Economic Growth

Sustainable Economic Growth

Until this point we have concentrated on the link between economic growth and some of the other statistical indicators that you will learn about during your study of Unit 3. But the truth is that there is a far more sophisticated understanding that you must acquire if you are going to come to terms with the Australian goal in relation to economic growth. In this country we aim to ensure that the rate of economic growth is sustainable. It is true that this means we would like to achieve economic growth without an increase in inflation or an expansion of the current account deficit, but there is much more to it.

If we aim to achieve economic growth, it is inevitable that there will be some cost to the environment. This can come via either direct or indirect consequences.

The Direct Impact

To achieve economic growth we must utilise some of our resources. For example, if we want to make a table out of timber it will be necessary for us to cut down a tree. In some cases the tree that we choose to use could be very old – older trees are usually wider and denser, and as a result they can produce higher quality timber. If we continue to make furniture in this way we will need to keep cutting down trees. Eventually we may reach a point where all of the old trees are gone. To continue making furniture we will either need to start using younger trees, or wait until the existing growth ages in the same way as the trees that we have already cut down.

Note that the direct impact of economic growth on the environment will occur regardless of how careful we are with the other decisions that we make. Even if we walk to work, and we choose to use hand tools instead of power tools, as soon as we cut the tree down the environment has been changed.

The Indirect Impact

In the modern world businesses are always looking for ways to increase their efficiency. If the producer being discussed above wanted to make more than one table a day, they would need to find ways to increase the speed with which they could work. This might mean employing more people, or using more sophisticated tools. Both of these decisions will have an impact on the environment.

The new employees may have to come from further away, which means that they might choose to drive. Even if they take public transport this means that energy will need to be created. This process has a significant impact on the environment. Driving a car will result in pollution. Excess pollution can reduce air quality, damage buildings, cause acid rain and, on a global scale, may even be responsible for global warming that could eventually result in some Pacific Islands disappearing beneath the sea!

Renewable and Non-Renewable Resources

It is true that any decision we make will affect the environment in some way, but this does not mean that we are heading towards the inevitable total destruction of the environment. If we make good decisions today then we should be able to find a way to sustain economic growth into the future. One important step in this process is being able to distinguish between renewable and non-renewable resources.

A renewable resource is one that has the ability to regenerate. For example, if the producer we discussed above discovers that they are able to wait while the tree grows back, then production for that firm will be sustainable. While this might seem impossible, in Victoria logging is managed in such a way that after an area has been cleared it can not be farmed again for one hundred years. Other renewable resources include livestock and fish. When we allow these animals enough time to reproduce, stocks can be replenished. Nature provides us with wind and sunshine; these resources can be used to generate energy in a way that is sustainable.

On the other hand, some resources are non-renewable. There is only a certain amount of crude oil in the ground; once we have taken the oil that is there, we will not be able to create more. This means that we must be very careful with the way that we choose to use the oil that we have. We must also try and find ways to generate energy that do not rely on access to oil. If we can not create and store energy in sustainable ways, we will struggle to generate long term growth for our planet.

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