NEW economic growth prospects among nations in Asia | Daily News

NEW economic growth prospects among nations in Asia

On the threshold of another decade ending in the 21st century, countries around the world, particularly those of Asia, where large populations live and work, would like know where they are heading and what prospects are in coming decades. Each country and each generation, would like to know in particular, their would be socioeconomic conditions, prospects of employment and high income earnings in future, given the trends of new economic growth in various countries and in Sri Lanka. Will the future holds better prospects of material life and general living conditions.

This is a universal expectation of people in modern times. In particular among countries that had experience conflicts, wars and uncertain conditions these expectations are very ripe and potent. They generally expect better times and do engage in political activities with such thinking in mind and expect the governments or regimes that they change to deliver economic developments that bring out their rising expectations of better living and not economic stagnation and gloom. This essay is meant to focus of economic growth trends and prospects, well beyond 2020 and explore what can be expected in the Asian region and elsewhere in the world and what trends can bring change in the Asian region and elsewhere. Economic Growth and Development:

Economic Growth is defined as the rate at which the Gross Domestic Product, the GDP OF a country grows over time and economic development is the consciously planned efforts on the part of government and people and their agencies and organizations do in expectation of increasing the GDP. The GDP growth and its distribution is the ultimate outcome of any meaningful economic development. People expect the benefits of development to reach them in terms of better living conditions, employment and incomes and a wide range of goods and services. However countries in Asia numbering 51 show different rates of economic growth. of these countries can be categorised into three broad income classes; namely low income, middle income and high income levels.

The low income level countries are those with per capita GDP of U.S dollars up to 2,000, PPP terms, middle income countries are those with above US$ 2,000 up to US$ 7250, per capita GDP and the countries with per capita GDP above US$ 7,250 but below US$ 11,750 per capita as higher middle income countries and finally those countries above US4 11,750 per capita GDP as high income countries. Further in terms of economic growth the countries with growth rates ranging from 1.5 to 2.5 percent per annum of the GDP can be termed as low growing economies, while those with growth rates above 2.5 percent per annum up to about 7.5 percent as moderately growing economies while those achieving growth rates above 7.5 percent annually as rapidly growing economies.

As will be discussed in the following sections of this essay, what matters for a country to achieve a high income level, leading to sustainable high socio/ecominc progress with satisfying material comforts and living standards for its people is to maintain a sustainable stayed rate of economic growth, say 6.5 to 8.5 percent per annum over a decade, without discontinuity. It will then propel the economy to higher levels with a momentum that pushes the economy to a fundamental economic and social transformation and may be within a generation. As will be explained, there is some kind of magic in economic growth process in terms of its compounding effect.

It is really the momentum of the growth process present in the change of the economy, which shows as its compounding effect. To some extent countries like Japan and South Korea had demonstrated this, achieving high income status within a short period and joining the club of developed high income countries. Indeed they have shown the way as a few determined Asian nations, and now China and Vietnam appear to follow suit to become the miracle economies in East ASIA.

Economic growth and development.

Economic Growth is defined as a rate at which the Gross Domestic Product , GDP, grows overtime and economic development is then, the conscious efforts on the part of people and their government to facilitate the progressive growth of the economy, to satisfy, the peoples expectations and aspirations for better socioeconomic levels of life. It is for this people change governments and regimes and for nothing else. A steady increase of real GDP for many years, in sustained manner will render the country to attain the status of high incomes, for people, to enjoy material comforts, good education, health facilities and comfortable housing for all the people in the country.

Within such societies there emerge persons and groups who bring new innovations, inventions and new products and ideas that would push the economy to still higher levels with improvements, in a sustained manner, managing change, without major disruptions. Such societies promote fair play, justice and indeed spiritual values and generally bring out a better attitudes and manage state of affairs among people, communities and indeed among nations. On the other hand, when a high levels of anxiety .fear, and uncertainty of future, prevailing among people, due to slow economic growth and mismanagement on the part of government , those who are then driven by poverty and sense of deprivation would tend to go rebellious and violent on various issues, sacrificing thereby the avenues of dialogue and discussions to settling disputes. Democracy fails and violence in society emerges. In many situations it is the lack of steady development and satisfactory economic performance led by government and the failure of equitable distribution of benefits of any development, that is taking place, in the country, are factors that shed light on these crucial issues. This essay will focus of the nature and significance of GDP which is the bed rock of economic development in most situations, which countries face from to time.

GDP and its history

GDP as a single measure of a country’s economic performance in a given period, in terms of socio economic outcome, may appear as somewhat lopsided, as an overall measure of human progress in a given country. This because GDP as a measure, statistically constructed, is meant to be primarily, of physical measure, in value terms, of an economy, affecting the life of peoples in a particular year or period. GDP when estimated by the practitioners, indicates the availability of produced and traded goods and services in a country’s economy, in value terms, it is really a measure of value added, each year to the country’s economy, in income in real terms. In this respects it would be interesting to peep into history and see how this measure as a concept in economics came to be used.GDP as measure of overall economy is really the outcome of the inter; war years and the Depression of 1930s which affected the US and the other major economies very badly, throwing millions of people unemployed and industries closed due to lack of demand and disruption to trade and shipping.

