were prohibited from using monopolistic practices or taking unfair advantage of competitors. Like the Interstate Commerce Act, the Sherman Act had to be modified and reinforced by later legislation, but the passage of the Act demonstrated that the age of unregulated corporate excess was finally coming to an end.
• The Hepburn Act is 1906 United States was another federal law aimed at defeating monopolies; it strengthened the Interstate Commerce Commission (ICC) giving it greater authority to set railroad freight rates and power to set maximum railroad rates and extend its jurisdiction.
• The Clayton Antitrust Act, which Congress passed in 1914, was also a piece of legislation that regulates business practices even further. It prohibited some anti-competitive business practices, such as fixed pricing and other malpractices (in which the same people sit on the executive boards of competing companies in one industry). This act complemented the Federal Trade Commission law passed the same year, which created a new government board appointed by the president and empowered to investigate and publicize competitive, corrupt, or anti-business practices.

The Gilded Age was a time when the greed and ego of humankind were at full display. To say that the United States during the Gilded Age was corrupt would be an understatement. However, it is important to emphasize that even though this was a time filled with corruption, unequal treatment, racism, inequality, and poverty, this era played a really important part in initiating reform in the coming decades. As a response to the Gilded Age flaws, we have the birth of the Progressive era, which brought about a tremendous amount of progress to America and the whole world

Introduction

The main findings affirm the positive effect of the improvement of the life insurance market on economic growth. With the expanded model, the insurance-growth nexus varies across nations with different conditions. For example, the positive effect on economic growth is mitigated within the middle-income nations, but amplified within the low income nations. Moreover, both the development of stock market and the life insurance market are substitutes rather than complements. Several robustness tests are also shown.

Improvement of life insurance sector like all the financial intermediaries has significant training impacts on economy. Life insurance companies all as the contractual savings institutions, in expansion to offer a social protection to economic agents, are specialized in mobilization of domestic savings from many small investors; and to channel it to productive investment opportunities. In addition, the insurance companies all as mutual fund companies of investment and retirement are the largest institutional investors on the stock, bond and real estate markets. For example, life insurance companies as investment vehicle, incite to a higher level of specialization and professionalism of the part of financial market participants (enterprises and financial institutions). This permits to finance the projects that are more daring, to exploit the economies of scale by reducing the transaction costs and to encourage the financial innovation. In this context, it is interesting to know if the improvement of life insurance sector contributes to economic growth in developing nations.

Since first session in 1964, UNCTAD formally acknowledged that “a sound national insurance and reinsurance market is an essential characteristic of economic growth2”. The economic literature has shown that the economic growth and the improvement of insurance segment are interdependent and that an economy without insurance services would be much less developed and stable. Indeed, a segment of insurance more developed and in particular life insurance provides long and stable maturity funds for improvement of public infrastructure and at the same time, reinforces the country’s financing capacity.

Understanding of Life Insurance

Life insurance is a contract between an insurer and a policyholder in which the insurer guarantees installment of a death benefit to named beneficiaries when the insured dies. The insurance company promises a death benefit in exchange for premiums paid by the policyholder. Depending on the contract, other events such as terminal illness or critical illness can also trigger installment. The policy holder typically pays a premium, either regularly or as one lump sum. Other expenses, such as funeral expenses, can also be included within the benefits.

Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Particular exclusions are often written into the contract to limit the liability of the insurer; common examples are claims relating to suicide, fraud, war, riot, and civil commotion.

A small business might provide life insurance to its workers as a tax-deductible employee benefit—like health insurance and retirement programs—in order to compete with larger companies in attracting and retaining qualified workers. In addition, there are a number of specialized life insurance plans that permit small business owners to decrease the affect of estate taxes on their heirs and protect their businesses against the loss of a key worker, partner, or stockholder. Group life insurance is generally inexpensive and is often packaged with health insurance for a small additional fee. Companies that provide life insurance for their workers can deduct the cost of the policies for tax purposes, except when the company itself is named as the beneficiary.

Life insurance is important for individuals as well, particularly those who—like many entrepreneurs—are not covered by a company’s group plan. Specialists suggest that every adult buy a minimum amount of life insurance, at least enough to cover their debts and burial expenses so that these costs don’t fall upon their family members. The insurance industry employments a standard of five times annual income in estimating how much coverage an individual should purchase. The individual can also utilize a ‘backwards’ calculation to establish what survivors will need to cope: current debt, two a long time of income for the spouse to find work, college funds for children, balance on the house, and estimated funeral expenses.

Modern life insurance bears some similarity to the asset administration industry and life insurers have diversified their products into retirement products such as annuities.

