In classical times, when Adam Smith propounded the concept of wealth of nations he focused on making values and not just hoarding gold coins into through trading. According to Adam Smith trade was important but it was more important to generate value which can be again invested into the production of other goods so that the nation can have its own wealth in terms of its manufacturing and supplying capacity (Mitchell, Wray & Watts, 2019). Here came the concept of economic growth which meant that there would be growth in the production and supplying capacity of nation in its own without any accumulation of gold coins only. According to Adam Smith can lead a nation to build and make investments into manufacturing products which increased the goods available for the citizens of the nation. So accumulation of capital has had to be invested in further use to make it a mode of manufacturing in the future. In regard this easy would make a comparison as how economic growth and economic development or welfare differ from each other. We would take Australia as a reference country to compare what is Economic Growth And Economic Welfare and mention what the measures of economic growth and economic welfare comprises of so that the nature and the size of the macroeconomics understood. Then we would undertaken cost benefit analysis of how Technology I’ll change has been an impact full parameter for the GDP of Australia as well as funny rest of the world (Nahman, Mahumani & De Lange, 2016).
Economic growth comes from the concept of Gross domestic product of the nation. Gross domestic product can be defined as the sum total of the monetary value of all the goods that are produced in Australia within the Australia territory in a given year. Australia being high income nation has very high GDP at about in 2021. This GDP has been calculated by including the monetary value of all the goods and services that are produced in Australian economy. The GDP of Australia increases per year due to many factors including labour productivity growth in the number of labours working growth in the natural resources and efficient utilisation of all the resources available to the Australian economy (Goodwin et al, 2017). A shown in the graph below we find that the gross domestic product of Australia is shown to increase exponentially from 1.35 Trillion USD in 2015 to 1.32 trillion USD in 2021. Economic growth comes from this growth in the gross domestic product of the nation. The GDP shows absolute value of the goods that are produced while economic growth shows the change in this absolute value over the years say from 2016 to 2021. Economic growth of Australia is shown in the graph below where we find that rate of growth of GDP from 1 year to another is high for Australia. The growth rate of gross domestic product for Australia has been around at 3% per year from 3.1% 2016 to -3.29% 2020 on an average. However we find that in the year 2020 the GDP fell to unprecedented levels due to the Covid 19 pandemic. In similar fashion the economic growth rate of the nation too fell to -3.29% .
Source: (Source: (Data.worldbank.org, 2020)
Source: (Data.worldbank.org, 2020)
However economic welfare is a far vast concept when compared with the economic growth. Economic welfare however starts when then citizens are having access to all essential goods in their life without any budget restrictions. Economic welfare occurs when the economy has high GDP so that the economy has the capacity to improve their well being of the citizens. The United Nations and World Health organization have defined economic development as the overall development of all the citizens in not only economic but also social means. The economic growth indicator was the GDP growth rate while in case of the economic development indicator we get a glimpse of how both differs. The major limitations of economic growth indicator or the GDP growth rate or GDP shows why economic welfare and development are broader concepts (Ivkovi?, 2016).
The economic growth does not take into account if the society in which one might live is let’s everyone the access to essentials like economic stability (in form of constant salaried income), better education ( in form of gross enrolment in the school and total number of years spent schooling) along with the average degree of health of the citizens. The limitations of the GDP are mainly not taking considerations the level of income inequality in the society. The GDP fails to indicate the costs incurred in correcting the negative externality that are imposed due to production and consumption of nations output along with the sustainability of the environment. Furthermore it is often consider that higher GDP would lead to a higher quality of life and happiness but that is solely dependent upon the level of income. If the society has high population yet high GDP it means on an average the per capita GDP would be less for those nations. In case of the Australian economy the inequality of income is not taken into consideration while measuring economic growth. But economic welfare accounts these parameters too.
The size of the economy can be found out by the absolute value of the GDP. It shows the production capacity of the economy and in essence also shows how much output the economy produces for its citizens and also for the external sector. Higher the GDP and lower the population larger is the size of the economy. But the GDP is a very narrow concept and do not show the nature and type of economy. For that the share of the various sectors in the economy to the GDP is looked upon, from which one can say if the economy is based on manufacturing or primary production. However we find that the GDP does not take into account the black market which is illegal in nature. The black market is the illegal market where, the commodities are sold at higher prices because the supply of those commodities in the free open market cannot be made at the given equilibrium price. On the other hand the GDP does not indicate the imputed costs incurred from the services given by the housewives, or the imputed costs incurred on living in one own house. The GDP also does not takes into account the purchase of second hand goods because that would be double counting. The GDP takes into account the income earned from interests but it does not indicate the opportunity costs incurred on getting a service. Hence the GDP fails to show the true value of various parameters. So once the GDP fails to take into account the valuations of these, the economic growth of the nation thus leaves out these parameters too. The economy growth fails to indicate these making the indicator narrow in concept. On the other hand type of economy can be seen from its overall developmental capacity. An advanced nation generally has both economic growth in its GDP and economic development. As such a highly capitalized nation is able to generate surplus over their domestic consumption and hence can attain high level of economic development. The human development index is a composite index which measures the level of welfare in three broad fields of education, per capita income and health. The per capita income of the citizens is viewed by GDP per capita, the education is seen from the composite index of enrolment to school and the mean years of schooling. The below figure shows the formula by which the HDI is calculated (Gurrib, 2016).
