[Essay] Relationship between GDP and Educated Persons

Introduction

Every nations and country has their own strategy on how to improve and enhance their economic status. In each country, economic growth and development and also the standard of living of the citizens are very important because these are where the survival of the country lies. The progress of the economy depends on the abundant resources or source of natural products and those people who are running it or manipulating it. These factors should work hand in hand in order to determine the weakness and strength of each so that it will immediately fix if there are any loop hole in the transactions. Basically, when judging whether the economy is doing well or poorly, it is normal to glance at the total income that everyone in the economy is earning. For an economy as a whole, income must equal expenditure because every transaction has a buyer and a seller and every dollar of spending by some buyer is a dollar of income for some seller. From this, countries are making calculations of their progress with the use of measures. Actually, the so-called real gross domestic product (GDP) is a macroeconomic measure of the size of an economy adjusted for inflation and price changes (Cobb, Halstead, & Rowe, 1995). It measures in constant prices the output of final services and goods and incomes within a country’s economy. In this paper, the relationship between GDP and educated persons in countries in accordance to economic development and growth was discussed.

Discussions

Economic growth is merely an increase in the given amount of goods and services produced by the country in a given year as compared to the previous year. It occurs when a society acquires new resources or when it learns to produce more using the existing resources. However, we need to consider that the economic has its pros and cons. The supporter of economic growth believes that growth is equated with progress because it would provide wider range of choices to the customers, consequently it improves the quality of life as well as the condition of less fortunate. On the other side of the scale, forerunner of anti-growth believes that growth only accounts things existing in the market, and that the essential barometer of improved quality of life is wanting, in fact it even deteriorates as it is being taken for granted. Second, as growth propels, new tastes and preferences for goods are created. Hence, the consumers become the followers of this created want which is contrary to our perceived assumptions that consumers are sovereign and that they are the dictators in the market. If growth increases at a rate higher than our improvement in natural resources-the world can no longer suffice this growth because limited resources can no longer be utilised. Lastly, growth leads to unequal distribution of income.

After considering the pros and cons of economic growth in accordance to country’s standard of living, it is now time to know how this is measured. So how can we measure development? Basically, the most popular way of measuring it is thru the use of Real GDP (Petrovich, 1994). Actually, we have three ways of computing it as Petrovich, 1994 stressed out: the industrial-original approach, expenditure approach and income approach. Let say hypothetically that in 2007 our real GDP was 969,334 in million dollars as compared to the real GDP in 2008 in of 1,012,614 in million dollar, we can say that there is an improvement in the production of goods and services in 2008 so we are better-off than last year. Moreover, unemployment rate could also be used as a measure of economic growth (Schwab, 1997). As we reach a single digit unemployment rate then we can say our economy is growing. But as we recognised that some temporarily unemployed people are accounted, this would be a subjective measure of economic development.

For so many years, the GDP with respect to its real GDP has been considered as the nation's foremost indicator of economic progress (Schwab, 1997). It is now widely used by economists, policymakers, international agencies and the media as the main scorecard of a nation's well-being and economic health.

The GDP is related to the educated persons. This refers to the need for a quality labour stock of knowledge and skill and increase in productivity (Alvarez & Busenitz 2001). The human resource with educated person is still the key to the success of any development and growth endeavour. Factor of production (e.g. land, labour, capital, etc.) becomes useful and productive if they are properly utilised by the people. If they are creative, socially oriented, and have the sense of ingenuity, they could enormously help their fellowmen and country. This is the Achilles’ heel of the Third World Countries-their attitudes, values and institutions do not favour development (Alvarez & Busenitz 2001). Attitudes such as tardiness, individualism, resistance to change, lack of self-reliance, to have a few hinder economic growth and development. Likewise, values life colonial mentality, fatalism nepotism and extravagance exacerbates underdevelopment.

The existence of educated persons affects and contributes to the development of Social Overhead Capital which is also known as infrastructure. Development and growth in a certain nation depends on huge infrastructural investment such as roads, power generation and irrigation in which in fact cannot be provided by single firm or household due to gigantic capital needed (Haggard & Webb 1990). Furthermore, Haggard and Webb 1990 pointed out that these investments are prone to externalities. Consider this, if a farm to market road was constructed, you cannot prohibit other farmers nor travellers to pass that road and say, “hey its my road, try the other one” hence, everybody benefits from infrastructure. Furthermore, it is next to impossibility to collect fees from the social benefits being offered by these investments. If let say, lighting was offered to the public, some people who pays for it don’t get less if some people not willing to pay use the same facilities. Thus, neither private firm nor household would be enticed to provide for this infrastructure, hence, the intermediaries and provision of the government are needed in order to ensure that the infrastructure are being planned if not currently done to propel development.

Conclusions

Therefore, standard of living with respect to growth and development refers to the economic state where the demands placed upon the environment by people and commerce can be met without reducing the capacity of the environment to provide for future generations; is economic development that has a positive long-term social and/or environmental benefit; and meets the needs of the present without compromising the ability of future generations to meet their own needs.

There are several interpretations of development and growth ranging from “pure ecologist” demanding minimisation of human influence on nature to “4D interpretation”, in which development includes ecological, economic, social and cultural dimensions. Aside from these, issues concerning the real GDP, Human Development Index or the so-called HDI and poverty issues in an economy must be considered to determine the range and engines of growth and development.

Moreover, development and growth is an economic, social, and ecological concept. It is intended to be a means of configuring civilisation and human activity so that society and its members are able to meet their needs and express their greatest potential in the present, while preserving biodiversity and natural ecosystems, and planning and acting for the ability to maintain these ideals indefinitely. Thus, development affects every level of organisation, from the local neighbourhood to the entire globe.

References:

Alvarez SA & LW Busenitz (2001) "The entrepreneurship of resource-based theory." Journal of Management 27, no. 6: 755-775.

Cobb, C., Halstead, T., & Rowe. J. (1995) "If the GDP is up, why is America down?" The Atlantic Monthly, vol. 276, no. 4, October 1995, pages 59–78.

Haggard, S & Webb SB (1990) What Do We Know about the Political Economy of Economic Reform? The World Bank Research Observer, 8, 143-168.

Petrovich, NL 1994. Introduction to Sustainable Development. Counties: Foundation for a Sustainable Future. Washington D.C.: National Association of Counties.

Schwab, AK & DJ Brower (1997) Sustainable Development: Implementation at the Local Level. Land Use Law & Zoning Digest (April): 3-7.