Teodora Georgieva - F82034

Dr. Kiril Avramov

April 10, 2016
"Is unlimited economic growth possible?"

The question of economic growth has been widely discussed over the years and it is even
more frequently debated over nowadays.

Economic growth is a quantitative and qualitative improvement of public goods and factors of
production. In essence the economic growth represents the dynamics of the basic parameters
of social production, as it fully reflects their upward development . In it, into a single piece
there is a correlation between resources and results. The relationship between the two groups
is an indication of the degree of efficiency of the social production and its level. It marks the
expansion and improvement of the productive potential of the society, its diversification and
full realization of its possibilities.

General economic growth is quantitative increase and qualitative change in the factors of
production ( shifting the border of the national production capacity ) and an increase in GDP
per capita. Economic growth is a moment of economic development. It can have both
ascending and descending character, while growth can be only upward economic
development over a long period.

Furthermore, economic development encompasses changes in the economic , social and

ecological environment , which does not relate to economic growth, but is a factor. An
example are all institutional changes - proprietary rights, the role of the state and others.
Economic development encompasses within itself and maintains economic growth.

Economic growth is the only means of creating an abundance of material goods . The increase
in the quantity and quality of goods and services produced provides a higher standard of
living for the population , better satisfaction of the existing and generation of the new needs.

The theory of economic growth is based on the concept of full employment and the most
efficient use of national resources. Full employment is a situation in which the economy
operates on the level of their potential. The criterion of full employment permits to determine
when and under what conditions the economy deviates from full employment of its resources ,
therefore, for optimum growth .

Except with a view of achieving and maintaining full employment of resources, especially
labor, economic growth is definitively linked to its most efficient use. The problem arises
from the fact that resources can be used in full, but ineffective, inhibiting or preventing
growth. Efficiency is regarding the results to those involved for their production inputs . The
effectiveness of the housekeeper is related to how it is produced. Here importance are : the
rational combination of production factors , their technological qualities, their marginal
productivity , technological principles themselves and others. In terms of economic growth is
equally important as getting a result with the smallest possible expenditure of resources, ie
lowest capital intensity and labor intensity and achieve with given resources for maximum
benefit , ie of the highest productivity and capital and labor.

Factors of Economic growth:

The functional ( input- output ) approach allows to cover the interconnections in the economy
and reveal the factors of economic growth in each of its phases :

• in the entry of the system are such growth factors , such as labor resources , natural
resources , investment, fixed capital , information resources and more.

• The production process does include such growth factors such as technology, innovation ,
management experience , organization , etc.

• output of the system ( in the distribution of GDP) stand these growth factors , such as private
and keep consumption , savings, exports and imports , and others. Based on the result are
determined on the one hand , capital intensity and labor intensity of production , on the other
hand , the productivity of capital and labor as a characteristic of growth.

There are other classifications of growth factors. For example, they can be divided into basic
(labor, natural resources and capital) and additional (from social, psychological,
technological, managerial and so on. Nature). Some of the factors have an internal origin,
while others are attracted from outside (trade, international loans, international integration,
etc.). From the standpoint of manifestation of their growth factors can be divided into
independently operable and integrated occurring in the interconnection of autonomous factors
and enhancing their importance. Such factors are integrated as technological progress,
structural adjustment of the economy, international integration and more.

Some of the growth factors can be determined by supply- and others- as related supply and
distribution of wealth. Supply factors are all resources. They identify opportunities for
growth. Demand factors are: income level , population density , level of prices and others. Of
these factors depends on how you will exploit opportunities for growth set out in the factors
of supply. Demand factors maintain the level of aggregate expenditure in order to ensure
continuous full employment and maximum use of resources. It is important that the
distribution of GDP , mainly because of the level of consumption and investment depends on
the level of aggregate demand , it depends normal playback of production factors . All this is
reflected in the rate of economic growth.

