Global Poverty And Economic Growth

Economic growth has been the central agenda for many developed and developing nations in the world. Economists agree that economic growth focuses on expansion of Gross National product or the aggregate productivity of a country or a selected economic zone. An increase in productivity must however increase the quality of living. According to the World Bank, the main aim of economic growth is to reduce social problems such as poverty.

Economic growth is derived from actions of both microeconomic and macroeconomic variables such as employment, inflation and interest rates. The combined effect of these factors can propel a nation’s economic ambition to stability or failure. Growth policies that are expansion biased often act to maintain the vicious cycle of poverty. The World Bank outlines a case study of Africa where growth is biased on resource extraction by foreign firms and privatization. This means that the local population do not benefit from the expansion of business. Criticisms a have been leveled against inability to control inflation and interest rates which make cost of capital high. Moreover, employment opportunities are minimal thereby rising poverty levels. Low employment levels have also increased the social gap between the haves and have not. This is a major problem in developing nations where rich people have the resource power to control the major sectors whereas the poor remain in their state of poverty.

Casey (2009) argues that sectorial biasness in growth is a negative effect of unbalanced economic growth. When economic growth is not balanced, it is hard to expect effective poverty reduction. In developing nations, a lot of growth is emphasized on agriculture and mining. This implies that the real national product will increase but will be skewed to the sectors in question. Economists argue that ideal economic growth should integrate economic development if substantial changes are to be realized. The failure to integrate social factors in growth is evidenced in economically advanced nations such as China which have a good number of people living below the global poverty line. The annexation of social benefits in economic growth can be expressed in terms of improved interest rates, low inflation rates and employment.

As stated above, economic growth does not necessarily incorporate poverty reduction motives; however, typical aspects such as expansion of firms and industries leads to increased opportunities of business and other spillover effects. It is thus worthwhile to say that economic growth has impact on poverty reduction though at controlled scenarios.