Life insurance provides financial support to surviving dependents or other beneficiaries after the death of an insured. Here are some cases of individuals who may require life insurance:

1. Parents with special-needs grown-up children – For children who require lifelong care and will never be self-sufficient, life insurance can make sure their needs will be met after their parents pass away. The death benefit can be utilized to fund a special needs trust that a fiduciary will manage for the grown-up child’s benefit.
2. Parents with minor children – In the event that a parent dies, the loss of his or her income or care giving skills could create a financial hardship. Life insurance can make sure the kids will have the financial resources they need until they can support themselves.
3. Young adults whose parents incurred private student loan debt or cosigned a loan for them – Young adults without dependents rarely need life insurance, but if a parent will be on the hook for a child’s debt after his or her death, the child may need to carry enough life insurance to pay off that debt.
4. Elderly parents who need to leave money to adult children who provide their care – Many adult children sacrifice by taking time off work to care for an elderly parent who needs help. This help may also incorporate direct financial support. Life insurance can help reimburse the adult child’s costs when the parent passes away.
5. Young adults who need to lock in low rates – The younger and healthier you’re , the lower your insurance premiums. A 20-something adult might purchase a policy even without having dependents on the off chance that there’s an expectation to have them within the future.
6. Families who can’t afford afford burial and funeral expenses – A small life insurance approach can provide funds to honor a loved one’s passing.
7. Businesses with key workers – On the off chance that the death of a key worker, such as a CEO, would create a severe financial hardship for a firm, that firm may have an insurable interest that will permit it to purchase a life insurance policy on that employee.

The cost of life insurance policies depends upon the sort of policy, the age and sex of the applicant, and the presence or absence of dangerous life-style habits. Insurance company actuaries utilize these statistics to determine an individual’s mortality rate, or estimated number of a long time that individual can be anticipated to live. Policies for ladies usually cost less than those for men, since ladies tend to live longer on average. This means that the insurance company will receive premiums and earn interest on them longer before it has to make an installment. Experts suggest that companies or people looking for life insurance coverage select an insurance agent with a rating of A or better, and compare the costs of various options before settling on a policy.

Life-based contracts tend to fall into two major categories:

• Investment policies: the main objective of these policies is to facilitate the development of capital by regular or single premiums. Common forms (within the U.S.) are whole life, universal life, and variable life policies.
• Protection policies: designed to provide a advantage, typically a lump sum installment, within the event of a specified occurrence. A common form—more common in a long time past—of a protection policy design is term insurance.

The policyholder and the insured are usually the same individual, but some of the time they may be different. For case, a business might purchase key individual insurance on a crucial worker such as a CEO, or an insured might sell his or her own policy to a third party for cash in a life settlement.

Different sorts of life insurance are available; the most common are term insurance, whole life insurance, and universal life insurance. According to most term life insurance policies, the client starts by paying a small annual premium and gradually pays a higher rate as he or she gets older. Experts suggest term life insurance for young individuals in their early to mid-20s who don’t receive some form of life insurance from their employers. Experts also suggest that these individuals obtain what is called a “guaranteed renewable policy,” since many life insurance companies retain the right to terminate the agreement if the condition of a policyholder’s life changes.

Malaysia is a Southeast Asian country, occupying parts of the Malay Peninsula and the island of Borneo. It is known for its beaches, rainforests and mix of Malay, Chinese, Indian and European culture references. Its capital is Kuala Lumpur. In 2021, Malaysia’s population is 33.42 million, it is an undeveloped country. Malaysia is very special among unique countries in the world. It is because, the diversity of races, religions and cultures. Malaysia’s climate is tropical, and they have natural resources including tin, petroleum, timber, copper, iron, natural gas and bauxite.

Moving on to electricity in Malaysia, electricity is the current or power that we use in everyday uses, for example, the light we use, fridge, TV, electrical oven, dishwasher etc. All these things depend on electricity, which are the important things in our daily life. If all electricity is shut down, this would be an electricity crisis. In Malaysia, regarding economy growth, they are productive, but sometimes, they would fall. Kuala Lumpur as a whole capital would state or agree on one point: “We have become increasingly concerned by the number of negative trends that have prevailed for some time, which are not receiving the attention they should. If these trends are not reversed, they will have significant negative consequences for Malaysia’s economic growth. These trends are slower growth, financial crisis, weak productivity and loss of global competitiveness”. This was stated November 2020, which proves that Malaysia’s economic growth is not stable. Malaysia has a huge awareness on the amount and purpose they use their electricity for, the measurement results showed that the average energy consumption of one house in Malaysia is 25.8 kWh (kilowatt per hour) per day during weekend, and 21.9 kWh per day during weekday with 11.5 kWh per day for the air conditioner only. All these results, were of course, before the year 2020, before Covid-19 had spread, and resulted in the pandemic. Carbon dioxide emissions, in the country have increased by 221% which lists the nation 26th among the top 30 greenhouse gas emitters in the world, and of course as a result of this pandemic and lockdown, the energy consumption raised by 50%.

