The economic growth of a country is a generally positive indicator of the progress and advancement of the nation. It is a generally accepted economic measure across the world making it a critical evaluation tool of a government’s success in improving the livelihood of its citizenry.
According to the World Bank, economic growth is the increase in the aggregate production of an economy, typically measured by a rise in national income or gross domestic product. The growth can lead to higher incomes, increased consumption, and an improved standard of living.
The World Bank defines economic development as more than just growth. It involves self-sustaining growth, structural changes in production, technological upgrading, social and political modernisation, and widespread improvements in the human condition. Vision 2030 envisaged the annual economic growth rate being an average of 10 percent.
The country has, unfortunately, not achieved the projected rate but reported positive economic growth for most of the past financial years. The growth has been fuelled by, among other factors, government spending through public infrastructure projects. The service sector has also been a key driver of economic growth.
The transmission of economic growth benefits has been subject to extensive debates and research in the economic realm. Two economic theories have emerged with governments choosing one model over the other in their development agenda.
The two major economic development models entail, trickle-down and bottom-up economic models. The trickle-down economic model focuses on stimulating growth from the top down with the expectation that this will stimulate the economy and benefit everyone.
The bottom-up model focuses on creating a strong foundation for economic growth from the bottom up with the main beneficiaries being the middle class, small and medium businesses, and the average citizen.
The government chose the bottom-up economic model and developed the Bottom-up Economic Transformation Agenda as its core development blueprint. This model prioritises empowering individuals and small and medium businesses at the base of the economy to drive overall growth and prosperity.
The government seeks to create opportunities for most of the population rather than rely on big corporations and major investments to drive overall economic growth.
The success of either economic model lies in its ability to improve the quality of life for the citizenry.
There have been concerns among the general population that the benefits of economic growth are not being experienced in certain segments of society.
The government must look beyond the positive economic statistics and interrogate the disconnect in the transmission of the benefits of economic growth to the general population.
This will ensure will create an environment where economic growth translates into tangible improvements in the quality of life for all citizens.
The transmission of the benefits of economic growth and development to the populace is normally the biggest challenge for any government.
As the saying goes, the proof of the pudding is in the eating, the citizenry is the best judge of a government’s success in driving economic growth and not overreliance on periodic published economic statistics.
There are several ways in which the economic growth can be transmitted to the general population. For instance, economic growth is expected to lead to an increase in the national income which should translate into higher incomes for individuals. This is through the creation of employment opportunities as industries expand thus reducing unemployment and increasing household incomes.
Additionally, economic growth is expected to result in improved public services and infrastructure. These improvements then enhance the quality of life and create a more conducive environment for further economic activities. This leads to knock-on benefits to the general population.
Another critical element is reducing inequality through increased social mobility. This enables individuals from lower socio-economic backgrounds to have more opportunities to improve their status through education and employment. The growth thus leads to poverty reduction through a boost in individuals and families’ incomes.
The quality of life is also enhanced through access to quality healthcare, education, and housing. This is addition to an increase in disposable income enabling individuals to afford better nutrition, leisure activities, and other aspects that contribute to a fulfilling life.
The writer is an Associate Director at Ernst & Young LLP. The views expressed here are not necessarily those of EY.
Unlock a world of exclusive content today!Unlock a world of exclusive content today!