In the system of factors of economic growth are separated and two groups of factors. Those
who encourage others who limitation. Stimulating growth factors are associated with
opportunities to increase the amount of resources or factors of production and increasing their
productivity. Limiting growth factors are mainly related to general global resource constraints
of production, deterioration of mining resources, the depletion of natural resources and other
sources.

From an abstract point of view, economic growth is based on three main groups of factors:

- The first group includes the specific level of development of productive resources between
countries.

- The second group of factors are natural resources, especially underground and aboveground
national treasures.

- The third group of factors includes participation in international division of labor. In

particular there is concern international exchange, specialization, cooperation in production,
etc., in short the inclusion of the national economy in international networks.
The presence of factors is crucial condition for economic growth of a country. However, it is
not decisive . Crucial to have the conditions and organization of the use of factors .

Determining factors of economic growth enables a number of conclusions. Manufacturing

capabilities of society depend on the quantity and quality of available factors of production :
capital , technical knowledge , labor and natural resources.

As far as the stock of natural resources and population growth as a factor of economic growth
are limited , it remains capital and technical knowledge that are determinants of economic
growth.

Technical knowledge are multiplied in the course of technical progress. The latter is reflected
in:

- Product innovation, ie. Is the production of new types of goods. They contribute to the
wealth of the people. Problematic in product innovation is a quantitative assessment of their
benefits;

- Technological innovations, ie. A new technology. Technological innovations allow at

unchanged costs of factors of production - land, labor, capital - to produce a large quantity of
goods or the same amount of goods, but with less cost factors.

Stocks of capital increase with accumulation ( investment ) . In certain labor resources and
technical expertise capital increase expands production capacity , i. E . As capital is greater ,
the greater the volume of GDP will be produced . Potential production per capita will grow, as
well as potential wealth.

The workforce is no less important factor of economic growth of capital accumulation and
technological progress.
Types of economic growth:

The way of combining and use of production factors define the type of economic growth.
First, we must distinguish between extensive and intensive growth.

The extensive growth is realized by attracting more workers , driving the more capital and
natural resources. Hence the extensive economic growth is growth based on quantitative
increase in production factors .

With this growth, growth rates results coincide with the rate of increase of resources for their
production , ie higher performance require more resources , ie With this type of growth
performance is maintained.

The extensive growth is accompanied by changes in the structure of the economy. Climax is
reached when the share of employed in agriculture falls below 20 percent , this industry and
construction up to 40-45 % and in services ( transport, communications , trade , etc . ) - 35-
40% .

Practice shows that the extensive type of economic growth under certain conditions grew into
intensive type. Key factors include the development of science , technical progress ,
innovation , improve the organization and management of labor, raising the qualifications of
employees and others. Therefore intensive economic growth is growth, provided on the basis
not of quantitative increase and the qualitative improvement and modification of production
factors and the most efficient use.

In intensive type of growth rates of growth results ahead of the growth rates of resources.
Capital-intensive labor consumption and GDP falling and productivity factors grow. Hence -
in contrast to the extensive growth, ie unit cost less. With this type of growth efficiency
increases. Consequently, the change occurs in the entire network of economic proportions,
formed under conditions of extensive growth, ie in extensive growth leading it services,
intellectual production.
In practice, often quantitative increase of factors is accompanied by qualitative improvement.
Growth is not purely extensive or intensive clean and mostly extensive or intensive mostly .
As a predominantly extensive and intensive growth mainly have different manifestation.

The extensive growth may be neutral, capital-intensive or labor-intensive. It is neutral when

due to the proportional increase of labor and capital factors. If, however, in this case resources
are growing faster than the product , marginal costs will grow an additional unit of product
will cost more. This type of growth some call not only extensive but non-intensive. When it
growth rates results lag behind growth rates used for this resource. There is a declining
efficiency, ie each additional unit of output requires more resources.

The extensive growth capital-intensive when the capital factor is growing faster than labor
and labor-intensive if employees are increasing faster than the capital.

