Technology change and economic growth
Economic growth simply means an appreciation in the value of goods and services in an economy over a period of time (Verspagen 2000). It is conventionally measured as the ratio of real gross domestic production to a country’s population characterized by price stability, equilibrium B.O.Ps, exchange rate stability, and low unemployment in a given country. Technology plays a vital part in economic growth. Indeed, changes in technology act as indicators of growth and development of the economic stature in a country. Therefore, this means that technology not only indicates economic growth but also the overall growth and development of a country. In particular, changes in technology offer a chance for a country to augment its efficiency and effectiveness in production and provision of products and services, which consequently translates into growth of economic activities. The introduction of a new technology in an economic sector affects its behavior and functionality thereby increasing its ability and efficacy in performance. For instance, in a business scenario, when a new machine is brought in, it will positively influence production through enhanced efficiency and effectiveness. In return, more products will be produced and sold both locally and globally, increasing the productivity of a country, which definitely translates to economic growth.
Rudimentary, there are many causes of economic growth but in reality, they revolve around changes in technology. Increase in productivity of goods and services s to reduced costs of these products (Eicher 2010). Consequently, this results in increased aggregate demand. Changes in technology affect productivity in terms of increase in the number of goods and services produced. Besides, the efficiency and effectiveness in production will increase the quality of products and services as well as reduce the cost of production. Because the cost of production is greatly reduced through the use of highly advanced technologies, this will be reflected in the prices of goods and services. That is, they will become cheap and affordable thereby attracting an increase in aggregate demand over time. Increase in production has everything to do with full employment of all factors of production at efficient proportions in a bid to exploit natural resources. Highly advanced technologies enable extraction and exploitation of resources with increased ease and efficiency.
In addition, the use of technology in the manufacturing and processing industries across the economy enhances quality and quantity production, which amplifies aggregate demand and thus leading to overall economic growth in the long run. Advances in technology can also lead to the growth of an economy by ensuring the growth and development of infrastructure (Goklany 11). In turn, this increases supply of goods and services by making sure that people are met at their points of need. Infrastructural development in the transport sector increases the mobility of goods and services in the local market as well as the international market. Therefore, exporters and importers alike can move freely in and out of the country to ensure the sustainability of their businesses. Besides, the use of advanced technology enhances movement of inputs from their extraction sites to the processing unit including easy movement of factors of production such as labor. Accordingly, this helps to foster the growth and development of the economy. In other words, technology change has a significant impact on the growth and development of the economy.
Policies and their effects
Various economic policies are put in place in a bid to enhance growth and development of the economy. These policies include employment policies, social equality policies, inflation policies, and balance of payments policies. Employment policies seek to reduce unemployment levels to containable levels. Through employment policies, a country is able to expand its economic activities in order to create more job opportunities. The desire to reduce the level of unemployment in a country generates the need to ensure full employment of resources, which in turn leads to increased job opportunities available for the eligible populace in the job market to secure as many job opportunities. The effects of increased unemployment inhibit the general performance and growth of the economy (Verspagen 2000). Consequently, these ramifications are adverse and lead to the dwindling of the economy with indications such as abject poverty and confined labor mobility.
Social equality policies endeavor to find ways to reduce inequality in terms of real wealth and income because of the fact that there exists direct and impartial nexus between social inequality and economic growth (Eicher 2010). This means that, increasing inequality poses adverse effects on the economic development of a country and vice versa. This is because inequality is associated with inferior levels of wealth formation, which reduces economic activities thus hampering the growth and expansion of the economy. Social equality has the effect of creating a more just society with reduced conflicts and thus providing opportunities for further development.
On the other hand, inflation policies seek to ensure sustainable price stability hence creating favorable grounds for the development of the economy. Price instability erodes the purchasing power of consumers, which consequently reduces aggregate demand and hence slowing down the economic growth of a borough. The effects of price stability on the sustainable growth of the economy are conspicuous from the perspective where demand balances with the supply of goods and services in the economy. In addition, balance of payments policies are put in place due to reduce surplus and deficiency thereby reducing fundamental disequilibrium (Verspagen 2010). These policies aim at encouraging both imports and exports to ensure a sustainable B.O.Ps equilibrium to avoid the deterioration of the local currency as far as international trade is concerned. This in turn provides a platform for economic growth and development in the long run.
Critical evaluation of policies
Employment policies involve strategies put forward to ensure full employment of resources including labor. These policies seek to ensure high exploitation of resources in a bid to engage more economic activities hence providing more job opportunities to the citizens of that country. Technology change enables a country attain full employment of resources, which subsequently leads to economic growth (Goklany 9). Equality policies endeavor to reduce wealth and income inequalities. Through advances in technology, the level of wealth formation will increase because of the growing need for education to gain expertise to operate in the newly acquired machines. Price stability policies also look up to technology change in a bid to amplify production efficiency and effectiveness as well as the quality and quantity of production. This as explained early has the effect of increasing the growth of economy. Balance of payments policies that seek to attain a sustainable B.O.Ps also rely on technology advancement. This is because change in technology encourages quantity and quality products with both local and international market appeal. Consequently, this encourages global trade and exchange of goods and services hence balance of payments equilibrium.
Eicher, Thomas Bailey and Theo. “Education, technological change, and economic growth .” 4 July 2010. University of Wasshington . 22 April 2014 <http://faculty.washington.edu/te/papers/eicherbaley.htm>.
Goklany, Indrur M. “Strategies to enhance adaptability: Technological change, sustainable growth and free trade.” Kluwer Academic Publishers (1995): 1-23.
Verspagen, Bart. “Economic growth and technological change: an evolutionary interpretation.” 12 January 2000. IDEAS. 22 April 2014