Diagram 2 - Gini coefficient
Environment
Economic growth has the potential to create negative impacts onto the environment. When growth is pursued with little regard to its impact on the environment it results in:
- Pollution.
- Depletion of non-renewable energy sources .
- Damage to the local environment through externalities.
Pollution can come in any form; noise, untreated rubbish, chemical substances, toxic fumes and almost any other by products of goods or services. They all affects the atmosphere, water supplies, the land all human activity and we live on seems to contribute to the problem. Pollution is often felt quite a distance away from the original source and this can affect all people in the community and in communities all over the world.
One example is the amounts of CO2 being pumped into the air every year contributing to the global felt affects of global warming. Pollution can lead to costs being paid by the firm to help repair the environment affected. Firms can also be liable to pay for compensation to individuals who are found to have been injured or have become ill directly from externalities from a firm producing their product or service. These costs may include costs paid out to cancer patients who may have received radiation poisoning.
As firms produce goods they use up resources, whether they be steel, electricity, coal, wool or wheat. Some of these resources are not able to be reproduces very quickly, like coal and other non-renewable energy sources like oil and natural gas, or unable to be produced again indefinitely like steels and ores. This increases the rarity and value of these resources compare to other resources that can be reproduces quickly like wheat or wool. One major resource that Australians have been noticing recently is water. Due to the massive drought experienced by millions of people all over Australia, people are beginning to realize that we won't always have water on call if this continues.
Firms are able to lower production costs, as they don't have to take into consideration the effects their business has on the surrounding community. These costs or benefits that the community is left with are called externalities and may include damaged creeks or roads or something good like produce more business in the surrounding area. Land degradation can lead to a loss of potential production as problems, like salinity and mudslides, can leave the area unable to continue producing the good or service. E.g. Farmers are unable to continue growing grain crops if their lands experience salinity from ground level water tables. Land degradation can also reduce environmental biodiversity of an area, as bush land is cleared or farming purposes.
In conclusion it can be seen that there are many factors that contribute to and affect the outcome of economic growth of a countries economy. Economic growth usually results in lower levels of unemployment, higher levels in inflation, more external instability, more inequality in the distribution of income and higher levels of environmental degradation of the environment. However with correct intervention by governments and other organizations, like the Reserve Bank of Australia (RBA), these effects can be lessened to a point at which sustainable economic growth can occur.