Do Malaysia have the availability in generating enough electricity for the whole country? Malaysia does enjoy near 100% electrification in 2018. Unfortunately, in the pandemic, things have become upside down, not as planned, Malaysia recently saw on 20 July 2020 a 23% spike in residential electricity shortage during the Covid-19 nationwide lockdown. There is no problem or shortage of electricity in Malaysia, except for the pandemic and some blackouts, but that is not their usual. Malaysia would not need to import electricity, instead they export, because of their surplus, in the times they had more electricity than what is needed. The main country they export to Singapore. They import, but not very often, only under one condition, when they need to use renewable resources which they are not producing locally. So, they do not import because of shortage, they import for cleanliness and greenness of their country, so global warming does not occur. These imports by Malaysia helped Malaysia in their tough times, they needed these imports to take care of their economy, and as well to reduce the usage of no-renewable resources, which significantly impacting people having asthma, these people are the most exposed people, for being tired, and more ill. These people could have severe damage, if Malaysia keeps using fossil fuels, and the other non-renewable resources, which will cause global warming which will cause people having asthma to get tired, and maybe forced to leave their country, if they keep using these non- renewable resources. That is why these imports helped Malaysia.

Here is a problem, Malaysia does not use its tropical resources in generating electricity, although these tropical resources that they have are so helpful for them in generating electricity. About storage in Malaysia, Singapore-based electrify Pte Ltd CEO Martin Lim said that there are discussions about storage energy using hydrogen also known as hydrogen energy storage, especially with the opportunity available in east Malaysia. Malaysia and Singapore are interconnected with electricity. Malaysia export electricity to Singapore. Sabah (state in Malaysia) has a huge potential in storing electricity. Heads up to Malaysia, they have set up a plan target for 2030, where they would generate 20% from renewables. When they apply this plan in 2030, they would use this excellent way to store their electricity, which is the hydrogen energy storage. The hydrogen energy storage is a process where there is a surplus of energy created by renewables during low energy demand periods, is used to power electrolysis (process in which an electrical current is passed through a chemical solution in order to separate hydrogen). This process is used when storing electricity in Malaysia in 2030. Usually, Malaysia would not need to store electricity in a proper way, because they use non-renewable resources mainly. That is why they came up with the renewable resources plan by 2030. Malaysia’s regulatory body for the electricity supply industry, the Energy Commission (EC), has reminded Malaysians that the government’s electricity subsidy cannot go on forever and that consumers should use electricity wisely. Acting chief executive and senior director of Electricity Industry Development and Market Regulation, Azhar Omar, said in an interview with Bernama Radio recently, that subsidies coming to an end will be the inevitable, and Malaysians should be prepared for what comes next. The point here, is that Malaysians have a problem, they do not use electricity wisely, and at the same time they do not have that much money to pay the electricity, but Malaysia are not selfish, they are doing the best they can to make their economy one of the developed countries, they cannot keep this subsidy forever. Malaysia really cares about its economy, what proves this is the plan they have done, to be applies by 2030, so no environmental damage happens. One of the main reasons for this 2030 plan, is that Malaysia is mainly relying on non- renewable resources, which is wrong, and they are aware. Malaysia’s main source of electricity generation is fossil fuels. According to the national energy balance, 2010, 53% of the electricity generation is met by natural gas, 40% met by coal, 5% met by hydro, 2% coal. These results are so dangerous, that’s why Malaysia’s government were aware, and they panned the 2030 plan.

In 1990, 1.09 million people in Malaysia did not have access to electricity. By 1995, 895.116 thousand people did not have access to electricity. By 2000, 694.330 thousand people did not reach electricity. By 2005, 507.027 thousand people did not have access to electricity, the b 2016, 0 people. This shows us that from 1990 till 2016, many people did not reach electricity in their homes, but from 2016 till now no one is not able to reach electricity. People in Malaysia did not leave the country at times like 1990. They were not happy, they were mad. The president was aware and tried to find solutions, so the contribution is equal throughout the country, and it is 5 years from 2016. Malaysia was affected negatively, but they were not giving up, because they were aware, that is why they have 100% equal distribution throughout their country.

To conclude, Malaysia is not careless about it is economy, besides, they are doing their best to make their country, one of the developed countries. Their only problem was is that they use loads of fossil fuels, and other non-renewable resources, for electricity generation, they didn’t take an advantage of their tropical resources. When storing electricity, best strategy. When distributing the electricity, they have gone from 1.09 million people in 1990 to 0 people in 2016. Their 2030 plan will make them one of the developed countries.

To begin with, the key question for modern growth, however, is this: ‘Does mercantilism still exist?’. In many developing nations, under one-party rule or managed by huge bureaucracies guided by industrial policies, the answer is undoubtedly, yes. On the other hand, in the modern economies, where tax reporting and collection are fairly efficient, mercantilism is much less in evidence. However, this idea of mercantilism was at its peak during the 16th-18th centuries. This time period is also known as the ‘Age of Mercantilism’. However, some economists argue that mercantilism is still practiced in the economies of developing countries in the form of economic interventionism known as ‘neo-mercantilism’. Mercantilism is an economic policy that aims to have a constant excess of exports rather than imports. This therefore teaches us that there is a limited amount of wealth (gold and silver) in the world that is required by all nations, hence introducing the point that in order to increase their wealth, their method will heavily rely on tariffs, trade leverage and military power. Exports make an economy richer because they bring money into the economy. Imports enrich competitors at the economy’s expense. However, this means that both parties rely on a relationship in which one nation wins and the other loses. This relationship lends itself either to an involuntary trade relationship or to trade wars in which both nations mutually ratchet up tariffs. This is not beneficial for economies, therefore this cannot be implemented if modern economies want to strive and grow, as a sense of openness and peace between nations is needed in the modern world today, and will cause nations to be at a state of vulnerability if for example, the majority of their wealth is being spent on tariffs. A country works more efficiently if they are trading with other countries, and specializing in their own goods or services. Further reasons and flaws suggested by Iyanu Dare, as to why mercantilism is not an effective form of growth in modern economies are that ‘it promotes exploitative rather than independent growth’.

