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Growth Factors: Extensive and Intense
Economic growth is determined by a number of factors. In economic science, the theory of three factors of production was widespread, the ancestor of which was J.-B. Say . Its essence lies in the fact that labor, land and capital take part in creating the value of the product.
Later, the interpretation of production factors received a deeper and broader interpretation.
They usually include:
- entrepreneurial ability;
- scientific and technical progress.
Growth factors are interconnected and intertwined. So, labor is very productive if the employee uses modern equipment and materials under the guidance of a capable entrepreneur in a well-functioning economic mechanism. Therefore, it is quite difficult to accurately determine the share of a particular economic growth factor. Moreover, all these large factors are complex, consist of a number of smaller elements, as a result of which the factors can be rearranged.
So, according to external and internal economic elements, external and internal factors can be distinguished (for example, capital is divided into incoming to the country from the outside and mobilized within the country, and the latter can be divided into used within the country and exported from abroad, etc.) .
The division of factors depending on the nature of growth (quantitative or qualitative) into intensive and extensive is also widespread.
- increase in investment while maintaining the current level of technology;
- increase in the number of employees;
- growth in the volume of consumed raw materials, materials, fuel and other elements of working capital.
- acceleration of scientific and technological progress (the introduction of new equipment, technologies, by updating fixed assets, etc.);
- advanced training of employees;
- improving the use of fixed and working capital;
- improving the efficiency of economic activity due to its best organization.
With the prevalence of extensive growth factors, they speak of an extensive type of economic development, with a predominance of intensive growth factors - an intensive type.
With an extensive type of development, economic growth is achieved through a quantitative increase in factors of production, and with an intensive type of development, through their qualitative improvement and better use. Moreover, in this case, economic growth is possible with a decreasing rate of capital investment, and even with a decrease in their physical volume.
Under the conditions of extensive growth, the change in the ratio between its factors occurs relatively evenly and the achievement of a maximum of production depends mainly on the state of economic resources, especially on the combination of labor and capital costs, and only to a certain extent on scientific and technological progress.
So, extensive economic growth is due to a simple buildup of applied factors: means of production and labor. Extensive economic growth is historically the original path of expanded reproduction. Therefore, it has a number of negative characteristics, which are a consequence of the imperfection of this type.
The extensive path, thanks to attracting more and more labor to production, helps to reduce unemployment and ensure the greatest employment of labor resources. A reasonable full-time recovery and sustainability program is an indisputable means of accelerating growth. Nevertheless, a few reservations should be made here. If we reduce the unemployment rate from 6 to 3%, then this decrease appears to be significant.
And from the point of view of people, it is so. However, when translated to products, this means that we have moved from an employment rate of 94% to an employment rate of 97%. This ratio - 97/94 or 3/94 - cannot be ignored, and it gives a more accurate idea than the ratio 3/6 or 50% of the increase in production that can be achieved through a high employment policy.
In addition, by reducing unemployment from 6 to 3%, we can further increase the annual growth rate by 3% (or 3/94), bringing it, for example, from the usual 4 to 7% per year. But such high rates are temporary in nature. The state of full employment, once it is reached, cannot be restored again annually. Next year, growth will again occur at the same rate of 4% due to the lack of free labor that could be used in reproduction.
The next problem, with the extensive type that should be considered, is stagnation, in which a quantitative increase in output is not accompanied by technological and economic progress. But technological progress is an important engine of economic growth. By definition, technological progress includes not only completely new production methods, but also new forms of management and organization of production. Generally speaking, technological progress means the discovery of new knowledge that allows a new combination of these resources in order to increase the final output.
In practice, technological progress and investment are closely interrelated: technological progress often entails investment in new machinery and equipment. With extensive economic growth, output increases to the same extent that the values of used production fixed assets, material resources and number of employees increase; therefore, the value of such an economic indicator as capital productivity and others, in other words, the overall production efficiency, remains unchanged at best.
Consequently, there is not enough money to upgrade fixed assets (buildings, equipment), and the latest scientific and technical developments are not actually being introduced. So, in the former USSR, the depreciation of production fixed assets increased in 1986-1990. from 38% to 41%.
Extensive type of economic growth allows you to quickly develop natural resources. But due to the fact that the use of these resources with the extensive type is irrational, there is a rapid depletion of mines, arable land, and minerals. With extensive economic growth, such an indicator as material consumption remains virtually unchanged, and as production grows, an irreplaceable resource base is inevitably depleted.
Consequently, more and more labor and means of production have to be spent on the extraction of every ton of fuel and raw materials. The problem of the development of natural resources merges with the problem of improving technology for a more rational use of resources, reducing the material consumption of products and the problem of providing equipment and tools for the use and detection of these resources.
Now consider the intensive economic growth based on STP. Contrary to the widespread notion that scientific and technological progress is a single evolutionary progress, it is a series of alternating complexes of associated industries - technological structures. They differ from each other in a set of leading industries, types of dominant energy carriers, types of structural materials and processing equipment, means of transport and communication.
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