The costs of growth
While growth improves a country’s chances of development, it also creates a number of economic and social costs.
Negative externalities
As growth increases, production and
consumption increase and there are likely to be considerable
external costs
as a result, such as deforestation, and the knock-on effects such as
increased flooding; desertification of regions suffering
over-production; pollution of rivers; depletion of non-renewable
resources and long term climate change.
Exhaustion of environmental capital
The environment is a scarce resource and a factor of production, which resembles capital. If the environment is over-exploited and miss-used, future development prospects will be restricted. A lack of property rights over often vast areas of land means that there is no incentive to conserve such resources. This impacts on the poor, who suffer most from polluted drinking water and loss of agricultural land.
Urban squalor
Urbanisation tends to go hand in hand with economic growth and an exodus from the land to the cities, as can be witnessed in much of India, China, and Latin America. The resulting squalor is one of the most widely recognised costs of rapid economic growth. The urban slums that exist in many parts of the developing world today closely resemble those that existed in large cities in the UK, and across Europe, at the end of the 18th Century because of rapid industrialisation.