Sustainable Economy

Topic 3: Economic Growth and Sustainable

Economy
 Sustainable Economy

Economic Growth
An increase in the production of
economic goods and services,
compared from one period of
time to another.

Increases in capital goods, labor

force, technology, and human
capital can all contribute to
economic growth.

What Is Economic Growth?

Economic Growth

• For an economy to triumph, it must grow.

• Most believe that economic growth is a panacea for many of society’s problems.
• Increase in Gross Domestic Product (GDP) will lead to increasing Income.
• Growth is anticipated to increase by increasing the following:
• physical capital
• human capital
• labor force, and
• technology.
Production and
economic growth

•For an economy to continue to grow in

the future, it needs to increase its
capacity to grow. An increase in an
economy’s productive potential can be
shown by an outward shift in the
economy’s PPF.
 Generating
economic
growth – to
satisfy
human
wants

https://www.investopedia.com/terms/e/economicgrowth.asp
 1. Increasing physical capital goods. Choices
between the two options.
• Might sacrifice other opportunity cost, or
• Sacrifice resources as well.
Understanding 2. Technological Improvement.
Economic • Invention of gasoline engine etc.
• Improved technology allows workers to
Growth produce more output
3. Grow the labour force - more workers
generate more economic goods and services.
4. Increase human capital – skilled labour.
Measuring economic
growth
How economic growth is measured?

• More productive economy makes more goods and provides more services
than before – growing economy.
• Economic growth is measured quantitively.
• The most well-known indicator is GDP.
• Combine the outputs of all industries, measured in terms of dollars spent
or invested.
GDP as a measuring economic growth
• Growth can be measured as an annual percentage increase in real
GDP, and in terms of a general trend.
Malaysia’s
GDP
 It is associated with a number of
material benefits which increase
economic welfare.
• Rise in national income (GDP)
Advantage of • Improving public goods –
economic growth increasing tax and allocated
more to the public.
• Benefit to society
• More employment

What else?
Critics on • Disturbing ecological crisis.
• The rapid rise of social inequality.

Economi • Rise of income inequality.

• Manipulation.

c Growth
• Economic Exploitation.
 • Negative externality is a cost that is
Economics suffered by a third party as a
consequence of an economic
Externalities transaction.
• There are differences between private
returns or costs and the costs or
returns to society as a whole.
• cheaper to buy the product that has a
worse impact on its environment than
the equivalent product that does less
harm.
Economic Growth
above all?
Disadvantage of economic
growth

• The depletion of the global resource base

• The impact of global warming.
• A huge expansion of waste and pollution
• Over-population
• Loss of bio-diversity
 Economic growth also brings some costs
which reduce economic welfare.
• Widening income gap - some groups may
benefit much more than others.

cont… The • Too rapid a rate of growth can also lead to

two significant economic problems:-

disadvantages of • inflationary pressure

• Deficit of a country's balance of
growth payments – (literally, country import
more to satisfy an increasingly active
household sector.)
Sustainable economic
Growth
• Sustainable economic growth is economic development
that attempts to satisfy the needs of humans but in a
manner that sustains natural resources and the
environment for future generations.
• An economy functions in the ecosystem.
 • Sustainable economic growth means a rate of
growth which can be maintained without creating
The meaning other significant economic problems, especially for
future generations.
- Sustainable • There is clearly a trade-off between rapid economic
growth today, and growth in the future.
Economic • Rapid growth today may exhaust resources and
Growth create environmental problems for future
generations, including the depletion of oil and fish
stocks, and global warming.
 • Reducing income inequality is an effective way
to resolve social problems such as violence,
criminality, imprisonment rates, obesity and
Why We need mental illness, as well as to improve children’s
educational performance, population life
Stable and expectancy, and social levels of trust and
mobility.
Sustainable • The focus of a successful social policy,
therefore, should be to reduce inequality, not
Economic to grow the GDP for its own sake. – Thomas
Piketty
Growth? • Rapid economic activity transgressed several
ecological planetary boundaries.
• the degradation of our environmental
systems will jeopardize socioeconomic
stability and worldwide well-being.
Activity

• Based on your reading and

understanding:

If we continue with the current

model of economic growth,
would it be sustainable for our
future generation?

Discuss the impact of

unsustainable economic growth.

https://padlet.com/mfah/topic3
 GROWTH VS
DEVELOPMENT
Economic Growth vs Economic Development

GROWTH
• Increase in national income.
• It is expected to enable more
economic development.
• Measured as an increase in Real
GDP (real output)
DEVELOPMENT
• An improvement in the quality
of life and living standards
• Beyond GDP.
• It is concerned with how
people are actually affected.
• Standard of living, freedom
 Human development Index (HDI)

How do we • Life Expectancy Index. Average life expectancy

compared to a global expected life expectancy.
measure • Education Index
development? • mean years of schooling
• expected years of schooling
• Income Index
 Next!
Understanding Sustainable Development!
Further Reading
https://theconversation.com/an-economy-focused-solely-on-
growth-is-environmentally-and-socially-unsustainable-39761

https://hbr.org/2011/10/the-sustainable-economy

https://www.undp.org/content/undp/en/home/sustainable-d
evelopment-goals/goal-8-decent-work-and-economic-growth.
html

https://www.imf.org/external/pubs/ft/fandd/basics/external.
htm

https://www.educba.com/economic-growth-vs-economic-dev