Following these economic negatives, the U.S congress asked Simon Kuznet, the Russian born economist, to estimate the national income of USA in preceding four years, up to 1933.

It is reported that until he produced the estimate for 1933, no one had a clue to the extent of the damage of the depression to the US economy. During this period a British economist, John Menyard Keynes of Cambridge University, made a plea to collect systematic collection of statistics on production of military goods and civilian goods and showing its importance and proceeded to define the modern concept of GDP as the- sum of private consumption and investment and the government spending plus the country-s foreign trade.

As one could see it was a measure conceived during years of anxiety and fighting for survival, hence finer points economic evaluation of depreciation of capital stock and pollution other implicit negatives being overlooked. In 1950 Richard Stone, a follower of Keynes, was asked by United Nations to prepare a template for estimating GDP of a country and it followed the move towards adopting a uniform method of estimating GDP worldwide and enabling comparison between countries and making it more meaningful. Keynes writing his most famous work on economic theory, the General Theory of Employment, Interest and Money, spelt out the nature and significance of National Income of a country and explained how to manage it to be steady and growing without running into depressions and mass unemployment. His ideas came to be developed into what is called macro economic management and public policy which respectfully came to be known as Keynesian economics or Keynes in model of economic management, through aggregate demand management in the economy.

Thus GDP has emerged as the major measure of a country’s national economy, its production level of goods and its increase overtime, which is the economic growth of the country to determine, the level of production, employment, incomes and living standard of the people in the country.

Hence increasing the GDP became the most important goal of countries across the world, necessitating economic development, and engaging people, governments and business community to increase production of output of goods and services. What came to be known as economic strategies, policies, prescriptions and indeed what is today called good practices are all supposed to lead to, increase in the quantity and quality of output of the goods and services in a country and its distribution among people.

GDP as grand measure of a country’s economy and its composition came to formalised as an equation where Y = C I G M X, where Y is GDP, C is consumption, Is investment, G is government purchases off goods and services, M and X are imports and exports foreign trading balance in a given period. These various components in the GDP are taken as market values of all final goods and services produced in the country in a year and this grand measure remain generally accepted as the norm concept, measuring economies. However this concept GDP entails some criticisms which can be briefly reviewed as follows.

Some issues related to GDP concept.

The first criticism is related to its restricting to goods and services that are produced and traded and exclusion of non traded goods and services, ignoring a host of goods and services which are produced and consumed at household level without a market being involved ( trading being involved. This is particularly relevant in developing countries like Sri Lanka, where a range of economic activities like home gardening , cottage crafts, self help and housing keeping and domestic services, all of which are not traded but produced and consumed at house hold level.

Some of these are to found even in developed economies wherehouse keeping services including personal services can be substantial and involve resource uses. In recent times with digital communication and production involve several areas as, in use of Face book, Twitter, Wikipedia output, though all have lot of economic values are ignored as they are considered zero-price goods and not counted for estimating GDP. Recently economic researchers at MIT in U.S have estimated the welfare gain of free internet products like Wikipedia, estimated to add value to US economy by a factor of .74 percent annually and this can be substantial in future years.

Following this the Economist Journal claims that U.K economy should get an annual increase of about 0.7 percent to its GDP by this engagement. The rationale behind this proposition is that GDP should be made to reflect the benefit of digitization service products at house hold level and elsewhere. Further the conventional estimate of GDP ignores the variety of aspects of products as in branding and its contribution to welfare and use of resources.

It is pointed out that under the conventional method of estimation just one million pairs of shoes of same size and colour is equal to one million pairs of shoes of different sizes and colours and no account is made as regards consumer preferences and welfare effects on account of variety and quality.

Many other problems are related to price adjustments to remove inflationary impact. It has been pointed out that a US advisory committee headed by Michael Boskin of Stanford University, showing that missing the improvement of performance quality of new products like smart phones can create problems if only price changes are used. Qualitative changes tend to be gloss over in the estimation of values. Despite these deficiencies GDP is used to measure countries economic performance and status. Given the size of GDP of a country, annually measured in constant unit of money, in US dollars in PPP terms it then become easy to size a country and make inter-country comparisons and assessments.

The growth of GDP overtime and comparing with population growth rate is taken as a measure of changing living standards of the country, reflecting its economic performance over a period. GDP when divided by population is per-capita GDP and this is taken as readymade of measure of improving living standard, without taking distribution into serious consideration. These two measures, GDP growth rate and its per capita measure can then be compared with other countries for comparison and assessment.

Such comparisons are meaningful when the countries are of relatively of same size and had similar historical and political circumstances and facing different development challenges. If country’s economy is unable to grow overtime, then obviously, it would lead to stagnation, resulting in increased poverty, social degradation, frustration and conflicts among people and groups. Such a state of affairs when persists, particularly after conflicts and wars, need to change under stable political systems and change regime where necessary should be under a strong and reliable leadership, to promoting certainty, and clarity of purpose, and give correct direction. A country’s socio-economic progress and its status over time is, in the final analysis is how fast it is growing economically, compared to its own past records and in relation to other countries in the geographic region it is located.

(To be continued)

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