Unit 15

Reading I: Economic growth

Many millions of people today enjoy a quality of life that previous generations could not have dreamed of. Home ownership, travelling on holidays and private cars are now standard for most families in industrialized countries. And yet, at the same time, billions of people in other countries live without proper food or even clean drinking water. What is the reason for this huge abyss between the formers and the latters? The reason is that the fortunate few live in the countries with sustained economic growth, while the unhappy millions of others – in the underdeveloped ones.

An economy is growing when the gross national product is increasing year after year. But economists must take into account the effects of inflation while calculating economic growth. Let’s imagine that the gross national product of a country increased from 500 billion dollars to 510 billion dollars during a year. It means – there is an impressive increase of two per cent in output. However, if the rate of inflation was the same two per cent, then there has been no real growth at all.

Speaking about economic growth we should remember that not all growth is good. Governments, undoubtedly, want steady, sustainable growth, because sudden, sharp increases in here (a boom) can cause the economy to overheat and fall into recession. For many economies, the long run growth over many years is steady, but the short run is a roller-coaster ride of boom and depression. For instance, the long run growth of the UK economy since 1950 has been a steady

2,5% Per year. However, if we look carefully at any decade, we’ll see that there is a cycle of growth, recession and recovery. It’s true, that steady growth in the short term is very hard to achieve.

Why are many countries struggling to achieve any kind of growth at all? What is necessary for growth to happen? Economists have tried to find the answer to this question, and there are many different theories here. Most economists, however, agree that three things are essential for economic growth to happen: capital growth, savings and technological progress.

Capital refers to the factories and machinery that the labour force uses to turn raw materials into products. Plus, the economy needs more capital for the labour to use: capital growth can also include training and education for the labour force, because this makes the workforce more efficient, creative and productive.

It is necessary to pay for the new machines and training. In other words, capital growth needs investment. Money for investment should be borrowed from banks, but banks can only lend if customers make savings. So, savings are very important for growth. However, the economy will not grow if everyone is saving and nobody

is spending. Getting the right balance between consumption and saving is another part of the challenge of economic growth.

Above all, technology is the real miracle worker of economic growth. An advance in technology can increase productivity from the same amount of capital and resources wonderfully!

Vocabulary

quality – качество previous – предыдущий dream of – мечта о ч-л. proper – надлежащий

abyss – пропасть

the former – первый из названных, прежний the latter – последний (из названных) reason – причина

fortunate – удачный, удачливый

sustained – длительный, продолжительный underdeveloped – слаборазвитый

the gross national product – ВНП

take into account – принять во внимание calculate – вычислить

impressive – внушительный rate – норма; величина

the same – то же самое sudden – внезапный sharp – острый; резкий

to overheat – перегреть recession – спад steady – устойчивый

roller-coaster – «американские горки» recover – выздороветь; поправиться

achieve – достигнуть struggle – борьба

to happen – случаться essential – существенный labour force – рабочая сила challenge – вызов

miracle – чудо

wonderful – замечательный

Assignment 1

Answer the questions, according to the text.

Why do some people today enjoy the high quality of life, while others do not even have proper food or water?

When does an economy grow?

Is its growth connected with the rate of inflation?

Is any economic growth good?

Speak about the long run growth and the short run one. Do they look similar?

Is it easy to achieve steady growth in the short term?

Why do many countries struggle to achieve any kind of growth?

What is necessary for growth (to happen)?

What is capital growth? Why does capital need investment?

Why are savings very important for growth?

Why should the right balance between consumption and savings be kept?

Does technology encourage the economy to grow?