Different aspects of econimic growth Essay Example | Topics and Well Written Essays - 750 words

Different aspects of econimic growth - Essay Example Upon undertaking the stated consideration through reference to the classical and the neo-classical economists, one finds that growth is alternately linked to capital accumulation and technological progress. Classical economists maintain that economic growth is inextricably linked to the unlimited supply of labor. As Lewis (1954) explains, plentiful supplies of cheap labor comprise the key to both economic growth and sustained growth. The presence of unlimited labor supplies at subsistence wages functions as a predicator of expanded growth, insofar as cheap labor implies low production costs and plentiful labor enables the evolution of several labor-intensive industries, implying that growth is not reliant on one industry and sector but on several. The neoclassical economists, as may be inferred from both Lewis (1954) and Allen (2005) largely concede to the above-mentioned but highlight their limitations. Quite simply stated, unlimited supplies of labor is not a permanent situation with the American South's reliance on slave labor and the subsequent abrupt halt of that reliance, functioning as a case in point. This means, and as borne out by the history of both the British Industrial Revolution and the South's large-scale plantation era that growth as predicated on unlimited supply of subsistence wage labor is not a stable strategy/means for economic growth. Accordingly, technological innovations, especially as in the automation of the means of production, step in as a central component of economic growth (Lewis, 1954; Allen, 2005). Consequently, one may argue that technological innovations and developments pick up from where labor leaves of, in which case both explanations for economic growth emerge as complimentary, rather t han as alternatives. The pace of economic growth, however, is determined by variables other than those outlined in the preceding paragraphs. Within the context of neoclassical economic theory, the predominant growth model is the Kuznets cycle. As per the aforementioned, the pace, or rate of economic growth is measured in terms of cycles, ranging from 10 to 60 to 100 year cycles, with the twenty-year one being the most popular or viable. In accordance with this particular perspective on economic growth rate, during a long swing/rate of growth cycle, an economy first experiences an expansion stage, supposedly accompanied by the accumulation of capital. The expansion phase is followed by a continued period of sustained growth, although with growth rates measured lower than in the preceding phase. The third phase, marking the termination of the second, is the depression stage, where economic growth slows down to a halt, possibly culminating in negative growth. From the neoclassical perspective, the aforement ioned theory of the pace of economic growth is validated through historical examples, encompassing the experiences of the United States and Great Britain, among others. A close reading of both Lewis (1954) and Allen (2005) explanations of growth and pace of growth, alongside class notes, highlight another important set of economic factors. These are surplus and capital accumulation both of which, when taken in conjunction, effectively explain why nation economies are able to sustain themselves during periods of depression, supposing of course, that the latter is not extended and extensive. Basically, periods of rapid economic growth