Along with quantitative occur and significant qualitative changes in factors of production .
This parallel process leads to the extensive - growth mainly in intensive growth. It can be
neutrally-intense, more capital-intensive or labor intensive.

Growth is neutral-intensive if reserves ratio " capital - labor ". In the case not be given to any
of these factors due to equal their marginal productivity . However, it is rising because of the
qualitative changes in the factors and due to full use.

If the marginal productivity of capital is higher and therefore, he grows faster than labor ,
economic growth is more capital-intensive . Conversely, when the marginal productivity of
labor is higher than that of the capital , it will be labor intensive .
Optimal is the neutral-intensive growth since equalize the marginal productivity of factors .
This happens in the transition from labor-intensive to more capital-intensive growth and vice
versa.

Aforesaid allows to make the following summary. At the core of economic growth we have
on the one hand , the degree of capital-consumption and capital-produvtivity, on the other
hand , the degree of labor consumption and labor productivity. Ultimately, the use of two
factors - capital and labor - formed the type of economic growth.
Supporters of the theory of unlimited economic growth believe that thanks to the economic
growth without reducing living standards, society can commit more funds to expand
production capacity , improving general conditions for the functioning of the economy and
raise the living standards of its members. The expansion of production potential means
creating new jobs and greater choices for work. In short , economic growth mitigates the
contradiction between limited resources and unlimited needs of society.

In reality the Earth is full- full of us and our stuff, full of our waste and full of our demands.
We have created so much stuff that our economy is now bigger than our host- the planet
Earth. This is not a philosophical statement, this is just science - based on physics, chemistry
and biology. Some people argue that we need constant economic growth to e.g. solve poverty,
develop technology, keep social stability etc. Unfortunately the Earth does not care what we
need, she just makes her rules and we must obey them, which include the basic, practical and
economic foundations of our lives.

What is commonly termed "economic growth" today is a combination of productivity

enhancements and population increase. In fact, nearly 70 per cent of so-called economic
"growth" is not productivity rise but simply population increase, not to mention inflation and
currency decline further skewing the statistics.

As Kent Welton mentioned in his book "Cap-Com the Economics of balance":

"The real meaning of capital's "progress" is that growth must proceed until all desirable
optimums are exhausted and destroyed. Preservation of any human or ecological balance, and
more desirable state of affairs, is denied in theory and practice. Pursued for its own sake, and
without reference to extant conditions, growthism is a cancer producing continual per-capita
diminishment and illusory profit - until space for natural freedom is exhausted and our
enclosure, dependency, and despair are complete."

While doing research on the topic I saw a video in YouTube named "The Impossible
Hamster" It was referring to the growth of a hamster doubling its weight each week until it
reaches puberty. The video went further illustrating that if the hamster didn't stop growing
when it reached its maturity level and continued to double on its own weight we would be
facing an enormous hamster. With this video it was pointed out that there is a reason that
everything in the nature grows to a certain size highlighting that the economy would not be
possible to "grow forever and ever and ever".

In my opinion the economy will continue to grow at a slower and slower pace as the needs of
people are met with the thousands of useless products, unless manufacturers and their
marketing departments continue to manipulate the mind of the consumer and integrate the
thought that the "new" product will be better than the previous one.
Bibliography:
Brown, C. V. (Charles Victor) & Jackson, P. M. (Peter McLeod), 1946- 1990, Public sector
economics, 4th ed, Basil Blackwell, Oxford

Geneshki, M., Georgiev, L. Regional Economics

Georgiev, L. Regional Economics

Growthism - The `Economic' Cancer of Growth-To-Ruin - http://www.growthism.com/

Stoichkova, O., Regional Economics

The impossible hamster retrieved at: https://www.youtube.com/watch?v=Sqwd_u6HkMo

Trout M. J. (2012) CEO of FOUNDUPS® retrieved at https://www.youtube.com/watch?

v=uZ4N1GO7ct4

Welton, K.(2001) Cap-Com the Economics of balance Pandit Press