A prime example of a country which has successfully achieved many things, such as economic growth, with neo-mercantilism is China. For example, China became the manufacturing ‘king’ through a process called ‘dumping’. This is where China exposes its customers with very low prices compared to their competitors or cost of production. The reason behind this is because, with this method set in place for a long enough time, they will be able to obtain a considerable market share and finally force out competitors, which evidently places China at a huge advantage towards their competitors and other nations. “The government is centralized, controls capital movements, discourages imports and encourages exports. From these exports, China builds up enormous foreign reserves, which gives the government extra power in monetary and fiscal policies” (Peter Pham). With their competitors out of the picture, GDP growth has averaged almost 10 percent a year, and more than 800 million people have been lifted out of poverty. This obviously reflects China achieving economic growth historically, which gives us an idea of how they will continue to grow in the modern world. As a result, with more power, capital goods, labor force, technology, and human capital, it reinforces the point that mercantilism is an effective form of growth in modern economies.

In order to further validate my claim, another argument that should be considered that simultaneously favors this question is that benign mercantilism, the idea and aims to protect domestic welfare and stability, actually allows the economy to meet its macroeconomic objectives of economic growth and low unemployment. When the nation focuses on itself, it will be able to develop enough resources to be able to rely on themselves, needing less amounts of trade from other countries. Other ways of doing this is through malevolent mercantilism, where the country tries to increase state power. The act of protectionism is the theory or practice of shielding a country’s domestic industries from foreign competition by taxing imports. With this more job vacancies can be brought up, allowing there to be less unemployment, and hence more money flowing into the economy, which can be used to be reinvested, eventually improving the standards of living as well, in the nation. An example of a clear benefit is that President Trump placed tariffs on steel imports to try and protect jobs in the US steel industry. In addition to this it diversifies the economy tariffs and protectionism can help develop new industries to give more diversity to the economy. Raises revenue for the government which can be reinvested into healthcare or education. It can protect certain key industries from international competition to try and safeguard jobs.

However, this cannot be considered as the most economically efficient, as other nations may be able to provide goods at a lower price than can be achieved domestically. This brings me onto my next point about specialization. When each country specializes in certain goods or services, that they will be able to thrive in, they will be able to trade their goods and services, or import necessities for a cheaper cost than producing it domestically. For example, Adam Smith (Scottish economist) talks about Scottish wine in an attempt to truly express the harmful nature of tariffs. He stated: “The natural advantages which one country has over another in producing particular commodities are sometimes so great that it is acknowledged by all the world to be in vain to struggle with them. By means of glasses, hotbeds, and hot walls, very good grapes can be grown in Scotland, and very good wine too can be made of them at about thirty times the expense for which at least equally good can be brought from foreign countries. Would it be a reasonable law to prohibit the importation of all foreign wines merely to encourage the making of claret and burgundy in Scotland?”. Foundationally, he is making a point that high quality grapes can be produced in Scotland itself, but the extra costs of heating it and providing it with necessary attention would make Scottish wine 30 times more expensive than French wines. This overall reinforces the point that it would be better to trade something Scotland had an abundance of (such as wool) in return for French wine. As France has a competitive advantage in producing wine due to its southern climate, tariffs aimed to create and protect a domestic Scottish wine industry would just waste resources and cost the public money. Therefore, this would be a win-win situation where Scotland would save time and resources to gain wine and France would simultaneously save time and money to accumulate Scottish goods such as wool.

Strengthening my point even further is that if nations were to focus on distributing domestic goods around themselves, without the help and acceptance of openness from other nations, they are at risk of depleted raw materials and resources, fundamentally because mercantilism is based on the complete use of natural resources, even though it is scarce. Non-renewable resources will eventually run out. If that happens sooner rather than later, then the entire economy will fail, contradicting the idea of economic growth and other macroeconomic objectives, such as unemployment, inflation, and government spending.

Additionally, we can see that Africa’s interaction on an international scale has had positive impacts and has allowed them to grow. According to The Economist’s article ‘The new scramble for Africa’, “Greater openness to trade and investment is one reason why GDP per head south of the Sahara is two-fifths higher than it was in 2000. Africans can benefit when foreigners buy everything from textiles to holidays and digital services”. This comes to show that when countries work together and specialize in something specific that will be beneficial for each other, they will be able to economically grow (this is the recurring point of specialization). Moreover, African leaders do not have to choose sides, as they did during the Cold War. They can do business with Western democracies and also with China and Russia and anyone else with something to offer. Because they have more choice now than ever before, Africans should be able to drive harder bargains. And outsiders should not see this as a zero-sum contest. If China builds a bridge in Ghana, an American car can drive over it. If a firm invests in a mobile-data network in Kenya, a Kenyan entrepreneur can use it to set up a cross-border startup.

