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International comparisons by many scholars regarding quality of life have over the years tended to indicate a strong relationship between economic growth and quality of life. In essence, these comparisons have shown that there exists a positive relationship between gross domestic product and the living standards of individuals in a country. While this may be thought of as being true given many researches conducted by many scholars, historical experience tend to negate this belief.
The timing of improvements in the quality of life in terms of health, education, happiness, material levels of living and civil rights tend to be different from that of improvement in gross domestic product per capita income. In essence, some indicators of improved GDP precede improvements in the living standards while others come after these improvements. On the other hand, different parts of the world experience different levels of quality of life improvements and at other times, the indicators of quality of life tend to remain static despite huge changes in the level of real per capita income.
In this sense, there exists strong evidence that points to the fact that improvements in the level of economic growth in most countries does not necessarily translate to improvement in the quality of life lived by citizens in those particular countries (Maddison, 1995, p. 65). Some scholars have argued that improvement in real gross domestic growth per capita can never be equated to improvement in the living standards or the quality of life in any given country. In this context, wealth creation can not be seen as been a guarantee of huge and broad improvements in the living standards of the population in a given country.
On the contrary, some countries tend to exhibit average levels of income or similar levels of gross domestic product yet there exists a big difference in the quality of life in these countries in terms of education, health standards, civil rights and the like. Moreover, evidence proves that some poor countries in respect to the level of gross domestic product exhibit high levels of quality of life as compared to rich countries (Landes, 1998, p. 45). Given the above discussion, it would be impossible to totally disclaim the fact that economic development improves the quality of life in some countries.
Despite the fact that it cannot be solely attributed to improvements or changes in the levels of living in many countries, there still exists some kind of relationship between quality of life and economic growth of a country. There are various benefits which can be harvested from economic growth and which can be reflected on the quality of life enjoyed by citizens in a particular country. To start with, economic growth increases the level of consumption in a country given increase in the amount and quality of goods available to the consumers.
Given the assumption that that consumption is related to the level of utility extracted from a given commodity or service, high consumption translates to greater prosperity. In essence, economic growth will imply that the consumers will have a range of quality products to choose from and at competitive prices since industries will be competing to gain a high market margin compared to the others in the same line of production. Goods and services will then be offered at lower prices and demand will increase given the law of demand as illustrated in the (fig. 1) below.
As economic growth of a country increase, competition in the production of goods increases more and more and assuming that the market is a free one, the prices of these goods and services tend to decrease whereas the quantity demanded will increase. In other words, consumers will tend to increase their consumption given the lower prices (Steckel, 1986, p. 41). Quantity Demanded (Fig. 1) Increased availability of goods and services can be demonstrated by using a supply curve. As economic growth increases, a country will increasingly open up to international trade.
Competition from both domestic and foreign goods and services will lead to an increase in the supply of goods and services. This will drive the prices of goods further and further down. In addition to the above benefit, economic growth can lead to improved public services as offered by the government. In this regard, tax revenue collected by the government from improved domestic production and money earned from exports will enable it to spend more and more on important public amenities such as education and health.
Improvement in the quality of health of a population can improve the quality of life of such a population though as will be seen later, it can have its own negative externalities. The life expectancy of the population will increase besides increase in the literacy level in the population. Improved educational standards will not only increase the literacy levels but will also increase the amount of skills, in the country. Education and improved health standards are some vital determinants of happiness and citizens welfare.
Increased economic growth will help in reducing the level of poverty and unemployment in an economy. As the economy grows, job opportunities will increase thus a reduction in the level of unemployment. This will further translate to a reduction in the level of poverty as there will be an increase in the level of real income earned by the population of a country. Unemployment causes a number of social problems such as alienation and crime among others which quality of life to the population in an economy.
It is however unfortunate to state that still there are some areas in countries with high economic growth rate that experience a high level of unemployment. Increase in demographics is one of the major factor that negates the benefits achieved from economic growth in the context of reducing unemployment and poverty levels in an economy (Richard, 2001, 98). Clearly, there are some benefits arising from economic growth but most of them tend to be short run. In this regard, the benefits are more visible in less developed countries or those that can be accused of having a low per capita income as opposed to high income countries.
In less developed countries, it is possible to employ economic growth in solving problems such as poverty, unemployment and others associated with basic amenities. On the other hand, economic growth in more developed countries has a weaker relationship with the quality of life in these countries. While it is not yet clear to state that economic development increases the level of satisfaction and happiness in a developed country, it can be argued that there exist various issues suggesting that economic growth has contributed to serious economic, social and environmental problems in many of these countries.
These problems have over the time reduced the quality of life in many countries though it does not necessarily mean that it has reduced the level of happiness in them. The challenge remains harnessing the level of economic growth to meet with the requirements of improved living standards and quality of life of the population in such an economy (Pope, 1992, p. 45). To start with, where there is absolute poverty in a given section of a population, economic growth increases the level of income in such a population and thus helping individuals to better meet their basic needs.
On the other hand, as the level of income increases, the returns of economic growth begin to diminish. The concept of diminishing returns as applied in economics hold true for economic growth just like it does to other macroeconomic and microeconomic variables. As economy starts to grow, there will be increasing returns to a certain point in time, constant returns for a given period beyond which it will experience decreasing returns. (Fig. 2) As the economy leaps the benefits associated by economic growth, the marginal rate of economic growth will increase at a steady rate up to a certain level.
This is true for short run benefits of economic growth. Beyond this level, the marginal rate of economic growth will tend to remain constant and then start to decrease as more and more growth is realized. Moreover, there are various externalities associated with increased economic growth. This externalities vary with the magnitude and direction of economic growth besides the forces behind such a growth. There are several externalities but the major one are increase in environmental degradation and increase in population which can turn out to be disadvantageous to the economy.
