HOW DO THE FOLLOWING FACTORS AFFECT THE ECONOMIC GROWTH OF A

COUNTRY?

WAR:
Aside from the very real human impact, war has significant economic consequences,
including the destruction of buildings and infrastructure, a reduction in the working
population, uncertainty, an increase in debt, and disruption of normal economic activity.
However, some argue that war can be advantageous to businesses in terms of
stimulating demand, creating jobs, stimulating innovation, and increasing
profitability. Below are the following factors of war that affects the economic growth of a
country, in general.

For a variety of reasons, war can result in inflation, which can lead in the depletion of
people's savings, an increase in uncertainty, and a loss of faith in the financial system.
For example, during the American Civil War, the Confederacy struggled to raise enough
money to cover the costs of the conflict. As a result, they began printing money in order
to pay the salaries of soldiers. However, as they continued to manufacture money, the
value of money began to plummet. High inflation has the greatest impact on middle-
income savers, who have seen the value of their assets completely wiped out. When a
battle comes to an end, hyperinflation is frequently the aftermath. With a shattered
economy, Hungary and Austria, for example, saw the greatest rates of hyperinflation
ever recorded in 1946, when their economies were devastated.

Apart from inflation, it also affects the domestic demands and unemployment. For
instance, there were enormous economic and workforce consequences to the United
States' involvement in World War II. After the Great Depression, the unemployment rate
in the United States was hovering around 25 percent. Changes began to occur after our
engagement in the war. Almost overnight, the unemployment rate in the United States
dropped to ten percent as companies were retooled to create war-related commodities.
Women were brought in to fill the void left by men who were gone to fight in World War
II. Women were discouraged from working outside the home prior to World War II. As a
result, they were being urged to take on traditionally male-dominated jobs.

Though wars degrade both physical and human capital, their effect on GDP per capita
is unknown. This uncertainty stems largely from the manner in which national income
management deals with war-related deaths and destruction. Making weapons is viewed
positively, whereas murdering people and destroying property is viewed negatively. On
the other hand, war can increase GDP per capita by reducing unemployment and
diverting individuals away from non-market activities such as family formation.

GLOBALIZATION:
As a result of globalization, companies are required to adapt to new strategies based on
new ideological trends that attempt to balance individual rights and the interests of
society at large. Allows firms to compete globally and represents a major shift in the way
business leaders, labor, as well as management, think about the role they play in
formulating and implementing corporate policies and strategies.

Businesses gain a competitive advantage as a result of globalization since it allows

them to acquire raw materials from locations where they are less expensive. Companies
can benefit from cheaper labor costs in underdeveloped countries while simultaneously
using the technical expertise and experience of more developed economies, thanks to
globalization. Globalization has resulted in diverse components of a product being made
in various regions of the world. When it comes to the automobile business, globalization
has been in use for quite some time. Different elements of a car may be made in
different nations, for example. Even relatively simple products such as cotton T-shirts,
which are manufactured in different countries, may include the participation of
businesses from a variety of different countries.

Globalization has an impact on services as well. There are different instances around
the world that is widely known and evident. Businesses in the United States have
outsourced call centers and information technology services to enterprises in India,
which has become increasingly popular. Automobile manufacturers in the United States
transferred their operations to Mexico as a result of the North American Free Trade
Agreement (NAFTA), which lowers labor costs in the region. Increased employment in
nations where it is needed can have a favorable impact on the national economy and
result in a greater standard of life for those who are employed in those countries. China
is an excellent example of a country that has reaped enormous benefits as a result of
globalization. Another case in point is Vietnam, where globalization has contributed to
an increase in the price of rice, allowing many poor rice farmers to escape the plight
they were in. As the standard of living rose, more children from low-income households
were able to leave their jobs and enroll in school.

International, national and sub-national rearrangement is a result of globalization.

Restructuring of production, global trade, and financial market integration are all part of
this. Multilateralism and microeconomic factors such as corporate competitiveness
affect capitalist economic and social connections at the global level. There are a
number of ways that changes in production methods have impacted the structure and
organization of capital. The less educated and low-skilled workers are increasingly
perceived as being marginalized as a due to globalization. It will no longer be assumed
that a company's growth will lead to an increase in employment. Additionally, because
capital is more mobile than labor, it can result in a large capital remuneration.

Three factors appear to be driving this phenomenon: globalization of all product and
financial markets, technology, and regulatory deregulation. There will be an increase in
cross-border commerce in financial services as a result of increased economic
integration in specialization and economies of scale, which will lead to higher cross-
border trade in financial services. Telecom and information availability, in particular, has
enabled remote delivery and new distribution channels, as well as the introduction of
non-bank businesses, such as telecoms and utilities, into the financial services industry.
Aside from the good effects of globalization on economic progress, there are certain
risks and negative consequences of globalization as well. In terms of GDP per capita,
less wealthy countries from the industrialized nations may not benefit as much from
globalization as more wealthy countries. In spite of the benefits of free trade, smaller
businesses that cannot compete worldwide are at greater danger of failure. Increasing
manufacturing and labor expenses, as well as higher compensation for a more skilled
workforce, may lead to the outsourcing of employment from nations with higher wages,
as a result of free trade.

Due to the comparative or absolute advantages of other countries in certain industries,

domestic industries in some countries may be at risk. In addition, the exploitation and
abuse of natural resources in order to fulfill new and greater demands in the
manufacture of goods is a potential threat and negative consequence.

DEBT:

The public debt has the potential to have a good or negative impact on the entire
economy. The impact is determined by the quantity of debt owed and the purposes for
which it was incurred. Ordinarily, the amount of debt that will be borrowed is expressed
as a percentage of gross domestic product (GDP). On the other hand, the ratio should
be no more than 90 percent in any case. Without exceeding 90 percent of GDP in debt,
the economy would still be able to grow at a reasonable pace. If the public debt rises
above a certain threshold, it will have a negative impact on the economy. It may be
demonstrated empirically by looking at the instance of emerging countries.  When the
level of debt falls below a certain threshold, the economy is able to grow in a good
manner. When the ratio of public debt to GDP passes a certain level, however, growth
begins to slow.

Throughout history, the quantity of national debt has been a point of conflict for every
country's domestic policy. In light of the massive amounts of economic severity that
have been pushed into every country's economy over the past couple of years, it is
simple to understand why so many people are beginning to pay close attention to this
matter. Unfortunately, the way in which the general public is informed about the degree
of debt is frequently difficult to interpret. When you combine this problem with the reality
that many people do not comprehend how the size of the national debt impacts their
daily lives, you have a topic that is sure to spark debate.

The economic justifications for why a big and growing government debt burden could
have a negative impact on a country's economic growth potential should be explored
briefly before going into the existing studies on the link between government debt and
economic growth. Economists have long recognized that debt can have a negative
impact on both medium- and long-term economic growth through a variety of
macroeconomic mechanisms. Large increases in the debt-to-GDP ratio, according to
new evidence, could result in significantly higher taxes, reduced future incomes, and
intergenerational injustice, among other consequences.