The Theory Of Economic Growth

As a product of colonization, the limited industrial development in the colonized area is a global issue. Because the widening gap between the rich and the poor between developing and developed countries, is the root reason of most of the contradictions and conflicts between countries in the contemporary world. And different level of industrialization caused the widening gap. So we can say the limited industrial development caused by colonialism is a real issue behind many current contradictions and conflicts. In order to reduce these conflicts and narrow the gap, the colonized countries should make a breakthrough on its limited industrialization by focusing on its own features-- resources and structures, and taking effective measures-- impoting foreign capital and technology and establishing independent or joint scientific research and ventures, to gain a long-term economic growth. For the relation between the colonization and the limited industrialization in colony, there are usually two views. One view is that people blame the colonizer were not willing to promote the development of industry in the colony. The other view is that people emphasize it was hard for the colonized to start the process of industrialization in the colony. In my opinion, both of the views are reasonable, but neither of them is comprehensive. In order to demonstrate my opinion on the relation, I choose British India and the Belgian Congo as two objects to analysis in the following paragraphs

evident in the run of financial crises that afflicted the global economy in the late 1990s

Economic analysis 2006 and 2011. The five year benchmarks selected for this analysis do not well represent the fluctuations in the economy in the interim years, which have been substantial. Naturally, the fiscal crisis of 2008 to 2010 had deep and enduring impact on the national and global economies, but the "bookend" years of this analysis effectively obfuscate the volatility resident in those years. Fiscal year 2008, for instance, the inflation rate reached nearly 5%, the unemployment rate peaked in 2009, and the interest rate reached 5% in 2007. What this analysis does provide is a look at the stabilization of the economy without the noise of the intervening fiscal crisis. Through the monetary policy by The Fed during the fiscal crisis, efforts have been directed at maximizing employment and price stability. As a result, the interest rate will remain low with no changes anticipated until 2014. Inflation has stabilized, interest investments are low but gradually increasing, and the unemployment rate is slowly dropping but is not expected to accelerate.

Economic growth aims at removing obstacles that could come in the way of increasing an economy’s productive capacity, like removing market imperfections that exist in an economy. Supplying the ‘missing components’ like capital, foreign exchange, technology, skills, and management, which is needed for improving an economy’s productive capacity. Consequently, expecting that the increased capacity of the economy would somehow reach the masses.

In contrast to the barter economy, the financial sector sits between savers and borrowers: taking funds from depositors and making loans to borrowers, linking together households, companies, and governments. As such, financial sector could allocate the surplus funds in the society to their most efficient use in the needed areas (Diamond, 1984). For example, the credit provision to SMEs fuels real business to invest in new buildings and machineries to foster their growth. In this way, financial sector benefits the nation by expanding the whole society’s productive capacity, then improving people’s living standards eventually. Third, a well-run financial system facilitates the management and allocation of certain risks (Baily & Elliott, 2013). Financial intermediaries have

Without dismissing earlier attempts, the foundations upon which modern economic growth theory rests on the foundations put by US

Since the great recession ended more than five years ago, we have never truly recovered and are still facing slow economic growth to this day. Despite even the best efforts of the US government to reverse the situation, with its nine figure bailouts and lowering interest rates to nearly zero. These measures were made, one to try and make the government and two to try and stimulate the government to increase investment spending. Instead of this desire effect of banks’ lending out money and business expanding their business, the opposite seems to be true with most banks and business holding onto their money instead. This is caused mainly by banks and business lack of faith in the state of the current economy and its potential for future growth. I believe if the US economy is going to get back on track to where it wants to be in needs to increase government spending that can improve the economy over the long term. My plan is to spend 250 billion in direct spending on new and improved infrastructure, to spend 25 billion on a private/public infrastructure bank. Lastly increase funding for scientific research at agencies like the National Institutes of Health and the National Science Foundation. Even though there will be some short term benefits the main goal here is to increase long term outlook for the economy.

Abstract This paper investigates the relationship between financial development and economic growth for the case of China over the period 1952–2001. After considering

It is possible to miss valuable information about macroeconomics and financial stability if policymakers continue to choose to ignore the behavior of credit aggregates. However, it is unclear from this study how this information is included in the overall policymaking and regulatory framework, and via which financial instruments. In terms of policymaking and research, it is safe to assert that credit aggregates contain valuable information about the likelihood of future financial crises. However, It is not proven to be a perfect predictor, and this is emphasized by the fact that, in some periods, especially in eras of financial expansion, development and innovation, credit expands to support real economic growth. It is important to keep in mind that at the same time, historical records show that the recurrent occurrence of financial instability and fragility have more often than not been the result of credit booms gone bad.

In the last two decades of the twentieth century, and in a few countries a bit earlier, a set of policy changes that were – and still are – considered to be positive reforms were introduced in the vast majority of low- and middle-income countries in the world. The results strongly indicate that these reforms on the whole were a failure. This is evidenced by the sharp decline in economic growth in the great majority of low- and middle-income countries, which coincided with and then followed these changes for two decades; and the concomitant decline in progress on social indicators such as infant and child mortality, and life expectancy. Perhaps because it is difficult to come up with an alternative to policy failure as an explanation for

Talking about the Endogenous growth model, it clarifies long-run economic growth as radiating from economic activities that make new technological knowledge.

Economic growth is an economic term to describe an increase in a country’s national earnings of wealth, or the growth of Gross Domestic Product (GDP) (Swanenberg,2005). The measurement of economic growth is possible that the change in national income in comparison to the numbers held by the year before. In the world today, economic growth is one of the ways to determine how successful is the country’s economic activity (Swanenberg, 2005). This is explained by the fact that economic growth reflects the standard of living of one country’s people, and how effective is the use of the economy’s resources. According to Riley (2015), economic growth is a long-term expansion of productive potential, and a short term will be shown at the annual % of change in real national output.

Economic Growth is caused by improvements in the quantity and in the quality of the factors of production such as human capital (labour) and capital stock. Indeed, it permit to enhance the productivity of an economy and thus its creation of wealth.

The classical economists Adam Smith, David Ricardo and John Stuart Mill were primarily concerned with the dynamics of the economic growth of a capitalist economy. They argued that population growth and capital accumulation are the necessary conditions of growth (Denis and Paul, 2000). The forces of diminishing returns and technological advancements determine the pace of economic growth. Capital accumulation, which itself is determined by the rate of profits, has two effects: it creates demand for labor and it fosters technological improvements by facilitating the division of labor. The population, which tends to grow rapidly, increases the demand for food.

With this inquiry I seek to establish the role of finance in economic development as presented by Joseph Schumpeter in his book, The Theory of Economic Development, [1911]