Economic Growth
Improving Economic Growth and Output
- Human Capital Investment - Human capital refers to the skills and ability that people possess. The government may seek to improve this by offering training or scholarship programmes.
- Physical Capital Investment - Physical capital is the physical resources used in the production of goods and services, such as machinery or vehicles.
- Infrastructural Investment - Infrastructure is the physical building blocks of society, including roads, bridges, hospitals and schools.
- Research and Development - The process of researching and creating new knowledge, products, or technologies through study and experimentation.
- Monetary Policy - The actions taken by the central bank to control money supply and interest rates to control inflation and growth.
- Fiscal Policy - This includes government actions relating to government spending and taxation which impact the economy.
How might the government improve economic growth and output?
Human Capital Investment
Human capital refers to the skills and ability that people in the economy possess. The government may seek to improve this by offering training or scholarship programmes. By improving the quality of human capital in the economy, the government aims to improve productivity and subsequently growth.
A recent way in which the Scottish Government is investing in human capital, is through their extensive apprenticeships scheme offered to young people. The government invests around £100 million every year on apprenticeship training, providing work experience and skills development. This investment both tackles youth unemployment, and can improve the quality of the labour force.
Do you want to learn more about the apprenticeships offered in Scotland? Follow the link below:
Physical Capital Investment
Infrastructural Investment
Prior to 2014, the Scottish Government invested heavily in infrastructural projects to host the Commonwealth Games successfully. Various infrastructural projects such as the Emirates Arena, Sir Chris Hoy Velodrome, and the SSE Hydro were erected with a cost to the Scottish Government of around £425 million. While costly, the project was estimated to generate increased tourism, trade and employment opportunities. In fact, the Commonwealth Games are estimated to have generated around £740 million for Scotland’s economy.
If you want to learn more about the impact of the games on Scotland’s economic growth:
Research and Development (R&D)
Monetary Policy
Fiscal Policy
Growth and Standard of Living
GDP per capita, otherwise known as GDP per head, is one of the most widely used indicators of living standards globally. GDP per capita is simply determined by dividing overall GDP by the population of the country. As such, we can use GDP per capita changes to understand the changes in standards of living. For example, if GDP per capita in Scotland rises significantly, then we would expect that living standards in Scotland would rise accordingly.
GDP and Living Standards: The Debate!
Environmental Concerns: It is often the case that higher economic growth correlates with higher emissions. Growth is often associated with increased production and consumption of services, which subsequently, increases the use of fossil fuels such as oil and gas. It is often the case that industry and factory use grows, leading to a rise in emissions. As high growth leads to higher pollution, many argue that it is unfair to indicate that high growth indicates rises in living standards.
We can see in the above graph that GDP per capita decreased significantly between 2007-2008 during the financial crisis. Such a significant decrease does not necessarily mean living standards plummet in that timeframe.