Ultimately, this leads me to the conclusion that this question of whether mercantilism is an effective form of growth for modern economies, is arguable to an extent in which it portrays that nations can either grow independently, embracing multiple methods such as protectionism and relying on tariffs. But they also heavily rely on personal resources which are scarce. Further validating this would be the acts of specialization and trade between countries, which can help provide for the welfare and stability of different nations reinforcing that there are multiple effective strategies other than mercantilism.

The boom of South Korean pop (K-pop) originally expanded to few Asian countries in mid-1990s; however, in early twenty first century, it has gained global popularity in the twinkling of an eye. The latest BTS – a Korean idol group which consists seven boys – got the first place on America’s Billboard album chart (Dal and Lee, 2019). It was also for the first time to get that record as Asian music stars. The announce means BTS got international fame not only in Asian countries, but also in Western countries. Even if Japanese pop music gains popularities in other countries, it doesn’t achieve such a historical record. This report will be branched three main topics. Firstly, a literature review will be written about how K-pop idols succeeded in foreign countries, especially Japan. It could be helpful to find their marketing strategies. Secondly, it will be about how did Japanese economy change because of the influence of them. Finally, it will mention about how did political relationship between both countries influence to their economic effect. It is to identify whether the growth of their economic phenomenon is affected by political issue or not.

The Marketing Strategy

This part will talk about how K-pop idols has succeed globally to find their main marketing strategy. K-pop idols succeed by using social media marketing strategy. In 1990s when the K-pop boom started Korea paid more attention to domestic music than foreign music. Even though foreign music accounted less than domestic music in the market, it influenced K-pop into global (Fuhr, 2016) K-pop idols affected positive impact to Korea. The recent study says that the effect to the Korean domestic economy and it the export rate increased tenfold in four years (Jeong, 2014). It tells us the K-pop industry advanced rapidly. Seo (2012) comments there are four factors which make K-pop idols succeed internationally: preparation, delivery, content and consumer. The biggest factor could be delivery which means K-pop companies use SNS to share their idols. According to International Federation of the Phonogram and Videogram Producers (IFPI), Japan is the second largest markets for music industries in the world (IFPI, 2019) It means Japan is one of the biggest marketing places for K-pop industry. The differences of idols between Korean and Japanese are regulations. Fans of K-pop idols could share videos or photos of their favorite idols on SNS such as YouTube and Twitter (Ahn et al., 2013). On the other hand, Japanese music companies make regulations for sharing on SNS. Nowadays social media is one of the biggest tools to get and share information. Letting people share idols connects to increasing popularities and reputations. According to this part, K-pop idols succeed by using social media.

The Influence on Japanese Economy

This part will mention about how K-pop idols effect to the economy of Japan. The boom of Korean drama trend peaked the early 2000s. In particular, ‘Winter Sonata’ was immensely supported by middle and elderly aged Japanese women in late 2004. It also became a social phenomenon. Kim et al. (2007) highlight the drama attracted more than 700,000 people to visit Japan, whose expenditure was US$21.7 million. This situation is like the current Japanese K-pop trend. Seo (2016) mentions Japan Travel Bureau (JTB) organized a package tour which is included K-pop idol’s concert tickets and shopping for K-pop fans and around 2000 people participated the tour. It means K-pop effects to Japanese economy through tourisms industry. According to the report by the World Travel and Tourism Council, travel/tourism industry accounts for large percentage for world economic activity. In other words, tourism is generally one of the most effective industries of the economy. The industry is related to music as well. It could be the representative example that people, who like The Beatles, have visited Liverpool. Gibson and Connel (2008) comments that The Beatles brought multi-million pound to the United Kingdom. Moreover, Social Media marketing could be connected to the tourism industry. Kolb (2017) mentions it might be said that more and more travelers organize their itineraries by themselves by using social media. It is included to post their photos after the trip. It is common that other people see their posts and want to visit there. It means that travelers are receiver who get information of trips as well as advocates who share their experiences. As for these perspectives, the influences of K-pop to the tourism industry by using fans through social media is bigger than package tours of travel agencies. Currently, many K-pop idols hold their concerts in Japan. They might affect to lots of places such as hotels which located near the concert halls and Korean towns in central cities in Japan.