As economic growth increases, the life expectancy tends to increase thus increasing the population in the country. This can by extension affects such things as employment levels, besides pressurizing the benefits acquired from increased economic growth. For example, while increased revenue would be used to provide health and educational facilities to the public, increased population will mean that the government will have less and less resources to support such projects (Easterlin & Richard, 1971, p. 97).
Moreover, as the world population increases, nonrenewable resources are exhausted rapidly thus straining the welfare of the future generation. Perhaps a more major externality is that of pollution or environmental degradation in general. As industries increases both in quantity and in their production capacities, pollution also tends to increase. In essence, the economic and social costs brought about by increased level of economic growth are potentially greater than what many economists and politicians have perceived.
Things like global warming are increasingly threatening the world environment more so given the fact that the major polluters of the atmosphere are the more developed and industrialized countries. Though benefits of economic growth can be used to prevent pollution through such things as development and usage of clean energy, it should be noted that the issue of economic development contributes and has contributed over the years to an increased level of global warming and deprived ozone layer.
All the above results to inefficiency in the world economy in the sense that the current generation is turns as being inconsiderate about the welfare of the future generation. Further, though economic growth can be managed to remove inequality in the economy, more often than not poor management leads to increased inequality in income and wealth distribution. As the economy grows, the rich accumulates more and more wealth at the expense of the poor. Resources in the economy tend to benefit those who already own the means of production sidelining the poor.
Moreover, as the rich countries increase their trade with the poor countries, low skilled workers in the rich countries may experience a reduction in their wages mostly due to competition as opposed to low skilled workers in poor countries (Komlos, 1998, p. 779). The Lorenz curve is used in measuring inequality in income distribution for a given population in any given economy. (Fig. 3) Lorenz curve gives a rough estimation or measure of the gini coefficient which in essence is used to measure the level of income inequality in the society.
To get the gini coefficient, we measure the between Lorenz curve and the diagonal or the 45 degree line. The area is then divided by the entire area below the diagonal line to arrive at the gini coefficient. Still, though economic growth has been known of causing an improvement in the health standards of the population, it has also been accused of leading to outbreak of diseases of affluence such as obesity and diabetes. These diseases among others are associated with prosperity level in the sense that the modern diets and lifestyles have changed the way people live and manage their diet.
For example, over the last few years, the issue of losing weight has become a prominent one in society. Moreover, stress related diseases have increased as the level of economic growth increases in many countries. Though such diseases cannot be termed as direct consequence of economic growth, they symbolize the fact that economic growth is capable of creating as many problems as it is capable of eliminating. Finally, as economic growth increases, the working hours are also increasing leaving people with few and fewer hours of enjoying their higher incomes.
Coupled with the other disadvantages of economic growth, it is clear that there exists a weak relationship between the long run level of economic growth and the quality of life lived by a population in any given country. Though there are many benefits associated with growth in the economy, there are equally many problems that deprive people of their happiness and thus a low quality of life for them (Stanley, 1997, p. 102). The economic rate of growth has been considered as the major determinants of living standards of the world population.
However, there are other factors that bring about changes in the living standards of any individual in any given economy. To start with, the social class of an individual forms a big determinant of the living standard of an individual or a house hold. Social factors such as people who you socialize with, the type of work that an individual is engaged in highly determines his or her living standard. For example, it would be impossible for a C. E. O of a given company neither to stay in a low income neighborhood nor to drive a low quality vehicle as would a person working on casual basis in a steel industry.
Social factors such as social class of an individual dictate the living standards that he strives to and actually live. Moreover, the amount of assets held by an individual whether actually accumulated over the years or still stagnant as were inherited determines the living standard of an individual. In other words, besides economic factors, traditional and cultural factors have a greater influence on the living standards of individuals in the world. With changing cultural beliefs and practices, the living standards of individuals have changed tremendously over the last few years.
In places such as in Africa, societies which were known of guarding their traditions and cultures but have over the years been reluctant in doing so have increasingly improved their living standards (Komlos 1998, p. 802). Moreover, education being a great determinant of economic growth can also be seen as a strong factor in changing the living styles of individuals in the world society. As a preceding factor of economic growth, education can be evaluated as an important determinant of an individual’s standard of living.
Where an individual is well educated and knowledgeable, he or she will tend to live a different life as opposed to another who is illiterate. For example, an educated individual will mind with a high level of consciousness his or her type of diet as compared with an individual who is far much less uneducated. In this context, improvement in the quality and the level of education offered to individuals all over the world have over the years contributed to improvement in the standards of living in many economy holding the assumption that education is precedent to economic growth (DeLong, 1988, p.
34). Another factor that has over the years affected the living standards of many individuals besides economic growth is housing costs relative to income. In this regard, home ownership affects the living standards of an individual by constraining cost of housing. For example, individuals who are free of house mortgages tend to have a better standard of living as compared to those who are still under the obligation of paying their mortgages (Murphy, 1998, p. 1150). Finally, the number of children born in a household greatly affects the living standards of such a family.
Over the years and as people have become increasingly educated on the need for small size families, the average number of children born to one family have reduced in many years. This has helped ease the amount of pressure on the resources held by households thus better improving their living standards. In conclusion, as stated earlier, many indicators of economic growth can actually precede it. For example, improved health services and education standards can lead to increased economic growth in any economy.
As such, all these factors can be seen as factors affecting the living standards of population in an economy given the assumption that they precede economic growth.
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