standards

Economic growth can accelerate social problems. • Economic growth can reduce leisure time available

Economic growth can reduce the number of hours of leisure. This is because over the last 30 years,

Australian workers have seen an overall rise in actual hours worked by those employed full-time to between 38 and 40 per week. With low wages and high costs of living, some are forced to have multiple jobs to make ends meet. As a result, there has been a reduction in the number of hours left for recreation and leisure, even though some people have taken a cut in income to reduce their time at work. • Economic growth can reduce health

Economic growth can be associated with increased levels of stress and health issues associated with sedentary work, and pressures to lift workplace productivity and cut costs. There are also health issues associated with the consumption of fast food for a busy lifestyle, along with the negative impacts of air and noise pollution, and traffic congestion. • Economic growth can harm families

Economic growth has been linked with a range of problems that degrade family life. Perhaps the most common one is underparenting due to mums and dads working longer hours to earn even more income. This means that they spend less time raising, loving, and guiding their children. Some young people are left unsupervised and to their own devices. Some wander the community, find themselves in unsafe situations, or are exposed to crime and drugs.

These can lead to further social problems. • Economic growth and a failure of government policy can lead to

more inequality

While economic growth has been good for many, the benefits of increased output and incomes are usually not shared or distributed equally. Some groups in society have benefited more than others and, in most countries, there has been an increase in inequality between the rich and poor. This does not necessarily

FPO

mean that economic growth causes increased inequality — it is more complicated than this. In fact, weak economic growth that leads to higher unemployment and lower incomes would almost certainly make inequality even worse. The growing inequality in income and wealth that we now see is partly the result of the government’s failure to adopt policies to ensure that the benefits of growing national output and income are shared more evenly.

In Australia, for example, with rising revenue gained for economic growth, governments have cut tax rates, and allow generous tax breaks that are most beneficial for higher income earners. While tax cuts might incentivise effort, the policy has made the tax system less steeply progressive, allowing for greater inequality. In addition, tax cuts have also reduced the government’s ability to pay for adequate welfare, education, health, and public housing that are needed to help slow the rise in inequality. • Affluenza — can money buy happiness?

Economic growth has created jobs, raised incomes, boosted consumption, and allowed most people to enjoy better living standards. But does all of this necessarily lead to greater happiness? Some (but not all) research suggests that only up to a point, where essential needs are met without uncertainty, does earning extra money add to society’s happiness. Beyond this, there may be a trade-off.

‘Affluenza’ is mostly a problem for some in high-income countries. The term describes a social condition that comes about from an individual’s obsession and single-minded pursuit of wealth and material things.

They fail to understand that their actions may hurt others and damage relationships, possibly leading to depression and anxiety. People with this problem focus on work and believe that their self-image in linked directly with their financial reputation and ability to display their success. This strong focus on material values prevents them from gaining enjoyment from the broader non-material aspects of life such as love, family, and recreational pursuits, ultimately leaving many feeling unfulfilled and unhappy. In some cases, they try to buy happiness through destructive, risk-taking actions, including substance abuse.

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4.13 Activities

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Track your results and progress Find all this and MORE in jacPLUS 4.13 Quick quiz 4.13 Exercise 4.13 Exercise 1. a. Growth in GDP can potentially bring economic and social costs. Complete table 4.16 by explaining how economic growth might cause each of the impacts noted. (4 marks) TABLE 4.16 The economic costs of economic growth Potential economic and social costs of economic growth Explain how the growth in GDP might cause the cost noted 1. Increased inequality of incomes 2. Affluenza 3. Unemployment 4. Higher rate of inflation 5. Lower future rates of economic growth 6. Lower future incomes and material living standards b. Some of our non-renewable natural resources are running out because of economic growth and a finite planet. Depending partly on the decisions we make as consumers, future generations will probably have reduced access to some resources. Classify each of the products in table 4.17 as to whether they are produced using mainly renewable (R) or non-renewable (NR) natural resources. (10 marks) TABLE 4.17 Classifying types of resources used in production Type of product Classification of resources (R or NR) 1. A nylon shirt 2. A coffee table made from plantation pine 3. Petrol (crude oil) 4. Gas made from corn or sugar cane 5. Solar or wind power 6. A woolen jumper UNCORRECTED PAGE PROOFS 7. Steel framing for a house

8. A plastic ruler

9. Cement

10. Sardines from the Atlantic Ocean

c. Over the past 1000 years, global production and population have both increased. Initially until the 1800s, this was relatively slow. However, in the subsequent 200 years, the process accelerated dramatically and, when graphed, their level has risen exponentially at a faster and faster rate. In some circles, this has caused alarm because the world’s resources are limited and in the long-term, growth in production is unsustainable.

Here is an old French riddle about exponential growth that you might like to solve — when will the lily plant cover just half the pond?

Imagine you own a beautiful fish pond (representing the supply of the world’s resources) on which a water lily is growing (representing the world’s demand for resources). This lily plant doubles in size each day. If the lily is allowed to grow unchecked, it will completely cover the whole pond in exactly 30 days, choking off all other forms of life in the water. For a long time, the lily plant seems small and harmless, and so you decide not to worry about cutting it back until it covers half the pond. Identify the day on which this occurs. The answer = day ………

d. Economic growth comes at a cost: i. Define the term, negative externalities, associated with economic growth, and outline how can they affect living standards? (2 marks) ii. Increased economic activity and growth can result in negative externalities. Describe the negative externality that is likely to be the result of the economic activities listed in table 4.18. (10 marks) TABLE 4.18 The nature of negative externalities Type of activity Describe the negative externality 1. Increased wood chipping in the Otways and north-east Victoria 2. Setting up a new paper mill in Burnie, Tasmania 3. The construction of a new tunnel near Westgate in Melbourne 4. The opening of Sydney’s new airport in the west 5. A passenger smoking a cigar on a flight to Perth 6. Leaving an electric light on all day in your bedroom 7. Driving instead of walking to the corner shop 8. Off-road four-wheel driving and trail motorbike riding 9. Disposing of household rat UNCORRECTED PAGE PROOFS poison down the sewer 10. Holding a wild and noisy party at your house on Saturday night

iii. Climate change is an example of a negative externality associated with economic growth. Explain how economic growth accelerates climate change and increases the incidence of severe weather events. (2 marks) iv. Explain how climate change and severe weather events can affect the material and non-material living standards of Australians and people living in other parts of the world. (4 marks) v. Define common access resources. Give examples of these resources. (2 marks) e. Economic growth has also been associated with a reduction in some aspects of non-material living standards, including the amount of leisure time. Examine figure 4.30.

FIGURE 4.30 Comparison of hours of work in selected countries as an influence on the amount of leisure time Where do employees work longer than 9 to 5? % of employees working more than 50 hours per week on average in selected countries* *Latest available year 0.2% 5.9% 5.6% 13.7% 12.3% 11.4% 10.7% 8.7% 22.6% 28.8% 27.1%

43.3% Turkey Mexico South Korea Japan Australia United Kingdom United States Brazil France Spain Germany Russia Source: Image copied directly from www.tutor2u.net/economics/reference/measuring-the-standard-of-living, graphfrom Statista Charts using OECD data. For some people, growing national production and income have meant longer hours of work. i. List the two countries that work the longest hours on average, and the two that work the shortest hours. (2 marks) ii. Identify and outline three ways this could reduce our non-material living standards. (3 marks) Fully worked solutions and sample responses are available in your digital formats. UNCORRECTED PAGE PROOFS