The Influence of Political Relations

This part will be talk about how the historical relationship between Japan and Korea effect to the economic phenomenon of K-pop. Korean Times (2014) mentions Japan and Korea are “close in distance but far in mind”, even though the two countries are geographically close. In the history, Japan invaded Korea countless times. At that time, Korea was prohibited to share Korean identities and traditions (Kim et al., 2007). This fact is not specified in Japanese textbooks, so both countries have argued about that. Following the history, protest demonstrations happened that some Korean people chopped their fingers to argue what Japan did (Ching, 2019). Mas media reports that these protest demonstrations have occurred in Japan. According to Akimoto (2019), Korean tourists accounted for the second largest number of whole foreign tourists visiting Japan, but the number has reducing. It means the relationship could affect tourism industry. However, the market of K-pop has been expanding in Japan. Asahi weekly (2019) reports that BTS’s latest album has turned over 620 thousand in the first week when it has come out in Japan. Additionally, K-pop idols appear on Japanese TV programs and collaborate with Japanese cosmetic companies. If those companies are afraid of making profit because of the relationship, they would not do that. Overall, the tension of the relationship could affect to whole Japanese economy, but it would not be connected too much the influence of K-pop market.

Conclusion

As a conclusion, the literature review gives three main ideas: prime strategy of K-pop idols, effect to Japanese economy and effect of Japanese and Korean relationship. To summarize, the main marketing strategy is using social media marketing. They share their idols by using it to spread the popularity and reputation all over the world. Then the strategy could connect to the influence of Japanese economy especially tourism industry. Additionally, the relationship of both countries might not affect strongly to influence of K-pop.

Economic growth around the world has meant countries has been able to develop at an exponential rate, particularly those economies in third world countries. Gross domestic product or GDP gives an indication of the country’s economic situation. Many economists would use gross domestic product to provide figures to help determine the rate of growth and the size of an economy for various countries. GDP can be calculated by taking the total value of products and services that are manufactured by a country (with their border limits) over a specified period of time. This provides an overview of that country’s economic health (Fernando, 2021).

Gross domestic product includes anything services or products that are used in specific established markets. The products or services must be produced in that quarter or year to be included, if they are produced outside of this time period, they are not included in the GDP for that particular period. Gross domestic product also excludes goods or services that are produced outside of the host country.

GDP provides an overview of a country’s economic situation. There are 3 ways that an economist may look to calculate GDP. As mentioned previously production is one of the values that are used for GDP and there is also income and expenditure of the general public (Prachi, 2020). This then may be adapted to account for the different size of population that a particular country has or the level of inflation that is currently being experienced.

“The level of GDP is now 8.8% below where it was pre-pandemic at Quarter 4 (October to December) 2019, revised from a first estimate of 8.7% below” (McAuley, 2021). This gives us an indication of the severity of the Covid-19 pandemic and the effects it has had on not only the local economy, but the global fiscal world. With economy grinding to a halt for several months at the start of the pandemic, this led to huge decreases in the amount of money being spent in the previously mentioned sectors. Therefore, this has led to the 8.8% drop in the level of GDP. However, with all restrictions soon to lifted for the summer of 2022. Countries should begin to see the normal proceedings for their gross domestic product. The uncertainties now lie with rising rates of inflation and hikes in living costs. As previously mentioned, the GDP will need to be adapted to take these rises into account.

What Are the Issues with Using GDP as a Measure of Well-Being or the Standard of Living?

Gross domestic product per capita is typically used as a measure of well-being. However, this does not mean that there aren’t flaws with it being used as a way to measure the standard of living in a country.

Gross domestic product per capita has several issues when used as a measure of well-being. Unpaid working activities are not included. Therefore, things such as volunteer work are not accounted for within the final numbers. While this may look acceptable on the outside, as no money is changing hands for these types of activities, it is what these actions contribute towards. There are a significant number of activities which would contribute towards gross domestic product that couldn’t function without the support of these volunteers. This means that it is misleading not to have some sort of explanation even identifying how many of these volunteer hours have been worked.

Many of the fastest growing economies are those is third world countries such as India and Bangladesh. These countries are often experiencing their own miniature industrial revolution and are now making strides towards being major players with regards to their economy. However, for any country to produce more, they must have the infrastructure to meet the demand. All of this will contribute towards pollution and issues regarding health and safety. Although we are seeing governments begin to understand the long-lasting effects of chemical pollution, many countries who are still developing will use these methods to bring their operations in line with the more established countries. Within GDP, this will typically be seen as a good thing due to the infrastructure and the jobs that are being produced. The issues regarding the pollution that has been created as a result of this growth may never truly be understood until many years into the future. GDP is unable to take into account the devastation that this will cause to the Earth and all of its inhabitants (Amadeo, 2020).

Lastly, there is an assumption within gross domestic product per capita that the production of resources and the income created as a result are shared amongst the population of the country evenly. GDP simply takes this figure as an average and it does not take in account the inequality of the inhabitants’ incomes. Therefore, GDP may show that a country has an excellent standard of living. However, this may be skewed entirely due to many rich individuals hoarding the majority of the wealth at the top and the common man is left fending below the bread line.

What Are the Current Debates Relating to GDP?

Gross domestic product has been used a way to measure the well-being of a country’s economy for over 80 years (Dvorkin, 2017). In the modern world, many economists have begun to question how relevant GDP is with regards to measuring the standard of living. As mentioned previously, GDP cannot take into account the volunteer work that is completed and offer this work contributes to the products or services which then factor into the final total for GDP. Although, this is valid and needs to be taken into consideration, gross domestic product is very relevant to several direct measures of well-being. Often quality of life can be determined accurately by looking at a countries life expectancy and also the mortality rate amongst infants. Therefore, it may be beneficial to have an accompanying method of determining well-being alongside GDP to help increase its accuracy.