The higher the value of HDI the higher is deemed to the welfare in the nation. The HDI is calculated using geometric mean which allows to check if the nation is performing in each category. Since there arithmetic mean is not used, we see that any underperformance in one category is not overshadowed by the over performance in another category. Furthermore since the HDI does not take into account the level of inequality, the inequality adjusted Human development index can be taken as another effective measure to look how much the Australian (for example) market economy have successfully achieved welfare. IHDI count stands at 0.86 while the HDI count stand at 0.94 (Data.un.org, 2018). Due to inequality of income in the Australian society there has been a 8.2% loss in the welfare of the citizens. The welfare of the citizens also can be calculated by the Australia’s comparative position in the Sustainable Development Goals. The sustainable development goal comprises of 17 sustainable goals which ought to be achieved by the nations before 2030, so that those a sustainable framework is achieved by which citizens’ welfare can be increased in a sustainable long term manner. Australia ranked 38th among 162 nations in 2019 (Sdgindex.org, 2020).
The cost and benefit analysis can be carried out in the field of Technology culture which impact the gross domestic product of a nation and the economic growth. Technology change can you defined as the change that enhances the technology of production which reduces the cost of production and also the productivity of both labour and capital is enhance due to that technology change. From past experience, we all know how industrial revolution brought about a change in the technology of production. In the United Kingdom, large factories with machines were set up which printed papers, which manufactured textiles using less labours and more physical capital. So this change in technology allowed humans to use machines to produce goods (Mankiw, 2020). The human labour supplemented this use of physical capital. From the first industrial revolution there have been many such industrial revolution which brought about changes in the production technology or techniques which reduces the cost and also increased the labour productivity. The second industrial revolution took place when the mass production increased complemented by various scientific innovations and discoveries. Similarly with the increasing enhancement in wireless technology, the automation of machineries marked the third industrial revolution. The use of internet electronic goods and discovery of nuclear power as means of fuel was another leap in the technological progress that happened throughout the globe. The level of Australian innovation marks how Australian economy have assimilated these Technological changes into its own production capacity. Australia have ranked 25th among the 132 nations worldwide in the global innovation index in 2021. The rank of Australia in global input Innovation is 15 while in innovation outputs it ranks 33 (Wipo.int, 2021).
Source: (Wipo.int, 2021)
This shows that Australia have excelled in innovation in the input category more than in the output category revealing it’s innovation inputs have lowered the cost of production. The below graph shows that with Innovation mad technological enhancement there have been high level of development.
Source: (Wipo.int, 2021)
Australia lies in the fitted line showing that on an average with high level of GII score there has been increase in the per capita GDP of the economy. The main costs of technological enhancement can be attributed to the rapid changes that might take place in the society and the aligned growth in the sectors of the economy. Technological enhancement does not happen on a continuous basis, rather, costs have to be incurred on investments and research and development ventures (Yang et al., 2017). Furthermore the for example we find that plastic discovery can be regarded as a cost imposed on the environment by technological enhancement. (LI, Tse & Fok, 2016). The main benefits of technology again lies in the higher level of income and growth along with development. Technology leads to lowering the income inequality if the access to technology is equitable. Furthermore, technology is the only aspect that is neutral, as it can be modified to conserve the environment also (Sun et al., 2019). It is technology which can be enhancement to create sustainable growth environment and enhanced innovations can be made to reduce the damages made on the environment. For example, green technology like solar and tidal energy are forms of technological enhancement that have reduced the carbon emissions in many nations (Shams, Alam & Mahbub, 2021). However, it is important for the nation to look forward to technologies that are actually demanded within in the society. There have been many such innovations around the world which are yet not feasible for the economy to adapt to and hence those technologies are actually not demanded. Yet resources have been expended on those. This calls for prudent analysis of the technology that is needed for the betterment of the citizens.
Conclusion
As of conclusion it can be said that economic welfare is a broad concept which is not possible without economic growth, but again, economic growth alone can never be taken as a welfare measure. Economic welfare is viewed via various types of parameters which reveal that for Australia because Australia have been able to increase their economic growth there have been also economic welfare. The HDI rank of Australia is very high making it one of the developed nations along with high IHDI value showing, it might not be one of the most unequal nations in the world. The GII score of Australia shows that Australia have been able to assimilate the growing technological enhancements into the production capacity and also they have been able to make their own innovation mainly in inputs lowering their cost of production. The benefits of the technological enhancement are basically in the development while costs can be attributed to environmental damages.
References
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