Environmental degradation is a significant externality that the measure of GDP has failed to reflect. The production of more goods adds to an economy’s GDP irrespective of the environmental damage suffered because of it. So, according to GDP, a country like India is considered to be on the growth path, even though Delhi’s winters are increasingly filled with smog and Bengaluru’s lakes are more prone to fires. Modern economies need a better measure of welfare that takes these externalities into account to obtain a truer reflection of development. Broadening the scope of assessment to include externalities would help in creating a policy focus on addressing them.

GDP also fails to capture the distribution of income across society – something that is becoming more pertinent in today’s world with rising inequality levels in the developed and developing world alike. It cannot differentiate between an unequal and an egalitarian society if they have similar economic sizes. As rising inequality is resulting in a rise in societal discontentment and increased polarization, policymakers will need to account for these issues when assessing development (Kapoor and Debroy, 2019).

Is Focusing on Economic Growth a Good Thing?

Economic growth has raised living standards around the world. However, modern economies have lost sight of the fact that the standard metric of economic growth, gross domestic product (GDP), merely measures the size of a nation’s economy and does not reflect a nation’s welfare. Yet policymakers and economists often treat GDP, or GDP per capita in some cases, as an all-encompassing unit to signify a nation’s development, combining its economic prosperity and societal well-being. As a result, policies that result in economic growth are seen to be beneficial for society.

We know now that the story is not so simple – that focusing exclusively on GDP and economic gain to measure development ignores the negative effects of economic growth on society, such as climate change and income inequality (Kapoor and Debroy, 2019).

Higher economic growth will have various negative impacts on society, which may not be realized. The increased capacity of the industrial industry will in turn lead to increased pollution of the air. This can then lead to a reduction in the standard of living in that particular area. For example, Asia has been a leader in technological developments in recent times, in turn the amount of energy needed to power these operations has meant the quality of air in China has dropped dramatically in recent times. As the quote below states, the fossil fuels that are used to power this growth may mean that future generations have to bear the brunt of the negative impacts.

“Smog in China has many causes, including pollution from industries and traffic, but it tends to happen more often in the winter, when plummeting temperatures cause electricity demand to soar. This pollution can come from many sources, but burning coal has been linked to the largest number of air pollution deaths in China, causing 366,000 premature deaths in 2013” (Griggs, 2017).

In modern times however, a responsible government understand that they must act in a responsible manner when it comes to the environment. They have a social obligation to help protect the planet for future generations. The larger a countries economy grows, the more they need to be seen to be actively trying to reduce carbon emission and pollution. They may do this by introducing tariffs against things such as fossil fuels. They may reward businesses which user cleaner forms of energy, such as electricity, by having grants and subsidies to help pay for wind turbines or other energy producers. Countries who are developing may not see this as a viable option, however, they will be experiencing an unprecedented period of growth due to investments in their country from large businesses. These countries may not have the capacity to take on this growth and also make sure that it does not harm the environment. They will want to improve the economy of their country and the impact on the environment is collateral damage.

The growth of the economy may also lead to income inequality. The more affluent members of society will own more significantly assets than the average working man. Thomas Piketty observed that, without sufficient policies of redistribution, the wealthy tend to increase their wealth at a faster rate than economic growth because they can reinvest their dividends. Governments may find that they are able to help benefit those that find themselves in poverty. Higher growth tends to enable governments to be able to afford welfare states and offer a minimum level of production. Economic growth from 1900 to 1970 helped reduce levels of inequality in the US and Europe (Pettiger, 2018).

Organizations such as the United Nations, national governments, universities, NGO platforms and financial entities all use different indicators to measure welfare. These tend to link economic growth to social progress without identifying any moral objectives of the economy.

At the social level, there are many indicators for measuring well-being. Factors such as life expectancy at birth, level of education, empowerment of vulnerable groups, quality of employment, and quantity of free time, all give a more complete picture of personal development in society.

Meanwhile, aspects such as violence against women, sexual harassment legislation, physical safety, criminality indexes, good governance, and the signing of international arms treaties, all provide for assessing the suitability of the environment in which we co-exist (Pais, 2018).

Conclusion

Overall, gross domestic product is shown to be an excellent indicator of economic growth, but it fails to take into account various indicators of social well-being. To get a better reflection of the overall success of a country, analysts should use a mix of indictors to make sure that they get an unbiased result, which takes into account living standards, environment, and mental well-being among others. Although, gross domestic product can give us a clear indication of a country’s economic growth, it doesn’t always tell the full story. Therefore, in order to get a fair reflection of a country’s standard of living, you must use a wide range of indicators to get a unbiased answer.

References

1. Fernando, J. (2021). ‘Gross Domestic Product (GDP)’.
2. McAuley, N. (2021). ‘GDP Quarterly National Accounts: January to March 2021′.
3. Amadeo, K. (2020). ‘Standard of Living’.
4. Dvorkin, M. (2017). ‘Is GDP a Good Measure of Well-Being?’.
5. Kapoor, A and Debroy, B. (2019) ‘GDP Is Not a Measure of Human Well-Being’.
6. Pettinger, T. (2018). ‘Pros and Cons of an Increase in Economic Growth’.
7. Griggs, M. (2017). ‘Why Is the Smog in China So Bad?’.
8. Pais, M. (2018) ‘Alternatives to GDP for Measuring Well-Being’.

Shockingly, 57 million children across the world don’t have a school to go to. This is atrocious for the kids as well as the country they are in because without formal education it is hard for a country to develop. This information arises the question of how access to quality education positively impacts children as they become older. Access to quality education positively impacts children as they get older by providing them with new opportunities and improving a country’s economy.

The first impact of access to quality education is that it opens up new opportunities for kids as they grow older. If a child learns information when they are young, it would be easier for them to get into college, and it also opens up new opportunities for them. In India, for example, many kids don’t have access to proper education, and surprisingly, India’s literacy rate is about 74% – leaving a quarter of the population without basic reading or writing skills. Moreover, this shows that the economy of India is not as strong as some counterparts where there is quality free education. This is due to the fact that the free education offered in India is not to par with the free education offered in other countries such as America.

The second impact focuses on improving a country’s economy. When a country has a strong education system, people become more educated and start to earn more money. Some might object that it is too expensive to give proper education to all kids. While it is true that costs can be high to provide this, if people get a quality education, when they become older, they will earn enough income to improve the economy. Coming back to India, its economy is not as developed as that of other countries and this is largely because poverty and illiteracy are closely related. You could think of it as investing in a child’s future. If the children put quality education to good use, then the economy benefits, if not, then the government will lose a little bit of money.

In conclusion, providing quality education to people all around the world could improve the lives of many and make the world developed and a better place. If the issue is not addressed, then the world will stay the way it is now and will not develop in terms of quality of life. We need to spread this information and make people more aware of the issue of people not getting a quality education.

With a population of 32.7 million, Malaysia is a multi-ethnic religious nation, distinguished primarily by three major ethnic groups: Malay and indigenous people, Chinese, and Indians. Malaysia has been effectively converting itself from a poor nation into a middle-income country since its independence in 1957. Despite difficult external factors, the economy of Malaysia has shown periodic expansion. It may also certainly assert its fighting success against poverty. Despite its progress in decreasing poverty, for certain geographical and societal factors, a vulnerable class of people in the country is still facing poverty.

Poverty is viewed as a mixture of diverse elements that goes beyond the claim of scarcity of income and is not limited to a single-faceted condition. The word ‘poverty’ applies to numerous detrimental social and psychological consequences, including domestic abuse, crime, alleged insufficiency of social investment and human capital expansion challenges, unfair distribution of services, and weak political involvement. The concept of poverty, however, is essentially country-specific.

In its earliest form, changes were made to the poverty line for discrepancies between the three major regions of Malaysia -Peninsular Malaysia, Sabah, and Sarawak – in average household size and cost of living. No adaptations have been made for rural or urban areas. Three ethnic poverty lines have culminated in this (besides the national one). These poverty lines, with inflation adjustments and changing average household sizes, were in place between 1976 and 2004 when they were introduced. While consumption established the poverty line, the poverty level was calculated in comparison rather than expenditure to gross household income. Therefore, families with incomes below the poverty line are classified as living in poverty, and those with incomes below half the poverty line are defined as living in ‘pretty tough’ or abject poverty. A modification was made to the poverty line in 2004.

The new poverty line has now been established for each family and measured for each state and rural or urban area, keeping track of the overall cost of living, the structure, and the scale of the household. Extreme hunger or hard-core poverty was often characterized by this current poverty line as households with wages beneath their food poverty line or families unable to fulfill their basic food needs. The national average poverty line in 2009 translates into an unadjusted RM6.50 per household per day (equivalent to US$3.00 per day). Poverty line income (PLI) is currently being updated and segregated for each state in the nation. In the updated edition, various sizes of households are taken into account, with a distinct division based on urban and rural areas. Specific features of each household considered for the PLI calculation include the number of inhabitants and their location and demographic aspects.

Malaysia has achieved immensely in fighting poverty. The poverty threshold was 49.3 percent as of 1970, and it was lowered to 8.1 in 1999. It was optimally decreased to 5.5 percent in the year 2000. The policy which was employed for reducing poverty led to accommodating a successful poverty reduction enclosure and quick economic growth with the continuous development of its micro-economy. Hardcore poverty decreased from 1.2% in 2004 to 0.7% in 2009, and the rate of total poverty dropped from 5.7% in 2004 to 3.8% in 2009. In Malaysia, the general poverty rate is 3.7 percent (Department of Statistics Malaysia, 2011).

Despite the clear achievements in eliminating poverty, owing to many deprived situations, poor parts of the population remain stagnant. But I believe that the right approach of the government and renewed models of economic development will give results and, in a certain time, Malaysia will still be able to overcome the problem of poverty.